Written by NCHIDZI SMARTS
Prices of rough diamonds collapsed in late 2008 and for most of 2009 as a result of the global downturn but now seem to be on the path of recovery, which has not really brought excitement to Debswana.
Boyce Sebetela, Group Manager Strategy Manager, said the current recovery is based on fiscal and monetary policy stimulus and not by private sector consumption. He said until those are withdrawn as recovery depends on the private market, the industry cannot talk about recovery.
“The United States, Japan and other major economies have put a lot of money to drive recovery. Since this is state funded it is difficult to say when we will get back to days of glory,” he said.
The financial downturn has delayed the onset of supply constraints. Before the financial crisis, demand was expected to outpace supply by this year and Sebetela said the reflection of market shows that in the medium to long-term fundamentals are positive and it is anticipated that demand will exceed supply.
Virtually no discoveries of huge diamond mines have been made in recent years and most of the small to mid-sized mines being developed are still years away from launching production.
“For 2010 we are ready to increase production to 20 million but if demand increases we will be positioned to meet it,” Sebetela said.
Due to the economic crisis, Debswana only produced 17 million carats in 2009, down from 32 million carats in 2008, approximately half of what it normally produces, due to the depressed demand of diamonds last year.
The company said it is ready to increase its production target from 20million carats this year if markets conditions improve.
After reporting better-than-expected sales in the first quarter of this year, Debswana's MD Blackie Marole said demand for diamonds would be significantly higher this year compared with 2009, but would not reach 2008 levels.
“Prospects for this year and beyond look good and already first quarter sales are already showing signs of improvement,” he said.
With regard to the financial performance of the company, the MD reported that during 2009, Debswana achieved modest results against the backdrop of the global financial crisis. Revenue for the year was 35 percent below the 2008 revenue mark whilst selling prices were 22 percent lower than in 2008.
On the 2010 outlook, Marole said prospects for this year and beyond look good and that first quarter sales are already showing positive signs. Debswana was forced to suspend operations for months earlier last year after the collapse in demand for diamonds. Currently Damtshaa mine remains closed as Debswana has termed it a small operation. The mining giant has said it still has capacity within the major mines to meet demand without opening Damtshaa.
The Botswana Gazette
