Since acquiring each of our underground mines in South Africa, we have been operating in mature caves, where the existing block of ore to be mined has been nearly depleted.
Once the majority of the ore in one block has been removed, waste from the side walls of host rock will start to fall into the cave and subsequently report to the drawpoints, thereby heavily diluting the material being extracted. This means that the overall diamond content per tonne mined (“grade”) is much lower than that of the pure kimberlite ore.
Petra’s expansion programmes are designed to take the next ‘cut’ by deepening and establishing new sub level and block caves in undiluted kimberlite.
As the development plans progress, the grade of each tonne mined is therefore expected to rise significantly, increasing the margin per tonne mined. See our detailed operational guidance sheet for more information on how we expect grades to increase up to FY 2019.
The shift in Petra’s production profile from mostly diluted to mostly undiluted ore at Finsch and Cullinan is expected to be the major contributor which will see the Group’s operating margin rise from 36% in FY 2015 to +50% in FY 2019. Petra has a high level of confidence in the average grade of the pure kimberlite ore at its mines, as each mine has a long production history and each orebody has been extensively drilled and sampled.
Currently tailings production, which involves the reprocessing of old tailings dumps, makes up a significant portion of our production profile. The diamonds recovered from these dumps are generally two to three times lower in value in comparison to diamonds recovered from the primary mining operations (either the open pit at Williamson or underground at the South African mines). As the percentage of tailings production reduces and is replaced by higher value and higher grade ROM tonnes, our average value per carat at each operation will rise.
The increasing grade and the higher value diamonds recovered will serve to have a positive effect on our operating margins. At the same time, lower unit costs due to increased efficiencies in the ore-handling systems and processing plants will also have a positive impact on our operating margins.