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More positive signs for Debswana’s output

MBONGENI MGUNI
Grinding away: The diamond sector appears to be recovering PIC: debswana.com
More positive signals are emerging for the local diamond sector, with reports that from an initial forecast of a significant slump, Debswana could produce ‘just under’ 20 million carats this year, BusinessWeek has learnt.

Last year, Debswana’s mines dug up 23.3 million carats against a target of 24 million. The numbers were influenced by a slump in demand caused by high inventory in the diamond midstream, a sector occupied by cutting and polishing firms as well as jewellery manufacturers.

This year, a softer start to the year, during which Debswana produced 5.6 million carats in the first quarter compared to six million over the corresponding period in 2019, grew considerably darker as the onset of the coronavirus (COVID-19) forced production stoppages and constrained both the arrival of buyers and the exports of diamonds. Global demand for the precious stones also dropped as customers in key markets such as China, India and the US were impacted by lockdowns and pressure on incomes.

Fears of a deep production cut at Debswana were fortified after government cut its forecast mineral revenues from P20 billion to about P10 billion and De Beers, Debswana’s parent group, also revised its group wide production target down by seven million to a maximum of 27 million. De Beers, which receives the lion’s share of its annual production from mines in Botswana, also warned of job cuts across its global operations.

This week, however, estimates from Statistics Botswana revealed that forecast lower production at Debswana will not be as deep as originally expected. At ‘just under’ 20 million carats, Debswana’s production will be within the general range of previous years, with a low of 20.3 million carats in 2015 and a peak of 24.1 million carats in 2018.

“We are expecting at Debswana just under 20 million carats this year, as they have

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revised their estimates,” Lekoko Simako, senior statistician at Statistics Botswana said in a briefing.

“Diamonds don’t sell themselves and demand must be sustained through marketing. De Beers have increased these marketing activities.

“Goods were sent for viewing to their auction arm in Singapore, which allowed De Beers to continue selling into the pockets of demand outside.”

The improved situation was noted by De Beers recently with executives saying while they were cautiously optimistic as the industry opened up, they were also noting pent-up demand. De Beers’ latest sales of rough diamonds showed a near three-fold increase in earnings compared to the last two auctions of the precious stones. Global diamond industry research group, Rapaport has also noted firmer polished diamond prices ahead of the holiday period, a trend, which is supportive of rough diamond production. For De Beers, the festive period covering Thanksgiving in the United States, Christmas, the New Year and the Chinese New Year in February, represents the peak retail period, with hundreds of millions of dollars invested each year in intensive marketing globally.

“Diamond market sentiment improved in September as jewellers started to prepare for the fourth-quarter holiday season,” Rapaport researchers said in an update on Tuesday.

“Polished prices firmed due to shortages and rising holiday orders.

“Polished inventory levels are well below those of previous years (and) manufacturing has gone down drastically since March due to the coronavirus constraints.

“There is growing anticipation for the holidays as consumers seek to express emotions with more meaningful gifting during the pandemic.”

Rapaport researchers said the rough diamond market was robust during September, “continuing the momentum from the previous month”.



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