Debswana to re-open Damtshaa Mine next year

Brian Benza
Staff Writer | Friday January 14, 2011 00:00

 

Damtshaa was mothballed in early 2009 along with all other Debswana mines at the peak of the global economic recession that knocked down demand and prices for diamonds.

However, Debswana's other mines - Jwaneng, Orapa and Letlhakane - were reopened after three months while Orapa No. 2 Plant was reopened later in 2009.

In an e-mailed response to Business Week, Debswana's Group Public and Corporate Affairs Manager, Esther Kanaimba-Senai, said Damtshaa Mine will be reopened next year and will operate at full capacity.

'Damtshaa will open for production next year and it will run at full capacity when it does open,' she said. 'In 2008, Damtshaa produced just over 500,000 carats.'

Asked about the company's production for 2010 and target for 2011, Kanaimba-Senai said they expect to produce more than they did in 2009 because market conditions continue to improve.

In 2009, Debswana produced 17 million carats and set a target of 20 million carats for 2010 that was subsequently revised upwards to 23 million. 'We are still finalising our reports for 2010, but we definitely have exceeded the target of 20 million carats that we had set for 2010,' Kanaimba-Senai continued.

'In view of the improving market for diamonds, we expect to produce more than what we did in 2010. However, we are not in a position to give the actual figures at this point as consultations with relevant stakeholders are yet to be finalised.'

Meanwhile, Canadian-born Jim Gowans is the head of Debswana beginning this month following the shock resignation of Blackie Marole in the middle of December last year. With demand progressively increasing along with the global economy, Debswana is expected to up its production this year. However, in line with De Beers' New Normal strategy, production will not reach pre-recession levels of over 32 million carats.

After coming out of the recession, De Beers adopted a new strategy of keeping goods in the ground by producing below maximum capacity in a bid to influence market fundamentals. 'New Normal' refers to the global diamond giant's new policy of prolonging the life span of its mines by moderating production permanently. Observers say this will result in the company influencing prices as demand will continue to outweigh supply.

But De Beers has denied any intention to manipulate the market: 'There is a natural supply-demand imbalance that is leading to certain realities,' the company has said.

In a drive to extend diamond reserves, De Beers, which also has mines in Namibia, South Africa and Canada, last year placed a 40-million carat cap on its annual diamond production starting in 2011, a move that is likely to drive up prices of rough stones.

In an interview with the Financial Times, former De Beers Managing Director Gareth Penny spoke about the company's production plans. 'Do we want to ramp production back up to 48 million carats, given the lack of availability in the future?

'Diamonds are a treasure of nature that should be properly protected because there will be less to sell. The reality is that supply cannot keep up, and that will become very accentuated over the next 15 years,' Penny said. In the past, De Beers has been accused of using its diamond stocks to affect diamond prices in the market. Possibly anticipating such an accusation in this context, Penny told the Financial Times: 'We are not seeking to manipulate anything, but there is a natural supply-demand imbalance that is leading to certain realities.'

Kanaimba-Senai says despite the improvement in market conditions in 2010, demand for diamonds is not yet back at pre-recession levels. 'Although the market has improved significantly, we are still not yet back to pre-recession levels,' she says.

'However, should demand increase substantially, our mines are configured to be able to meet that demand up to 33 million carats.'