Debswana to cap output at 26m carats

Brian Benza | Friday April 10, 2015 12:39

Addressing the media in Gaborone yesterday, the company’s managing director Balisi Bonyongo said the company plans to produce between 23-26 million carats in the near future.

“It is better to keep the goods in the ground than to just produce when the market fundamentals do not support it,” he said.

Debswana produced 24.3 million carats in 2014, leading to a 31 percent jump in revenue with strong demand and a favourable exchange rate supporting the growth.

At its peak, Debswana produced 34 million carats in 2007, before adapting to a ‘new normal’ strategy of producing to the market, a development which analysts said contributed significantly to price growth.

According to Bonyongo, Debswana has this year adopted a guarded optimism approach, as indications are that the first half will be characterised by weak rough diamond demand with a recovery only seen in the last six months of the year.

“US are our biggest consumer, we had expected strong demand because of increasing employment level and rising consumer levels but sales figures from thanksgiving holiday were below expectations.

“Our other big market China is also experiencing an economic slow down while Hong Kong’s jewelry sales were seriously affected by the demonstration in the Chinese state last year. The liquidity challenges faced by the Indian market have also caused a glut in the midstream.  We however expect a recovery in the second half of the year,” he said.

While rough diamond market is weak, Bonyongo said that Debswana has not slowed down production at it mines and the company will not experience shut downs as in 2009.

Debswana will, however, slow down production at it it’s Jwaneng Modular tailing plant this year, which has a capacity to produce 900,000 carats per annum.

From a high of 34 million carats in 2007, diamond production, which contributes just under 25 percent to Botswana’s GDP and 65 percent to foreign exchange receipts, has plateaued in the last few years as Debswana caps production to match weakening market conditions.

In the medium to long-term, De Beers, which owns half of Debswana, expects industry fundamentals to strengthen as diamond production plateaus and demand continues to increase.

In a recent interview with BusinessWeek, De Beers CEO Phillipe Mellier said Debswana will this year target to produce slightly less than 24.3 million carats dug up in 2014.