Fiscal boost as Debswana output jumps 33%
Brian Benza | Friday October 27, 2017 18:00
Production figures released by parent company, Anglo American this week show that Debswana anchored De Beers’ output for the period, with the resurgent demand prompting an upward revision of 2017 production guidelines.
“In the period, Orapa’s production increased by 60% mainly driven by the ramp-up of Plant 1, which was previously on partial care and maintenance in response to trading conditions in late 2015. Jwaneng’s production increased by 23% as a result of planned increases in feed to plant,” said Anglo.
Debswana is equally owned by government and De Beers, with the latter 85% owned by Anglo American.
Debswana produced 24.2 million carats in 2014 before mid-stream overstocking and weak demand forced a limiting of production to 20.4m in 2015 and 20.5m carats in 2016.
Early this year, the diamond company indicated that it would produce 20.5 million carats this year, but later revised the production target upwards to 22 million carats on robust demand.
Indicative of the improved demand in 2017, Debswana has produced 17.1 million carats in the first nine months of the year, a 14% rise from the 15 million produced in the same period last year.
The higher production by Debswana will come as a boon for fiscal authorities, as it will translate into higher revenues for the year. The government gets 80 thebe from every pula worth of diamonds that Debswana sells to De Beers and Okavango Diamond Company (ODC). Diamonds also contribute to about 20% of the gross domestic product (GDP) as well as 80% of foreign exchange earnings.
At its peak Debswana produced 34 million carats in 2007 before adapting to a ‘new normal’ strategy of producing to the market, a development that analysts said has contributed significantly to price growth.
Debswana will not dig up more than 26 million carats in the short to medium term as the company looks to continue matching production to demand.
Addressing the media in Gaborone earlier, Bonyongo said the company plans to produce between 23-26 million carats in the near future.
“It is better to keep the goods in the ground than to just produce when the market fundamentals do not support it,” he said.
From a high of 34 million carats in 2007, diamond production has plateaued in the last few years as Debswana caps production to match weakening market conditions.
For the De Beers group, sales volume and production jumped in the third quarter as the market stabilised and due to the contribution of the recently launched Gahcho Kué mine in Canada and higher production at Debswana.
Rough-diamond sales grew 21% to 6.9 million carats in the three months to September 30, parent company Anglo American said Tuesday.
The improvement came as demand for lower-value goods returned to normal this year, De Beers explained.
Indian consumer demand improved compared to last year, resulting in higher sales of small rough diamonds destined for the local Indian market, a De Beers spokesperson added.
Anglo did not disclose De Beers’ sales value for the period, but results from its sights in July and August suggest a seven percent drop in the sales amount for the quarter, according to Rapaport records.
De Beers revised its full-year production forecast upward to approximately 33 million carats, representing a 21% increase versus 2016.
De Beers had previously projected that output for the year would be in the range from 31 million to 33 million carats.
In the first nine months, sales grew 12% to 26.9 million carats, while production increased 29% to 25.3 million carats.