Debswana underground on track despite diamond downturn
Lewanika Timothy - Mbongeni Mguni | Wednesday December 18, 2024 13:44
At an estimated $6 billion, the Jwaneng project will create the world’s largest underground diamond operation, involving 360 kilometres of tunnels.
Starting in 2034 and going up to at least 2054, the project will bring up nine million carats to the surface annually, anchoring Debswana and the government’s revenues at a critical time when the country’s diamond resources are tapering out.
Yesterday, Debswana officials told Mmegi that the underground project was on track with its set targets.
Senior Corporate Affairs Manager at Debswana, Matshidiso Kamona, said blasting started mid-year and had exceeded drilling targets thus far.
“Following the approval of the Exploration Access Development by the Board in November 2023, the first blast was successfully executed on May 15, marking the beginning of this critical phase,” she revealed. “As of December 11, 2024, the development team has safely delivered 971 metres of progress, surpassing the year-to-date target of 905 metres. “With the project on track and already exceeded its 2024 goal of 947 metres, the underground access development at Jwaneng is proceeding according to plan, and the team is optimistic about continued success in the coming months.”
Debswana, like other players in the diamond industry, is facing strong headwinds from the downturn in the industry. Factors such as slower than expected Chinese economic activity, as well as the impact of Russian sanctions and the boom in synthetics, have dampened retail demand for natural diamond jewellery.
The result has been an oversupply in the retail and mid-stream segments of the market, forcing producers such as De Beers, which holds 50% equity in Debswana, to reduce production.
The downturn has seen Debswana cut its output for the year and pursue belt-tightening measures, while De Beers is cutting costs by $100 million this year.
Despite the tighter funding, the Jwaneng underground is viewed as “mission critical” and necessary to avoid a revenue gap after the end of the open cast operations. Analysts have said the Jwaneng underground is not only critical for De Beers and government, but also the broader natural diamond industry where trends-mapping shows that demand will outstrip supply in the medium term due to the lack of major discoveries in the past decades.
Earlier this year, De Beers and government approved a $1 billion (P13.6 billion) budget to kickstart underground activities at the Jwaneng pit, the country’s single richest diamond mine which contributes up to 70% of Debswana’s profits.
Meanwhile, while De Beers cuts its costs, government is equally searching for areas to reduce the planned budget expenditure this year, in order to keep the deficit from ballooning beyond control.
Vice President and Finance Minister, Ndaba Gaolathe, yesterday told a youth budget pitso that government had no choice but to reduce the public sector wage bill, scale down grants and subventions as well as accelerate parastatal reforms, amongst other containment measures required to restore fiscal stability.
From an original estimate of P8.7 billion, the budget deficit for 2024-25 could go as high as P18.7 billion, owing to the sharp drop in diamond sales which are now expected to come in significantly lower than forecast.