Murray & Roberts rises on winning of contract for De Beers’ Venetia mine

24-07-2014
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BusinessDay
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MURRAY & Roberts’s share price rose 4.36% to R24.90 on Tuesday after it announced its mining contracting subsidiary, Murray & Roberts Cementation, had won a R2.6bn award for the De Beers Venetia underground diamond mine project in Limpopo, which is set to see overall investment of about R20bn over seven years.

The Venetia project will build an underground diamond mine beneath the existing open-pit mine — which is among the top eight diamond mines in the world — replacing about 3.2-million carats a year of production by late 2021, as the surface-stripping mining ratio becomes too expensive.

The construction and engineering group compared the award in size and scope to civil construction work it did for Eskom’s giant new Medupi and Kusile coal-fired power stations. The contract comes at a time when South Africa’s building and construction industry has been scrabbling for work amid relentlessly competitive trading conditions.

Murray & Roberts said this was the first of a "series of potential awards" by De Beers for the Cementation unit, which apart from South Africa and numerous African countries also operates in Australia and Canada.

"The planned total investment by De Beers at Venetia potentially represents the single largest opportunity to Murray & Roberts since the Eskom power build programme," Murray & Roberts CEO Henry Laas said on Tuesday.

The scope of works comprises the building of an entire underground mine. This includes the sinking, equipping and commissioning of a decline shaft and two vertical shafts and horizontal tunnel development to provide the establishment of, and access to, loading levels. The work includes associated ventilation, ground and water-handling infrastructure.

Mr Laas said this was a flagship project for Murray & Roberts and its local project team had been complemented with project management and operational capacity from the group’s Cementation mining companies in Australia and Canada. More advanced Canadian shaft-sinking methods will be used for sinking the vertical shafts at Venetia, and Cementation Canada will also provide specialist training for shaft sinkers.

Venetia is South Africa’s biggest diamond producer, contributing 40% of South Africa’s production, and about 10% of De Beers production of 31-million carats last year.

De Beers spokesman Tom Tweedy said on Tuesday the underground operations would open up deeper reserves, replacing above-ground output with about 4-million carats a year as the surface-stripping ratio became too costly.