ODC suspends sales, Lucara stays the course
Pauline Dikuelo - Mbongeni Mguni | Monday October 30, 2023 06:00
The decision is yet another indicator of the pressures in the diamond market after the most challenging year since 2019, with falling prices and consumer demand.
ODC’s announcement this week echoes a recent decision by De Beers to give its rough diamond buyers full flexibility in their allocations for the last two auctions of the year. Prior to that, Indian cutting and polishing firms, which process 80% of the world’s rough diamonds, had announced a two-month suspension of imports.
The different interventions are designed to reduce the oversupply of rough diamonds in the market while waiting for strong end-of-year marketing to help perk up retail jewellery demand and restart a healthy diamond cycle.
ODC Managing Director Mmetla Masire told participants at this week's Facets diamond conference that the ongoing global economic uncertainties, especially in major markets such as the United States, as well as stiffer competition from synthetics, had weakened the company's recent sales. “Due to the broader market challenges, we are not going to hold the November sale,” Masire told BusinessWeek in a separate interview. “It is not because we cannot sell but rather this was a conscious decision as we do not want to dump our diamonds. “We are still to decide whether the December sale will go through but chances are slim.”
Masire said the ODC will channel more energy into marketing Botswana diamonds, noting that synthetic diamonds have rapidly gained ground in the market, posing a challenge to naturals.
“We are focused on highlighting the uniqueness and irreplaceable quality of our natural diamonds. “We will be looking at advertising and marketing strategies that will make our natural diamonds appeal to customers. “We will be telling our story better and putting it out there so that the end user can get to make informed decisions,” he said.
ODC conducts 10 sales events for rough diamonds each year attended by registered buyers from across the world, who bid on a spot auction basis for the different sizes and types of stones on offer. The state-owned diamond trader has an allocation to purchase 25% of Debswana’s annual production, a figure that averages six million carats a year. That amount is due to increase to 30% once the sales agreement between the government and De Beers is finalised.
Meanwhile, as producers restrain their output amidst declining sales, Lucara Diamond Corp says there are no plans to postpone or cancel quarterly sales tenders of Karowe Mine’s production.
Lucara sells Karowe’s production through quarterly tenders, as well as the Clara diamond sales platform, a blockchain-powered sales channel.
“Lucara's tender process has been in use since 2012 to sell Karowe rough of all sizes and qualities and is seamlessly scalable,” Lucara Botswana MD, Naseem Lahri told BusinessWeek in an emailed response to enquiries. “The process and customer base are well developed. “Lucara is taking the necessary steps and engagements to ensure that all production is sold in a timely manner.”
She added: “Lucara will continue to use its established mechanisms to sell Karowe's rough diamond production, namely through its Clara diamond sales platform, traditional tenders and other value-added mechanisms for stones.”
Despite the downturn in the market this year, Lucara has also not changed its production, sales and revenue guidance for 2023, which was originally shared with the market in December 2022. The high-flying miner expects revenues to reach up to $230 million and sales to fall between 385,000 and 415,000.
Lucara recently terminated a 10-year sales deal with HB Antwerp, which in the first six months of the year, accounted for 60% of revenues. Lucara says it maintains its confidence in its own sales strategies and its existing channels.