Debswana output flat in bearish market
Brian Benza | Friday April 24, 2015 15:53
A first quarter production update from parent company, Anglo American says Debswana’s output decreased by two percent to 5.6 million carats compared to the same period in 2014, on the back of a decline in grade at Orapa.
“The Orapa decline, was which was largely offset by an increase in throughput at both Jwaneng and Orapa,” stated Anglo in a statement.
The 5.6 million carats dug up in the first three months of the year are six percent below the carats recovered in the last three months of last year.
In the first three months of this year, Orapa Mine produced 2.61 million carats, while Jwaneng output was slightly higher at 2.78 million. Damtshaa and Letlhakane Mines produced 57,000 and 188,000 carts respectively.
The modest production decline in the first quarter is a reflection of sluggish market conditions, as managing director Balisi Bonyongo recently told the media that indications are that the first half will be characterised by weak rough diamond demand with recovery only seen in the last six months of the year.
Further reflecting the weakness of the market De Beers, which owns 50 percent of Debswana, has also reduced its full year production guidance from between 32 to 34 million carats to 30 to 32 million carats, in light of current trading conditions.
De Beers, which also has mines in South Africa, Namibia and Canada produced 7.7 million carats in the first quarter of 2015 up two percent from the same period in 2014, driven primarily by higher grades at Venetia mine in Limpopo province. 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 has contributed significantly to price growth.
Debswana will not dig up more than 26 million carats in the short to medium term as the company looks to continue matching production to demand.
Addressing the media in Gaborone recently, Bonyongo said the company plans to produce between 23-26 million tonnes 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.
While rough diamond market is weak, Bonyongo said Debswana has not slowed down production at its mines and the company will not experience shut downs as it was the case in 2009.
Debswana will, however, slow down production at its 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.