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Diamonds perform better in Q1, 2016

The rough diamond market bounced back during the first quarter of 2016, asserts the economic consultancy firm, E-Consult. In its quarterly economic review publication, E-consultant points to improved performance of the rough diamond market with De Beers sales averaging P6.4 billion during the first quarter of 2016 when compared to sales of the last quarter of 2015 which averaged a paltry P1.8 billion.

The firm attributes improved rough diamond market performance to efforts by De Beers and Alrosa, the two largest global suppliers of rough diamonds, to reduce supplies after the supply pipeline through trading, cutting, polishing, jewellery manufacturing and retail activities was overstocked, consumer demand was weak, and high rough prices relative to retail prices left little scope for profits. This, the firm says, all led to limited demand for rough and downward pressure on prices.

The E-consult review comes hardly a month after the foremost global diamond expert, Dr. John Bristow forecast that the rough diamond supply constraint exercised by major producers and the restructuring of the midmarket of the diamond value chain will put back the global diamond market back in sync.

Dr. Bristow commended De Beers and Debswana for reducing production and Russia’s Alrosa for building inventories to prevent an oversupply of rough diamonds. He adviced that the rough/polished price disconnect needed to be worked out of the system if normality was to return. Further, he explained that the midmarket, with access to very cheap credit, had been buying more rough diamonds than it should have and emphasized the importance of removing excessive debt from balance sheets.

Year 2015 had been a difficult one for the diamond market with producers, manufacturers, traders and retailers having suffered from tight liquidity and low margins resulting in a drop in business levels and revenue.

Producer’s attempts to sell were faced with continued rejected allocations from clients.

They were forced to reduce both volumes and prices, as well as allow their clients to defer purchases.

Larger producers either cut production in the second half of 2015 or reduced supply to the market resulting in fall in revenue.

Smaller producers, who sell via tenders or auction, fared better as they were able to place their lower volumes into the market at prevailing prices.

The midmarket saw financial weakness and several bankruptcies in key cutting centres. This situation was caused by a combination of high rough diamond prices, declining polished prices and reduced demand from the emerging markets, particularly China. India as the world’s largest cutting and manufacturing centre was the worst hit.

Beneficiation in African countries struggled with Botswana, South Africa and Namibia all seeing factory closures due to the reduced ability of manufacturers to operate profitably in these relatively high cost centres.

The polished diamond market saw a mixed demand and sales picture in 2015. The key US market, with around 40% of global polished sales, was relatively solid. Increased consumer confidence gave a boost to jewellery retail sales.

However, the emerging markets of China and India have both struggled and both polished and retail sales figures weakened in 2015.

The aggressive expansion of jewellery stores over the last decade has stopped and some of the major retailers are actually closing retail units instead in order to improve operating efficiencies.

Polished diamond prices are estimated to have fallen by 7% since January 2015, compared with the drop of 15-20% in rough prices.

To combat the challenges, the industry put several mines on care and maintenance, for example Damtshaa Mine near Orapa and producers cut back on production.

The industry established the Diamond Producers’ Association in May 2015 to support marketing initiatives to promote demand for natural diamond jewellery.

De Beers embarked upon new advertising campaigns in the US and emerging markets to drive renewed demand for diamond jewellery over the key Christmas season and several initiatives to combat the threat of synthetics diamonds were also initiated.

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Matsheka seeks raise bond program ceiling to P30 billion

14th September 2020
Dr Matsheka

This week Minister of Finance & Economic Development, Dr Thapelo Matsheka approached parliament seeking lawmakers approval of Government’s intention to increase bond program ceiling from the current P15 Billion to P30 billion.

“I stand to request this honorable house to authorize increase in bond issuance program from the current P15 billion to P30 billion,” Dr Matsheka said. He explained that due to the halt in economic growth occasioned by COVID-19 pandemic government had to revisit options for funding the national budget, particularly for the second half of the National Development Plan (NDP) 11.

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Lucara sits clutching onto its gigantic stones with bear claws in a dark pit

14th September 2020
Lesedi La Rona

Botswana Stock Exchange (BSE) has this week revealed a gloomy picture of diamond mining newcomer, Lucara, with its stock devaluated and its entire business affected by the COVID-19 pandemic.

A BSE survey for a period between 1st January to 31st August 2020 — recording the second half of the year, the third quarter of the year and five months of coronavirus in Botswana — shows that the Domestic Company Index (DCI) depreciated by 5.9 percent.

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Botswana Diamonds issues 50 000 000 shares to raise capital

14th September 2020
Diamonds

Botswana Diamond PLC, a diamond exploration company trading on both London Stock Exchange Alternative Investment Market (AIM) and Botswana Stock Exchange (BSE) on Monday unlocked value from its shares to raise capital for its ongoing exploration works in Botswana and South Africa.

A statement from the company this week reveals that the placing was with existing and new investors to raise £300,000 via the issue of 50,000,000 new ordinary shares at a placing price of 0.6p per Placing Share.

Each Placing Share, according to Botswana Diamond Executives has one warrant attached with the right to subscribe for one new ordinary share at 0.6p per new ordinary share for a period of two years from, 7th September 2020, being the date of the Placing Warrants issue.

In a statement Chairman of Botswana Diamonds, John Teeling explained that the funds raised will be used to fund ongoing exploration activities during the current year in Botswana and South Africa, and to provide additional working capital for the Company.

The company is currently drilling kimberlite M8 on the Marsfontein licence in South Africa and has generated further kimberlite targets which will be drilled on the adjacent Thorny River concession.

In Botswana, the funds will be focused on commercializing the KX36 project following the recent acquisition of Sekaka Diamonds from Petra Diamonds. This will include finalizing a work programme to upgrade the grades and diamond value of the kimberlite pipe as well as investigating innovative mining options.

Drilling is planned for the adjacent Sunland Minerals property and following further assessment of the comprehensive Sekaka database more drilling targets are likely. “This is a very active and exciting time for Botswana Diamonds. We are drilling the very promising M8 kimberlite at Marsfontein and further drilling is likely on targets identified on the adjacent Thorny River ground,” he said.

The company Board Chair further noted, “We have a number of active projects. The recently acquired KX36 diamond resource in the Kalahari offers great potential. While awaiting final approvals from the Botswana authorities some of the funds raised will be used to detail the works we will do to refine grade, size distribution and value per carat.”

In addition BOD said the Placing Shares will rank pari passu with the Company’s existing ordinary shares. Application will be made for the Placing Shares to be admitted to trading on AIM and it is expected that such admission will become effective on or around 23 September 2020.

Last month Botswana Diamond announced that it has entered into agreement with global miner Petra Diamonds to acquire the latter’s exploration assets in Botswana. Key to these assets, housed under Sekaka Diamonds, 100 % subsidiary of Petra is the KX36 Diamond discovery, a high grade ore Kimberlite pipe located in the CKGR, considered Botswana’s next diamond glory after the magnificent Orapa and prolific Jwaneng Mines.

The acquisition entailed two adjacent Prospecting Licences and a diamond processing plant. Sekaka has been Petra’s exploration vehicle in Botswana for year and holds three Prospecting Licenses in the Central Kalahari Game Reserve (Kalahari) PL169/2019, PL058/2007 and PL224/2007, which includes the high grade KX36 kimberlite pipe.

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