SMALL CHAPTER IDEA: URA focuses attention on Gravelotte emerald mine in Limpopo

URA Holdings Chief executive Bernard Olivier and his colleagues, including chairman Edward Nealon, are veterans of the mining sector.

With gemstone success stories at Tanzanite One (T1) and experience at Bezant Resources, Olivier knows the industry at a granular level.

Meanwhile, Nealon founded and built Aquarius Platinum before moving on to Sylvania Platinum and was also on the ground floor with T1.

Both are familiar with the rapid movement of mining assets along the value path, which likely explains how they, and an experienced support team, have been able to take a historic emerald operation from acquisition, to the inaugural resource of the JORC ​​and into production in just over two years and on a budget of around £2 million.

The mine is located in Gravelotte, in the Limpopo province of South Africa, about 50 kilometers from the world-famous Kruger National Park.

It was the largest operation of its kind during the 1960s and has historically produced almost 113 million carats.

It was sold to URA by Mangum Mining of Australia for an initial £100,00 in shares and payments of £100,000 for every five million carats mined up to a maximum of £1 million.

The team was not left behind after purchasing the asset. It compiled a JORC resource estimate for the Cobra and Discovery deposits that has identified around 29 million carats of contained emeralds, giving an initial mine life of nearly a decade.

To add some spark, the URA team has also compiled a list of exploration targets that could add between 168 million and 344 million more carats to that total.

Instead of following the traditional process of feasibility studies, financing and construction, URA has adopted a rapid and gradual approach.

So, with very little money, the company purchased and installed crushing equipment, screens, conveyors and dewatering pumps along with an optical sorter; in other words, everything needed to start production.

This has been helped by the fact that Gravelotte is a historic mine with infrastructure such as civil works, water storage, accommodation, access roads to the site and, crucially, access to the electrical grid, which reduces capital expenditure and expenditure. diary. -daily costs. In the future, URA intends to invest future profits to expand and increase production.

With production underway, URA’s first test auction will take place in the second half. Olivier says he is currently putting the finishing touches on a deal with a well-known auction house, formerly used by Gemfields, the leading supplier of colored stones, and owner of the Kagem emerald mine in Zambia, which has generated more than $1 billion. of dollars in sales since its inception.

URA’s chief executive says Gemfields provides a model for what URA is trying to achieve, as it is effectively self-funding its growth by creating its own market for ethically sourced emeralds.

‘We are much smaller and have a long way to go before we catch up with Gemfields. But I would say that they are the ones we would like to emulate,” says Olivier.

Taking a closer look at industry dynamics, the Gemval Aggregate Index shows a strong and healthy market for colored gemstones that has decoupled from diamond values, which have effectively stagnated for more than a decade.

Therefore, Anglo American’s decision to divest De Beers’ diamond business, amid supply-side problems and the challenge of man-made alternatives, should not be confused with the market for emeralds, rubies and sapphires, where demand dynamics are governed by different and separate factors. drivers, says Olivier.

He will not be interested in the prospects of the first URA auction. This is because there are many imponderables: the mix and quality of the lots, which can vary from sale to sale, and characteristics such as size, color, clarity, fashion and market demand affect the outcome of an auction.

CEO Olivier explains: ‘Prices can and will vary from the lowest to the highest category, where prices range from $300 to $400 per carat. At this point we don’t know what we’ll get, so there’s no point in speculating.

‘That is why I have been very careful not to make forecasts about the first sales. You know, it’s a very gradual process; It’s about getting sales exposure. And as the auction house we’re working with told me, we should limit our expectations.’

Outside South Africa, the mine developer has a strategic minerals project in Zambia with prospects for cesium, tantalum and niobium, yttrium and fluorine. Now that production is underway at Gravelotte, the asset is not essential, says URA’s CEO.

“(Zambia) is really a greenfield exploration, so we are in talks with some interested parties about a joint venture or something like that,” he explains.

“Our goal is very much to get the Gravelotte operation into production and then expand.”

At the core of any mining program in South Africa is black economic empowerment (BEE) legislation, which requires project owners to attract indigenous investors.

With this in mind, a 26% stake in Gravelotte has been given to local communities and black employees to ensure that much of the value created in the area is recovered.

“We can really say it’s a community-sponsored mining operation and, in my opinion, that’s what (BEE) is all about,” Olivier says.

Having made rapid progress towards production and ultimately very quickly towards the revenue generation phase, it is surprising that the progress is not yet recognised.

However, Olivier is unfazed. Time and further progress towards generating income will help. He has some patient capital on the shareholder register having been able to attract institutional investment, including Premier Miton from small-cap guru Gervais Williams.

So what attracted these funds? “I think the only thing that stood out was the management record,” Olivier says.

‘Tanzanite One was successful; Ed (Nealon) has made it platinum. We were also able to get some key Tanzanite One team members, who I have known for 15 or 20 years, to join us. We have a small team, but with a lot of experience.’