Debswana output flat as market stabilizes
Staff Writer | Wednesday February 1, 2017 17:31
Maintaining production at the previous year’s levels signals stabilisation in the diamond market after a sluggish 2015 in which Debswana had to cut production by 15% due to slowing consumer demand.
Debswana, a joint venture between government and Anglo American’s diamond unit De Beers, produced the bulk of its diamonds from its flagship Jwaneng Mine at 11.9 million carats.
At Jwaneng, production increased 40% in the fourth quarter, partly offset by Orapa, which decreased by six percent, and Damtshaa, a satellite operation of Orapa, which was placed on care and maintenance from January 1, 2016.
Its oldest mine, Orapa, was the second largest contributor at 7.9 million carats while Letlhakane produced just over half a million carats.
From a high of 34 million carats in 2007, diamond production, which contributes just over 20% to Botswana’s Gross Domestic Product (GDP) and 65% to foreign exchange receipts, has plateaued in the last few years as Debswana caps production to match weakening market conditions.
In the medium to long-term, De Beers expects industry fundamentals to strengthen as global diamond production plateaus and demand continues to steadily increase.
Government gets about 80 thebe from every pula worth of diamonds sold by Debswana to De Beers. Diamond revenues are also accrued from state-owned Okavango Diamond Company (ODC), which sells 15% of Debswana run on mine annual output.
According to estimates provided by Rapaport, De Beers closed 2016 with sales up 36% to $5.58 billion.
“Rough sales increased significantly in 2016, largely due to the low base created when rough demand slumped in 2015. “Mining companies sold more diamonds in 2016 at lower prices than the previous year,” Rapaport stated.
On the other hand, Okavango’s sales grew 80% to $546.5 million in 2016, with its average price declining 13% to $160.25 per carat.
“We expect rough demand will improve in the first quarter as manufacturers start to ramp up production to meet resurgent polished demand. It will be a challenge for mining companies to resist raising rough prices, but manufacturers are more determined not to overpay for rough than they used to be,” Rapaport said. Although Debswana kept production at a flat 20.5 million carats in 2016, fiscal authorities will be encouraged by the numbers that show mining bounced back in the third quarter of 2016 to anchor a 4.5% jump in GDP.
Latest figures from Statistics Botswana show that the domestic economy increased by 4.5% in the third quarter of 2016 compared to a decline of 5.4% recorded in the same quarter of 2015. The significant growth in the real mining value added of 13.3% was attributed to the increase of the diamond industry value added by 9.3% in the third quarter of 2016 compared to a decline of 33.4% registered in the same quarter of the previous year.