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Lucara gigantic stone shakes Canadian markets

This week Lucara Diamond Corp which started this year on a high note with regards to digging out larger precious stones discovered a 223 carat high white gem diamond and its share price responded by a hot wave which slightly shook the Canadian markets, going up by 8.28 percent or moving up by 14 cents from $1.69 to $1. 83.

A market observation shows on 15 February the share price was at $1.69 and it went up to $1.83 the same time when Lucara announced its 223 carat diamond. This was after the share price was moving at a slow but fluctuating pace of between $1.67 and $1.68 since 7 February 2019 prior to the big announcement of the 223 carat gem on 19 February 2019 which showed a significant rise of 8.28 percent in the share price. In the Swedish market the new discovery by Lucara only increased by 1.59 percent while in Botswana the share price remained unmoved at P16.00 even after the big announcement.

Lucara’s primary listing is in the Toronto Stock Exchange(TSX), has secondary listing in the Botswana Stock Exchange and the Nasdaq Stockholm all under the share code “LUC”. Lucara is registered in Toronto, Canada and 100 percent Karowe Mine in Letlhakane where the recent 223 carat high white gem diamond discovery was made.

The latest 223 carat mined from the Botswana soil is expected to be showcased alongside its other large counterparts, the 127 carat which was discovered just ten days into 2019 and the 240 carat which was found eighteen days later still on this year, at the upcoming diamond tender closing on 7 March 2019. The next sale date for Lucara diamonds is 7 March 2019 and the viewings, which are open for Gaborone, Botswana only, will be on 24 February and 7 March 2019.

Lucara President and Chief Executive Officer Eira Thomas commented: “2019 is off to a great start, with several, high quality diamonds in excess of 100 carats having been recovered by mid February, a testament to the strong, stable operating environment that has prevailed at Karowe since late 2018. The 127 carat, 240 carat and 223 carat gems will be made available for sale alongside other exceptional, single diamonds at our first diamond tender of the year, closing on March 7, 2019.”

Last year Thomas lauded Botswana’s Karowe mine’s significant contribution to Lucara’s production, especially with regards to producing big gems. The Lucara president called Karowe operations “stabilized and significantly improved our mining operations.” Diasmond experts believe Karowe has positioned itself as Lucara’s flagship with the production of larger diamonds.

Ever since laying its sharp mechanisms on Karowe in 2012 a total of 129 diamonds in excess of 100 carats have been mined and last year 33 precious stones were dug up. There have been 12 larger than 300 carats in size diamonds mined by Lucara and five of them were recovered in 2018. When touting Karowe last year after an avalanche discovery of further larger diamonds Thomas said the Letlhakane mine “has consistently delivered large, high-value diamonds throughout its history.” The Karowe open pit is reported to boast reserves of 2.6 million carats extending out to 2026.

Karowe is known to produce the historic 1109 carat Lesedi La Rona diamond, the largest rough diamond to be found in more than a century. Lesedi La Rona which was dug up in Karowe in November 2015 is also the third largest diamond ever found and the second largest of gem quality-only the non-black gem Sergio and the gem-quality Cullinan were larger. The largest diamond to be produced by Lucara was insured for P1.2 billion and was sold for P530 million to British jeweler Graff Diamonds

Another giant gem coming out of the Karowe open pit was the 813 carat Constellation which was purchased by Swiss jeweler De Grisogono for P631 million. Both Lesedi La Rona and Constellation have been rated Type IIa by the Gemological Institute of America. Type IIa diamonds are the most valued and the purest type of diamonds. They are regarded as rare and coveted subgroup and are chemically pure and often show extraordinary optical transparency.

Next month Clara Diamond Solutions is expected to have a field day when selling the large three diamonds which have just been discovered in two months.  Clara, wholly owned by Lucara, is the digital sales platform that uses proprietary analytics together with cloud and blockchain technologies to modernize the existing diamond supply chain, driving efficiencies, unlocking value and ensuring diamond provenance from mine to finger.

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Botswana on high red alert as AML joins Covid-19 to plague mankind

21st September 2020

This century is always looking at improving new super high speed technology to make life easier. On the other hand, beckoning as an emerging fierce reversal force to equally match or dominate this life enhancing super new tech, comes swift human adversaries which seem to have come to make living on earth even more difficult.

The recent discovery of a pandemic, Covid-19, which moves at a pace of unimaginable and unpredictable proportions; locking people inside homes and barring human interactions with its dreaded death threat, is currently being felt.

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Finance Committee cautions Gov’t against imprudent raising of debt levels

21st September 2020
Finance Committe Chairman: Thapelo Letsholo

Member of Parliament for Kanye North, Thapelo Letsholo has cautioned Government against excessive borrowing and poorly managed debt levels.

He was speaking in  Parliament on Tuesday delivering  Parliament’s Finance Committee report after assessing a  motion that sought to raise Government Bond program ceiling to P30 billion, a big jump from the initial P15 Billion.

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Gov’t Investment Account drying up fast!  

21st September 2020
Dr Matsheka

Government Investment Account (GIA) which forms part of the Pula fund has been significantly drawn down to finance Botswana’s budget deficits since 2008/09 Global financial crises.

The 2009 global economic recession triggered the collapse of financial markets in the United States, sending waves of shock across world economies, eroding business sentiment, and causing financiers of trade to excise heightened caution and hold onto their cash.

The ripple effects of this economic catastrophe were mostly felt by low to middle income resource based economies, amplifying their vulnerability to external shocks. The diamond industry which forms the gist of Botswana’s economic make up collapsed to zero trade levels across the entire value chain.

The Upstream, where Botswana gathers much of its diamond revenue was adversely impacted by muted demand in the Midstream. The situation was exacerbated by zero appetite of polished goods by jewelry manufacturers and retail outlets due to lowered tail end consumer demand.

This resulted in sharp decline of Government revenue, ballooned budget deficits and suspension of some developmental projects. To finance the deficit and some prioritized national development projects, government had to dip into cash balances, foreign reserves and borrow both externally and locally.

Much of drawing was from Government Investment Account as opposed to drawing from foreign reserve component of the Pula Fund; the latter was spared as a fiscal buffer for the worst rainy days.

Consequently this resulted in significant decline in funds held in the Government Investment Account (GIA). The account serves as Government’s main savings depository and fund for national policy objectives.

However as the world emerged from the 2009 recession government revenue graph picked up to pre recession levels before going down again around 2016/17 owing to challenges in the diamond industry.

Due to a number of budget surpluses from 2012/13 financial year the Government Investment Account started expanding back to P30 billion levels before a series of budget deficits in the National Development Plan 11 pushed it back to decline a decline wave.

When the National Development Plan 11 commenced three (3) financial years ago, government announced that the first half of the NDP would run at budget deficits.

This  as explained by Minister of Finance in 2017 would be occasioned by decline in diamond revenue mainly due to government forfeiting some of its dividend from Debswana to fund mine expansion projects.

Cumulatively since 2017/18 to 2019/20 financial year the budget deficit totaled to over P16 billion, of which was financed by both external and domestic borrowing and drawing down from government cash balances. Drawing down from government cash balances meant significant withdrawals from the Government Investment Account.

The Government Investment Account (GIA) was established in accordance with Section 35 of the Bank of Botswana Act Cap. 55:01. The Account represents Government’s share of the Botswana‘s foreign exchange reserves, its investment and management strategies are aligned to the Bank of Botswana’s foreign exchange reserves management and investment guidelines.

Government Investment Account, comprises of Pula denominated deposits at the Bank of Botswana and held in the Pula Fund, which is the long-term investment tranche of the foreign exchange reserves.

In June 2017 while answering a question from Bogolo Kenewendo, the then Minister of Finance & Economic Development Kenneth Mathambo told parliament that as of June 30, 2017, the total assets in the Pula Fund was P56.818 billion, of which the balance in the GIA was P30.832 billion.

Kenewendo was still a back bench specially elected Member of Parliament before ascending to cabinet post in 2018. Last week Minister of Finance & Economic Development, Dr Thapelo Matsheka, when presenting a motion to raise government local borrowing ceiling from P15 billion to P30 Billion told parliament that as of December 2019 Government Investment Account amounted to P18.3 billion.

Dr Matsheka further told parliament that prior to financial crisis of 2008/9 the account amounted to P30.5 billion (41 % of GDP) in December of 2008 while as at December 2019 it stood at P18.3 billion (only 9 % of GDP) mirroring a total decline by P11 billion in the entire 11 years.

Back in 2017 Parliament was also told that the Government Investment Account may be drawn-down or added to, in line with actuations in the Government’s expenditure and revenue outturns. “This is intended to provide the Government with appropriate funds to execute its functions and responsibilities effectively and efficiently” said Mathambo, then Minister of Finance.

Acknowledging the need to draw down from GIA no more, current Minister of Finance   Dr Matsheka said “It is under this background that it would be advisable to avoid excessive draw down from this account to preserve it as a financial buffer”

He further cautioned “The danger with substantially reduced financial buffers is that when an economic shock occurs or a disaster descends upon us and adversely affects our economy it becomes very difficult for the country to manage such a shock”

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