Debswanatrims output on weak gem demand

DEBSWANA Diamond, which operates the biggest mine for the gems by value, is trimming output at a tailings-treatment plant in Botswana as it sees weak demand for the stones persisting in the first half.

The company, a joint venture between the country and Anglo American’s De Beers unit, had “leveraged down” production at the Jwaneng facility by half, Balisi Bonyongo, the managing director at Debswana, said in Gaborone.

Its other operations were “running flat out”, with output going according to plan, Bonyongo said.

Rough diamond prices dropped 6.9 percent in the last three months of 2014, the biggest quarterly decline in more than two years, and weakened a further 1.2 percent in the first three months of 2015 as banks tightened credit, forcing traders, cutters and polishers to sell more inventories.

“In cutting and polishing, we’re also seeing a squeeze in margins because rough prices have gone ahead of polished,” he said. “This has congested the midstream and because of that, the market has softened.”

Debswana, which operates four diamond mines, started processing tailings at Jwaneng last year and estimates the dump can yield as many as 900 000 carats annually for about 20 years. The first stones from the plant were recovered last November.

Bonyongo did not see a repeat of 2008, when Debswana had closed all of its four operations that December as the global recession had reduced spending on luxury goods including jewellery.

“We have built flexibility and agility into our operations and can reduce production without closing down,” he said.

“We have a robust balance sheet and can run this business without shutting. We are comfortable that we have enough resources and connected resources with banks.”

De Beers said last month that the outlook for diamond jewellery growth in 2015 was positive across all the main markets after sales rose 3 percent to $81 billion (R958bn) last year. “Our partners say the market could improve in the second half and our job is to respond,” he said.

At Debswana, output would range from 23 million carats to 26 million carats annually until about 2028, the company said. It produced 24.2 million carats last year, Bonyongo said.

Production peaked at 34.3 million carats in 2006, according to the nation’s Department of Mines.