COMMENTARY: Glimmer of hope as diamonds sparkle returns

SHARE   |   Monday, 04 April 2016   |   By Staff Writer
COMMENTARY: Glimmer of hope as diamonds sparkle returns

News coming from De Beers and forecasts from elsewhere that demand will soon outstrip supply in the global diamond markets signal a glimmer of hope following a tumultuous 2015 for the roughs, which are the cornerstone of our economy.  Mining companies cut about a quarter of global supply last year to arrest the 18 percent slump in rough-diamond prices brought on by China’s economic slowdown and an industry-wide credit crunch. Last year, Jwaneng’s production declined 13 percent to 9.8 million carats, with most of its output from the Cut 7 ore body. The output represented 34 percent of De Beers’ global diamond production in 2015. The mine plans to cut its operating costs by 3 percent this year. News this week that De Beers’ project to expand the world’s most valuable diamond mine – the Cut 8 project – has encountered its first gem-bearing ore, seven years after it started are comforting.

Since the beginning of the year prices have climbed 5.1 percent in 2016. Statistics Botswana reports this week that in January 2016, total exports were valued at P6, 981.1 million, showing an increase of 32.5 percent from the December 2015 value of P5, 269.3 million. The increase was as a result of more exports of rough diamonds during the current period. Total exports for January 2016 show a rise of 20.8 percent from the January 2015 value of P5, 779.4 million. Of the P6, 981.1 million January 2016 export value, 87.3 percent was attributed to exports of Diamonds. These exports consist of diamonds from diamond polishing companies as well as those from the aggregation process.

We hope this positive trajectory signals recovery in the diamond market and continues on the upward incline, which in turn will give assurance that our economy returns to the happy times once more. Such positive outlook will save the much needed jobs among locals, who in recent months have been thrown into the streets as diamonds took a tumble and producers cut production while others closed some of their projects. We are confident that the swift and decisive responses, announced by Debswana MD Balisi Bonyongo last year, will soon begin to bear fruit and have positioned the company well for 2016. We hope the volatile and uncertain economic environment of last year will diffuse and pave way for the economy to flourish again. We also pray that the Chinese and Japanese markets, which remain subdued for 2016 will follow patterns of positive sales growth anticipated in the USA market that remained strong last year.

We note that on the exploration side things remain subdued as investors remain skeptical and shun undeveloped projects, which are banking on feasibility should markets recover adequately to profitability. Botswana Diamonds chairman John Teeling acknowledges that it is difficult for explorers to raise capital, but expresses confidence in the 50/50 partnership that his company has with ALROSA. Botswana Diamonds and ALROSA are currently conducting an extensive exploration programme in Botswana, drilling, sampling and conducting geophysics on two licenses in the Orapa area. They remain convinced that their technology and expertise will provide encouraging results in the Gope region.

On Tuesday Botswana Diamonds plc announced its interim results for the six month period ended December 31, 2015, which showed that the miner lost $388,000. The losses are due to depressed global diamond market and a lack of investor interest in exploration companies. We can only hope that the argument by Teeling that markets are still developing outside of the US and Europe, with burgeoning middle classes in South America, Asia and part of Africa likely to drive trade in the future, is sound. Elsewhere the $30 million acquisition of BK11 diamond mine in the Orapa/Letlhakane region from Firestone Diamonds by Tango Mining presents a glimmer of hope for mining juniors.