Mungo Soggot
A Canadian mining company has accused De Beers of trying to hijack its rights to mine a lucrative diamond field in the Northern Province.
The company, Southern Era Resources, also believes old-guard government officials have conspired against its bid for a mining permit at the Marsfontein field.
De Beers apparently passed over the field a decade ago. The diamond giant only became interested again after Southern Era, which was already prospecting in the area, discovered a new, lucrative source of diamonds. De Beers claimed this week it had wanted to mine, but that Southern Era’s South African partner, Randgold, had beaten it to securing a prospecting licence in 1987. But SouthernEra counters that De Beers wrote to Randgold earlier that it had found “nothing significant”.
Now De Beers has sided with the heirs to the land in a bid to wrest control of the mining rights from Southern Era and Randgold. Southern Era has spent R20-million preparing the field with a valid exploration permit, and has committed at least R100-million to develop it.
After a six-month struggle to secure the mining rights – a battle which has precipitated a sharp drop in the company’s share price in Toronto – Southern Era is now in danger of losing its investment in the project.
Southern Era has already started underground and open-pit mining in an area surrounding Marsfontein. The diamonds can be mined easily from the surface, which would give Southern Era cash to fund the underground mine, Klipspringer.
The matter is now in the hands of Minister of Minerals and Energy Penuell Maduna, who can decide which company gets the mine. Maduna is under pressure from both sides: foreign investors have warned him of the investment repercussions if he sides with De Beers, and the company’s chair, Nicky Oppenheimer, met Maduna this week to argue its case.
On Thursday, during a conference call with his Canadian shareholders, Southern Era’s chair, Chris Jennings, kept the door open to a joint venture deal with De Beers – a prospect he says he does not relish. Analysts believe Maduna will be keen to back such a compromise.
Jennings, a South African, suspects De Beers has been gunning for his company, with a view to seizing control of Southern Era’s diamond deposits in Angola. “I wonder why De Beers is worried about Marsfontein if there isn’t a longer-term strategy to access rights to potentially huge reserves in Angola,” he said.
Since February Southern Era has been involved in a complicated legal battle with people claiming to be the heirs of the diamond-rich land. Shortly after the company filed its application to convert its prospecting licence into a full mining licence at the Pietersburg branch of the Department of Minerals and Energy, the 29 heirs grouped together and applied to the high court for an interdict stopping Maduna from granting the licence.
The heirs had remained silent until then, while Southern Era, in partnership with local mining house Randgold, prospected for diamonds on the land.
The Pretoria High Court granted the interdict in January and set the matter down for a full trial, which Southern Era expected to win. The company says it searched for any heirs to the mineral rights, but found none. The heirs were obliged to register their claim within two years of the original owners’ deaths between 1958 and 1969.
But before the matter was heard in court, officials in the department quietly accepted the registration of the heirs’ mineral rights in the name of a company they set up. Jennings says this transaction should have been approved by the minister.
Southern Era struck back and obtained an interdict against the heirs from alienating the rights. But the heirs have effectively circumvented this interdict by signing a secret option with De Beers entitling it to mine. A De Beers representative said it was approached by the heirs in January.
Jennings fears De Beers will end up with the rights after signing with the heirs. He has until now decided not to take the department to court for its seemingly extraordinary decision: “We first want to try to be good citizens about this.”
De Beers is offering the heirs R75- million – a figure Southern Era is prepared to match.
Meanwhile, Southern Era has offered a R50-million reward for lost documents the company thinks prove that the original owners sold off their rights before their deaths.
Maduna has recently shown himself willing to take on De Beers. The minister said in Parliament he would remove the state diamond producer, Alexkor, from the Central Selling Organisation – De Beers’s London- based diamond cartel which controls the supply of diamonds to world markets – claiming that Alexkor will be able to get higher prices if it sells outside the organisation. De Beers said it had not heard of this decision.
It remains unclear whether Maduna will deal another blow to De Beers so quickly. He has already publicly backed Southern Era in the early stages of the court battle, but has said nothing since his department signed away Southern Era’s rights.
Jennings said of the Oppenheimer- Maduna meeting this week that he suspected Oppenheimer would have wanted to discuss Alexkor, but that Marsfontein would have been high on the agenda. He said he was waiting to see Maduna. “It does worry me that he has seen them first. Maduna must right a wrong.”
Jennings believes the department acted improperly in signing over the rights to the heirs, raising the concern that the officials who signed away Southern Era’s rights just after the temporary interdict were perhaps not acting on their own.
Jennings says senior department officials expressed surprise that the rights had been signed off to the heirs at a meeting in Pretoria.
Maduna’s special adviser on mineral affairs, Linda Makatini, confirmed the minister had met Oppenheimer and said he planned to meet Jennings before the end of this week. Makatini said her department’s transfer of the rights to the heirs had “changed the case completely”.
She said the department decided to settle the case after the heirs offered to pay the department’s costs. She would not comment on Maduna’s discussions this week.
Jennings says none of this would have happened if the new Green Paper on mineral rights was law. The Green Paper places a strong emphasis on encouraging foreign investment in South Africa’s mining industry. It gives the state a greater say over who can develop mines, and proposes the transfer of privately owned mineral rights to the state.