Canadian based top gem producer, Lucara Diamond Corporation last week announced another watershed recovery from its Botswana flagship mine, Karowe located in the lucrative Boteti diamond fields. In a statement released by the Botswana Stock Exchange (BSE) listed corporation, which wholly owns and operate Karowe announced the recovery of a 127 carat, top white gem diamond.
Since mining began at Karowe in 2012, a total of 129 diamonds in excess of 100 carats have been recovered, 33 in 2018 alone. That tally includes 12 diamonds larger than 300 carats in size, of which five were recovered in 2018. In addition, Lucara has sold 180 diamonds in excess of $1 million (P10.5 million) each and ten diamonds have sold for in excess of $10 million (P105 million) each.
When commenting on the recovery Eira Thomas, Lucara President and Chief Executive Officer said her company’s latest unearthing of this high value, top white 127 carat diamond attests to the remarkable nature of the Karowe ore body, which has consistently dispatched large, high value diamonds throughout its history. “2018 was an incredible year for our mining operation, having recovered a record number of Special diamonds of 10.8 carats in size,” said Thomas.
Lucara chief further shared that in 2019, Korowe’s mining will be largely focused on the high value south lobe, including contributions from the newly refined EMPKS unit which is now understood to be the source of both the historic 1109 carat Lesedi la Rona and the 813 carat Constellation, which sold for a record US$63.1 million (P660 million). The Karowe Diamond mine currently boasts of its open pit reserves of 2.6 million carats extending out to 2026 and is in the process of completing a feasibility study that could expand mining underground to 2036 and beyond.
Lucara reports that another budget of $14.8 million (P155 million) has been approved to complete a feasibility study that was initiated last year, evaluating the potential for an underground mining operation at the mine. “Work undertaken in 2018 under a budget of approximately $29 million (P304 million) has significantly de-risked the project and in 2019, efforts will focus on follow up geotechnical and hydrogeological drilling and related studies,” shared Eira Thomas in statements released last week Friday.
Lucara hinted this possibility in their Quarter 3 results last year when they received promising feedback from the underground feasibility study. According to the Vancouver headquartered Diamond Corporation, an updated mineral resource was announced for the AK06 kimberlite during 2018 Q2. The updated Mineral Resource Estimate was completed by Mineral Services Canada Inc.
The estimate is based on historical evaluation data combined with new sampling results of microdiamond, bulk density and petrography from recent deep core drilling and from historical drill cores. Lucara further explains that new delineation drill coverage and review of historical drill cores supported an update of the internal geological model.
Production data which includes a controlled production run from the Eastern magmatic-pyroclastic kimberlite and recent sales-valuation results have been incorporated into the grade and value estimates, which have been made based on an updated model of process plant recovery efficiency. The in situ Mineral Reserve for AK06with an effective date of May 25, 2018 is within the probable category containing 19.84 Million tonnes with a recoverable grade of 13.08 carats per hundred tonne for 2.60 Million carats with an average price per carat of $ 624/ct.
“Life of Mine and Working stockpiles contribute an additional 5.56 Million tonnes with a recoverable grade of 6.7 carats per hundred tonne with an average price of $625/ct. The recoverable grade is based on the updated Mineral Resource estimate as presented in the technical report (1.25 mm bottom cut off size – BCOS) at 70 percent of in situ carats at 1.00 mm bottom cut off size.
Last week Lucara also released their future projections going forward. In 2019, the company forecasts revenues between $170 million (1.8 billion) and $200 million (2.1 billion), consistent with the forecast for 2018. These projections include “Specials” which are diamonds that are 10.8 carats and larger but exclude the sale of any truly unique diamonds such as the 1,109 carat Lesedi la Rona and the 813 carat Constellation.
Specials are consistently recovered from the Karowe diamond mine and contribute a significant percentage of the Company’s annual revenue. Diamonds recovered are expected to be between 300,000 carats and 330,000 carats and diamonds sold are expected to be between 300,000 carats and 320,000 carats. Thomas says having stabilized and significantly improved its mining operations at Karowe in 2018; Lucara is now focused on optimizing the base business and pursuing a suite of high potential, organic growth opportunities.
“The completion of a feasibility study examining the potential for underground production and Life of Mine expansion at Karowe from 2026 until at least 2036, remains a top priority for 2019,” she said. Lucara Boss also added that her company will continue to systematically ramp up diamond sales through Clara, the company’s transformational, proprietary digital sales platform that successfully completed its first trial sale in December 2018.
“Our focus at Karowe in 2019 will be on driving operational efficiencies, increased productivity and cost control, and maximizing cash flow. The waste stripping bottleneck is now behind us and we expect stripping ratios to steadily improve towards the end of the calendar year, enabling improved access to high value, south lobe ore,” she said.
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.
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.
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”