Debswana eyes four-year production high
Mbongeni Mguni | Monday September 12, 2022 06:00
Last year, Debswana’s local mines produced 22.3 million carats which at the time represented the highest level since 2019, helped along by a rebound in the global economy from COVID-19 and resurgent demand for the precious stones.
By the end of July this year, Debswana’s production for the year stood at 13.8 million carats, slightly below the target level, while sales at 16.2 million carats were above target and the main contributor to the confidence for higher output by year end.
Andrew Motsomi, Debswana managing director, said the performance had been achieved despite a P1 billion increase in operating costs due to inflation rising locally and in the countries where the company sources its goods and services.
“Our business is such that our mines are very intensive in terms of consumption of fuel, as well as costs associated with trucks, the shovels, tyres, explosives and others which are all much more expensive than last year,” he told the company’s annual business seminar on Wednesday. “This is mainly the result of the inflation woes that have affected the world.”
Motsomi said going forward, Debswana would adopt the FutureSmart Mining method in its operations, an approach anchored on technology, digitalisation and sustainability. Anglo American, which owns 85% of De Beers, the co-owner of Debswana, pioneered the FutureSmart Mining innovation which it says achieves a “much-reduced environmental footprint from new ways of mining, including by using a number of precision mining technologies and data analytics”.
The mining giant says across its mines under the FutureSmart Mining method, it is applying technologies that “more precisely target the desired metals or minerals, delivering greater than 30% reductions in the use of water, energy and capital intensity, and producing less waste in the process”.
Motsomi said for Debswana the new innovation would be introduced gradually.
“FutureSmart implementation has started gradually,” the managing director told BusinessWeek in an interview on the sidelines of the seminar. “It will continue being phased in for the next 10 years. “Full cost not yet estimated (because) it is more of a journey and the final cost will depend on final technology selections.”
Debswana contributes about 70% of De Beers’ annual production, which in turn is the world’s second largest producer of rough diamonds after Russia’s Alrosa.
From a strong rebound last year and into the first half of 2022, the diamond industry faces an uncertain period going forward due largely to projections of a global economic slowdown, one that will affect key markets such as the United States. China, which is expected to account for 32% of the growth in global diamond jewellery demand this year, is implementing a zero-COVID strategy that has resulted in frequent lockdowns.
“Debswana operates within an unpredictable market that is affected by global conflicts and market instability,” Motsomi said. “We have experienced COVID-19, the impact of the conflict in Ukraine and the rise in the cost of doing business due to hyperinflation.”
The diamond company and its parent group De Beers expect that sales will be supported by steady growth in demand in the US, China, India, Japan and other markets.