The Okavango Diamond Company (ODC) rough diamond sales fell 23 percent year-on-year to $231 million in the first half of 2015.
ODC, which has held five tenders in 2015, is expected to sell 14 percent of Debswana’s production through auctions this year as Botswana seeks to develop its own price book through the independent window outside of De Beers’ channels.
“Although we saw a temporary improvement in rough market sentiment and prices early in 2015, prices dipped again after the March Hong Kong show and the recent bankruptcies in India have now prompted further uncertainty in the market,” Toby Frears, Okavango’s managing director told Rapaport News.
“ODC’s prices are set by our customers through a competitive and transparent bidding process and reflect prevailing rough market conditions.”
Frears added that the company’s prices have softened since the third quarter of 2014, in line with market trends. However, the average price achieved fell by just 2 percent to $178 per carat during the six-month period.
Frears explained that the marginal decline was due to variations in Okavango’s product mix, particularly the large stone content, as the company has been able to offer significant high-value stones during the year.
Okavango’s sales by volume dropped 21 percent to 1.296 million carats during the period and the company sold 745 of the 794 lots on offer.
ODC holds 10 auctions in a year, which are attended by both local and international buyers. The state-owned company sold approximately 3.27 million carats, achieving revenue of $552m (P5.2 billion) in 2014, which was its first full year of operation.
As per the 2011 agreement with De Beers, ODC’s supply of the diamonds increases by one percent annually, until it reaches 15 percent by 2016.
ODC buys partially sorted diamonds from De Beers Global Sightholder Sales (DGSS) and then sorts the goods into its own sales assortment before inviting its customers to view and purchase the stones through an auction process.
On average, Okavango sells about 250,000 carats of rough diamonds per auction with projected annual sales of about $400 million (P3.5 billion).
In an earlier interview, ODC’s stakeholder relations executive officer at ODC, Kutlo Thathana told MmegiBusiness that plans are still underway to introduce contract sales to complement auctions.
“It remains our intention to introduce contract sales to complement our regular spot auctions as we recognise the importance some customers place on regular committed supply arrangements.
“We will introduce contract sales when we have the necessary volumes to support contract and auction sales in parallel,” she said.
Currently, the diamond company only sells through auctions.