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Market downturn: Debswana sneezes

Botswana’s diamond industry is already feeling the pinch as a result of the latest developments of weaker strength and uncertainty of the global growth which has led to slower growth in the overall demand for polished diamonds.

Relative to the World Economic Outlook (WEO), the growth prospects of Botswana major trading partners like the United States and China have weakened. According to the latest Stanbic Bank Botswana Economic Review, Botswana’s economy remains critically dependent upon global demand, particularly of diamonds.  

In a media release this week Debswana Diamond Company’s Head of Corporate Affairs, Esther V Kanaimba-Senai confirmed that her company is to place Damtshaa Mine, which is part of the Orapa, Letlhakane and Damtshaa Mines, into a care and maintenance programme for up to three years as part of the company’s response to the downturn in the diamond market.

Furthermore, she explains that Orapa Mine Plant 1(One) will run at a reduced production level of approximately one million carats per year in order to maintain plant readiness to ramp up production quickly should it be required.

“As a result Debswana has revised its production for 2016 to 20 million carats to match expected levels of demand for rough diamonds. During this period, Debswana will produce more from Jwaneng Mine which is a high value, low cost asset and reduce production from Orapa, Letlhakane and Damtshaa Mines. Jwaneng Mine will produce an average of 12 million carats per year while production at OLDM will average 8 million carats per year.”

But Kanaimba-Senai stresses that all efforts are being made to preserve jobs by re-deploying affected employees to other parts of the business. At this juncture, we do not anticipate any job losses.

“Since the second quarter of 2015, Debswana has been experiencing a significant reduction in the sale of rough diamonds due to weak demand as a result of a global macro- economic slowdown and the strengthening of the US dollar which have put liquidity pressures on cutting and polishing centres. This is an unprecedented situation which has impacted the entire diamond pipeline from rough producers, cutting and polishing companies and the retail sector,” she states.

According to Kanaimba-Senai, Debswana will continue its focus on Zero Harm, especially as we are compelled to implement our business plans in manner that is different to a business as usual environment.

To demonstrate the uncertainty of the situation, De Beers – the main player in the rough diamonds industry globally and under pressure from its main shareholder (Anglo American) – announced in July this year that it would cut its 2015 production.

Stanbic Bank Botswana Economic Review notes that De Beers had cut its full-year production forecast to between 29 million and 31 million carats from an earlier range of 32 million carats to 34 million carats for 2015 due to weak market conditions.

“The polished diamonds prices have continued on a downward spiral since 2014. The Antwerp Diamond Index – which gives the average evolution of polished diamonds in the Antwerp markets – was 11 percent lower in May 2015 than the same month last year. Meanwhile prices of rough diamonds have not commensurately declined and have remained at historically elevated levels. Because of this, profit margins of the midstream diamond industry have dwindled. As a result, the demand of rough diamonds has considerably declined. A visible manifestation of this is the high levels of refusals of purchases that have increasingly been witnessed in de Beers’ sights.”

These developments are pointing at further reduction in production for both diamonds and copper in the remainder of 2015. “Therefore, the expectation is that the mining sector will post negligible growth in 2015. For this reason, the present exercise anticipates the national economy to grow in 2015 by a much slower rate than the 2015 Budget Speech projected growth of 4.9 percent,” reads the quarterly Economic Review prepared by the University of Botswana Economics Department.

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China’s GDP expands 3% in 2022 despite various pressures

2nd February 2023
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.

The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.

In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.

Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.

China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.

Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.

On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.

According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.

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Jewellery manufacturing plant to create over 100 jobs

30th January 2023

The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.

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Investors inject capital into Tsodilo Resources Company

25th January 2023

Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.

According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.

The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.

Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.

Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.

Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana.  The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.

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