Minerals off with a bang in 2010

MBONGENI MGUNI
Staff Writer | Monday April 12, 2010 00:00

Diamond exports for the first quarter of last year amounted to P1.5 billion while for January and February 2010 alone, the industry has already earned P3 billion. Analysts believe the higher figures for this year are more a reflection of higher diamond demand and prices, although Debswana cut back production in the first quarter of 2009 due to low gemstone prices.

According to estimates from Harry Winston - a diamond company with production and retail interests - after plummeting in September 2008, rough diamond prices have generally recovered to pre-recession levels.

Recovery is being driven by demand in China, India, Europe and increasingly the United States, that has traditionally been the main consumer of diamonds. New US retail figures mirror positive consumer confidence showing that demand for luxury items, including diamonds, is on the rise in the world's biggest economy.

SpendingPulse, an information service of MasterCard Advisors, released figures last week showing healthy year-on-year growth in luxury goods for March. The trends show that US consumers have eased off their savings, leaving them with cash to spend partly because of the reduction in the consumer debt burden in the aftermath of 2008 mortgage crash.

Although the rising spending could decelerate as consumers seek to avoid the horrors of the recession, experts are generally agreed that diamonds have room for further upward price revision in the short to medium-term.

Besides diamonds, earnings from gold and copper and nickel for January and February 2010 are all on the rise, indicating the general recovery of the world economy. Copper and nickel exports netted P496 million for the first two months of the year, up from the P191.3 million recorded during the first quarter of last year. The higher earnings were expected, given the strong growth in the price of copper driven largely by demand from the Chinese economy and production hitches in Chile, the world's largest producer of the metal.

Export earnings from gold for the first two months of the year amounted to P67.5 million, compared to the P55.4 million earned in the first quarter of last year. The country's sole gold producer, Mupane Gold Mine, largely withstood last year's recession as investors bought into gold as a safe haven from the recession.

Gold is presently nearing its highest level for 2010 due to the euro's recovery against the US dollar and bullish sentiment on gold's outlook. The precious metal's price is expected to rise further than Friday's US$1,157.25 per ounce as investor demand continues to be strong while producers have been slow to come to the market.

Earnings from soda ash, which was equally insulated from last year's recession, are marginally down for the first two months of the year when compared to the first quarter of last year. By February this year, soda ash exports were P76.3 million against the P142.7 million earned in the first quarter of last year.

The country's export earnings, while positive thus far for 2010, could be dampened by the pula's strengthening against the US dollar. However, the crawling peg system, employed since 2005 by the Bank of Botswana to manage the pula, has thus far sustained the country's export competitiveness through continuous adjustments to the local currency's position against major trading partners.