“I want to be a producer.” Interview with John Teeling, Chairman of Botswana Diamonds

Mining and Exploration
25/05/2018 16:57

John Teeling is the executive chairman of Botswana Diamonds PLC, one of the most prolific diamond exploration and project development companies that holds exploration licences in Botswana and South Africa. With 40 years worth of resources experience, he is often called a ‘serial entrepreneur’, and is involved in a number of other AIM exploration companies. Notably, he was the founder of African Diamonds, which discovered the AK6 mine in Botswana, a venture that eventually became Lucara's famous Karowe Mine. The Lucara Diamond Corp. takeover of African Diamonds in 2010 was worth approximately $90 million. He recently paid The Diamond Loupe a visit in Antwerp, together with Commercial Director of Botswana Diamonds, Robert Bouquet. What follows is a summary of our engaging conversation.

The Diamond Loupe (DL): Botswana Diamonds recently signed a Memorandum of Understanding with Vast Resources for the exploitation of diamonds in Zimbabwe. Would you tell us about this project and your prior experiences in Zimbabwe? You were there for 30 years, but in 2011 you got out. Was it promising from a mining perspective and your departure was more a political issue?

John Teeling (JT): Yes. Totally and absolutely political. It is a country blessed with great resources. It had very good infrastructure as well, which is important. It also had very good title (rights to the prospecting licenses, in English laws), even with the problems. It is only very recently that title became suspect. All the skills were there, because they had been mining since the 19th century. They have third-generation miners, which you will not find in most European countries. They were very good.

Then there are things like supplies, all of the backup in Zimbabwe. After the UDI [Unilateral Declaration of Independence], they had to develop locally engineering businesses and supply chains. If you broke a piece they would engineer it for you instantly. In other parts of Africa, you would be waiting six weeks to get a piece flown in. So, it was a wonderful place to work.

It got bad by 2011. I could not survive any more there, and left. I am happy enough to go back in at this stage, but mind you, this is ‘toe in the water’. Are there opportunities in diamonds and other minerals? Yes, there are. I do not know what is left in the Marange area, but maybe there is quite a bit left. I just don’t know. We have to check that. You have to walk the ground.

It will not be as easy or as cheap as it was for the Chinese, just skimming off the top [alluvial mining]. Will there be problems with the locals that got done badly? Yes. It does not matter what president you have, they are going to feel hard done by. And were they hard done by? Yes, of course. There will always be challenges, but I am happy enough to go back in and have a look at it. We will not be spending significant money at this stage.

Looking for a ‘blow’

DL: Looking at the pipeline in your Corporate Presentation, it looks like Thorny River is the furthest along. Could you tell us more about Botswana Diamonds’ activities?

JT: Thorny River [the flagship Vutomi Project in South Africa] is indeed the furthest along in terms of development, and our scoping study will be completed by the end of the month. We have been particularly active in South Africa, in the old De Beers areas, which is largely due to the influence of our tireless Managing Director, James AH Campbell. Thorny River’s Kimberlite dyke system stretches eastward from the Klipspringer and Marsfontein mines.  

When it comes down to it, we are looking for blows [a ‘blow’ is miner terminology for a swelling on a dyke], which might be more interesting than a Kimberlite pipe, but effectively they are the same. If we find another Marsfontein it would be good - the grade there was just ridiculous, something like 170 cpht [carats per hundred tons], and quality stones at that. It took four days to pay back De Beers on their investment. If we find another Klipspringer it’s not so good, but we’ll take it.

DL: What is your timeline for Thorny River?

JT: Thorny River is either commercial or not. We will know in a month. We think we can set up a low-cost plant there for $15 million, but it is the licenses that are difficult; water permits in particular are a big issue. That takes time. But Klipspringer has them [it has an existing plant, 10km by road from Thorny River, 4km as the crow flies]. If we can use Klipspringer’s plant, and if the decision is made to go ahead, it would be 18 months to production. Logically, we would bring those goods to Antwerp.

Given what we have done, the work to date, we had hoped that we would have had an inferred resource of about a million tons. Now, this is very small compared to other projects, but at very good grade and good quality. We thought it would be viable to turn into a small mine. That would still be the belief. We think we have the million to two million tons, but we did not get the big stones we should have recovered, and we do not know why, because according to the diamond distribution they should have been there. The valuations are probably less than we thought, but might be ok. We are still on the side of positive at this stage as to where we go. The ore is there, the resource is there. The question is whether it is viable. Once the scoping study is done next month, it will be 6-8 weeks to our next decision stage.

DL: What is the likelihood of getting access to the plant at Klipspringer?

JT: There are discussions going on. That’s progress. It would ideally be a tolling arrangement for the first trial mining, where they would process our material. You might want to do 10,000 tons. Now, they should do that for us because it would mean money for them, but that’s not always how the world works. We would like to do something like that. If we had a situation where they would take 10,000 tons, we would just mine that and put it through, that would be ideal. Those are the discussions going on in South Africa. But just because it is logical and commercial does not mean it gets done.

Huge potential at Maibwe, Botswana

DL: You have numerous ongoing projects at various stages, from exploring to prospecting to drilling. Is there any one in particular that makes your heart beat a little faster? Or is finding something like a blow totally unpredictable?

JT: It’s predictable enough. These vein systems have blows. It’s just a question of where they are. The thing that makes our heart beat a bit faster would be something like Maibwe [the joint venture with BCL (51%), Future Minerals (20%) and Siseko (29%) in Botswana], in the Kalahari Desert, where they found kimberlites, and they were diamondiferous. The grades were exceedingly good … so good that you wouldn’t mention them. It still needs to be verified. There is no point in announcing stuff like that, ridiculous grades, and as I said, we have not been able to verify them.

But we found the kimberlite and we found diamonds. So that has big potential. At this stage, that is probably the best one with large upside. The rest are at earlier stages. We have done the preliminary work on a number of licenses, we have identified the anomalies. The next stage is to drill a couple more holes. All you are trying to do is take something like that and narrow it down. Botswana still looks very good to us.

Robert Bouquet (RB): Botswana Diamonds has been active now for six or seven years, since 2011. It has done everything it said it would do, on budget, with environmentally and socially correct practices. We have had our joint venture with ALROSA. We have probably been the most prolific, active explorer as a junior in southern Africa.

JT: At an early stage! You might ask what kind of lunatic are you to do early stage? I say that to myself all the time!

"I sell greed.”

DL: So then why do you do it? Because you did it before with AK6, which became Lucara's Karowe mine?

JT: Yes, and then you might say the odds of having found something like that are hundreds if not thousands-to-one, so why in God’s name would you tempt fate? I do sometimes think that. I say to myself, “you should have walked”. We found the mine, we got our money…

RB: The odds are improving to find another one, but repeating Karowe is tough.

JT: Yes, they are, and tough it is. Karowe is among the top five in the world in terms of quality. That’s a big ask. I would take a little Karowe. I would take a Thorny River if it is viable. We need one of these to work. I would like to be in production. At this point, instead of being an explorer, I would like to be a producer. We would like to get to production. So, if we are able to, we think we will.

The market in the past six or seven years has attached far greater value to producers than to greenfield explorers. There has been very little interest in grassroots exploration. It has just turned off. Lots of my investors have been turned off. They have lost most of their money. But you have to understand, that’s what we do. We actually drill dry holes. My shareholders hate that I say that. They ask, “Why do you drill dry holes?” Because that’s what you do. You don’t go out expecting to hit every single one … or maybe you do, but you don’t hit them. You just don’t. It is not the nature of high-risk exploration. You must accept a large level of failure. They do not like that word. But you have to accept it. Maybe I am completely immune after forty years of this (laughs).

DL: How do you communicate to investors the sense of hope that would transcend the risk?

JT: Greed. I wish I could put it more nicely. Though as I said before, I sell romance, not reality. Reality is the Kalahari Desert, which is not all that romantic. I don’t sell history, I sell mystery. But actually, I sell greed. Because if you had come with me on African Diamonds at the beginning, you would have made 90x your money. That is not bad. Even the average guy that got in when shares were 2p made 40x his investment. Botswana Diamonds is now 1.2p, so success will have a huge upside.

An African Diamonds scenario happens very rarely, but that is what you are trying to sell. You are also selling on the fact that we put our own money into it. People follow you on the basis of you risking your own money. They rely on your skill and expertise, expecting we can reduce the level of risk. Still, it is very difficult for junior miners to raise money. They say you have to rely on family, friends and fools … and all the fools are gone … maybe the friends too!

We go to Botswana rather than Ireland to look for diamonds. You might think that is a joke, but some people drill in places where there are no diamonds. You wonder why, but they do. So, you go where the diamonds are. That is the first thing to do. There is no point in going where they are not. You try to take the best ground, and we would hope that we are good at selecting ground. We also try to use the best technology, which is why we brought in ALROSA and its people, for the new technology.

ALROSA brings the technology

DL: Can you tell us about the joint venture with ALROSA? The diamond community’s ears pricked up when you announced that. They were going to bring in the technology, the means…

JT: They didn’t bring the means, but they brought the technology. Technology to see through the sand, that was the first thing. But what turned out to be far better is they brought mobile laboratories with them. Typically, in diamonds, when you take soil samples you send them to the traditional place in Johannesburg and wait maybe six weeks. And usually you have finished your program before they got back to you and say, “You’re in the wrong place.”

ALROSA did it in two days. Out in the desert! They put the stuff through the lab and said, “You’re getting your best results over here, go there.” I think it’s fabulous, and it is really efficient for a little company. If nothing else happens with ALROSA, whether or not there is any further diamond exploration, we should really use that technology. The technology of looking through the sand, using geophysical techniques - it was actually designed to look through the tundra in Siberia - they said they could not only identify anomalies that were kimberlites, but also identify which ones were likely to be diamondiferous.

That last part of it was unique in diamond exploration. Some people will tell you, “We can find kimberlites”, but they cannot tell you whether they contain diamonds or not. You have to drill. ALROSA came along and said, “We can tell you.” It has not turned out that way so far. Now, mind you, three years is not a long time to operate in an area like this. Not at all a long time, and on a ridiculously small budget. A million and a half a year is nothing. The jury is out yet on it, but we will continue to use the best tech available. They say technology changes every 20 years, and then you should start again. In diamonds, you should explore again.

DL: Is the JV going to continue?

JT: We do not know. There is a new management team. We took over operations in January this year. We have done the 2018 work and have just completed the initial analyses. We are talking to them about what they want to do. Because if they want to continue they will have to come up with the 50% for the next phase, and that phase would probably happen in September. But we need to know before that. There is probably an alternative. That is all I can tell you. If it is not ALROSA, there might be a replacement.

Too good to be true

DL: The Maibwe project is currently owned 51% by BCL. Do they want to divest themselves of it because they are not a diamond company?

JT: What happened is a copper/nickel company went into liquidation. A terrible mess. They had bits and pieces about the place, one of which was a diamond exploration venture. They were unable to keep their end of the JV up. They did not spend the money they were required to spend at 51%. We have not argued too much about that. Instead, we bid them the $400,000 they had spent. We said we would take it off of them at that price. They have not accepted it. They are producing a proper prospectus, using consultants and the like, and they will offer it to other people. If someone comes in and offers them huge money we would say fine, and go with that. If they don’t, they will probably sell it to us, for that price. We would be perfectly happy to take it on those terms.

It is hard to believe that they cannot get more for it than that, but so far, they have not. Also, people would bid for it knowing that the other shareholders have the right of first offer to buy it. It is a private company. We pre-empt, and we would use the pre-empt if we thought it worthwhile. That sounds clear, but it is kind of murky because of the local partners. There are three locals that got the ground in the first place, at 20%. They have this idea, “we’ve discovered diamonds, we’re billionaires.” That is a problem. Heightened expectations. We have not attempted to address that at all, because we were the technical partner. But it is coming to a head in the next three or four months.

RB: And there is something very interesting there for sure.

JT: That is exactly what you could say. Something very interesting. Is it going to be a mine? I have no idea. But there are diamonds there. That and the Eclogite – which is a cluster of diamonds. You just do not find diamonds in huge quantities like that. Finding them is very rare, but they found a nest of diamonds. Literally. The stones had not diffused all over the place. They stayed together. And these guys happened to hit it, by luck or by design. There was no ‘salting’ or anything like that. That was not possible. We checked. They could not possibly have had that many diamonds anyway. Very little ones, mind you, but they have something good. Can it be transferred into anything else? It requires more drilling. The only thing to do is to drill more holes.

RB: BCL, in the joint venture in Maibwe, drilled and found a very high grade. Almost too good to be true. A lot of head-scratching ensued. How could it be possible that you got such a high grade?

JT: It’s not at all likely. That is what people are saying. Few have seen grades like that. Others have, but we have never.

RB: Having drilled ourselves, I think the only conclusion James (Campbell) has come to is it is an Eclogite, which comprises an extremely high-density of diamonds in one place, like a ‘sweet spot’.

JT: It is exceptionally rare in diamonds. In gold, they call it a ‘jewelry box’, where you find gold all bunched together. You find it once, and you may never find it anywhere again. You go through that box, you got a pile of gold, and then nothing. Don’t ask me about nature. I don’t understand.

“It would be nice to have your own mine.”

DL: And what do you do if you find one? Mine it or sell it?

JT: If we found one, we would be taken out. That is what happened with AK6. Lucara bought us out as we could not fund the development. It is only a question of how much money you make at that stage. We would like to have a mine. It is a pity we do not have AK6. It would be nice to have Karowe.

DL: But ultimately your goal is to produce?

JT: Oh yes. I think most people that are prospectors, rather than explorers, ultimately would like to have a mine. It would be nice to have your own mine. 

DL: Final question … South Africa looks to potentially finalize its new Mining Charter, aimed at distributing the wealth and benefits from the industry more widely and attracting more investment, by the end of May. What are your thoughts?

JT:  Vutomi, the Botswana Diamonds associate company, is fully compliant with existing legislation. We welcome the new President and the new Minister of Mines. Both are experienced and will have knowledge of the risks associated with exploration and with the fact that exploration dollars are fickle. They go where they are welcome.

South Africa is blessed with abundant natural resources. They need to be discovered and exploited in a way that benefits all stakeholders. In a country as developed as South Africa there will be changes in mining rules and regulations. We do and will work within the rules. Exploration is long term, needing patience, money, skills and luck. We are optimistic on the long term outlook for South Africa.