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Debswana production drops, De Beers cuts forecast

MBONGENI MGUNI
Debswana production drops, De Beers cuts forecast
Debswana's production fell by five percent in the first quarter of the year, as its parent, De Beers, cut its forecast output for 2020 to a maximum of 27 million carats from an initial target of 34 million carats.

Debswana is by far the biggest producer in De Beers’ group of mines worldwide, accounting for 76% of output in 2019. De Beers also has mines in South Africa, Namibia and Canada.

In a statement to investors earlier today, Anglo American, De Beers’ majority owner, said Debswana’s mines produced 5.6 million carats between January and March 31, 2020, down from about six million carats in the corresponding period last year. As a group, De Beers produced 7.8 million carats for the quarter, down from 7.9 million in the corresponding period last year.

While the reduction was due to operational challenges at Orapa and expected lower grades at Jwaneng, Anglo American said production would come in lower for the year due to effects of the coronavirus (COVID-19) pandemic.

Operations at Debswana have been constricted by coronavirus protocols as well as the suspension of diamond sales due to the travel ban. On Tuesday, Mineral Resources, Green Technology and Energy Security minister, Lefoko Moagi told journalists further planned diamond sales (known as sights) for this year were provisionally cancelled, although plans were afoot to leverage technology and reopen the auctions. 

Traditionally, De Beers has a policy of “keeping stones in the ground” rather than producing for inventory, whenever the diamond market experiences weakness.

“In response to the impact of COVID-19 on mining operations, wholesale trading activity and consumer traffic in key consumer markets, production guidance has been revised to between 25 and 27 million carats (for 2020) from 32 to 34 million carats,” Anglo American told investors.

“This is subject to continuous

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review based on the disruptions related to COVID-19 as well as the timing and scale of the recovery in trading conditions.” 

Anglo American said lockdown measures had significantly impacted diamond in Southern Africa, manufacturing in India and retail operations in the United States, the chief market for diamonds.

The group said consumer demand had returned to China, the second biggest market for diamonds. China was the epicentre of the coronavirus, but has recently relaxed its restrictions as cases have declined, allowing consumers to shop for diamonds.

Meanwhile, in his virtual press conference with journalists, Moagi described the situation facing the local diamond industry as “difficult and bad”.

“It’s so bad that Debswana as the main producer, stopped at the third sight and the others have been cancelled,” he said.

“There are other producers in the market who are attempting to charter planes to access the goods.

“The hope is that since we expect the restrictions to end in May, sales may start again cautiously.

“For now, production will be affected so that, for example, where we expected 20 million carats, the production may be 18 million for 2020.” 

Diamonds continue to be the backbone of the local economy, accounting for the bulk of foreign currency inflows and a significant proportion of government revenues. Last month, government revised its expected mineral revenues, in the form of royalties and dividends, for the 2020-2021 fiscal year to P12.4 billion from P14.4 billion.

Mining operations around the country in different minerals are generally still ongoing, as the sector has been classified as essential.



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