Botswana’s future economic outlook is still uncertain as Diamond suppliers remained under pressure as polished prices fell further in September, based on Rapaport Monthly Report – October 2015. The authoritative diamond U.S. demand is steady as the holiday season approaches but Chinese buyers are restrained due to a slowdown in economic growth in China and Hong Kong.
But such negative sentiments were downplayed by ALROSA CEO, Andrey Zharkov who this week told Bloomberg that his company expects rough diamond prices to stabilize by the end of the year after falling 15 percent. The company will continue to focus on diamond mining and may review diamond polishing to see if it is beneficial for the company’s value, according to the report.
The Rapaport Group is an international network of companies providing added-value services that support the development of fair, transparent, efficient, and competitive diamond and jewelry markets. Established in 1976, the Group has over 20,000 clients in 118 countries.
Group activities include Rapaport Information Services providing research, analysis and news; Rapaport Magazine, the leading print publication for the diamond industry; RapNet® – the world's largest online diamond trading network; Rapaport Laboratory Services providing GIA and HRD gemological services in India, Belgium and Israel; and Rapaport Trading and Auction Services specializing in recycled diamonds and jewelry.
â€¨The ALROSA boss said the company may also start talks with clients on diamond sales in rubles. Diamond prices have declined by about 15 per cent in 2015 but are still stronger than other commodities, Zharkov said the company may pay back $500 million of debt this year and may keep dividends at the 2014 level, Bloomberg reported.
â€¨â€¨Rough & Polished website reported October 7 that ALROSA’s supervisory board had approved the possibility to settle payments in rubles under new export contracts, but that these will not be available before 2018 and will not affect current clients. The value of diamonds will still be calculated using the exchange rate set by Russia’s Central Bank and market prices will be in US dollars, according to the report.
Elsewhere, Rapaport reports that Belgium’s polished diamond exports fell 12 percent year on year to $1.39 billion in September. By volume, polished imports decreased 14 percent to 610,853 carats, while the average price increased 2 percent to $2,193 per carat, according to the Antwerp World Diamond Centre.â€¨â€¨
Total polished imports to Belgium were also down 12 percent to $1.34 billion during the month as net polished exports, representing exports minus imports, fell 4 percent to positive $47.6 million.
Among Belgium’s main trading partners, polished exports to the U.S. fell 8 percent and to Hong Kong slipped 1 percent, while exports to Switzerland dropped 4 percent. â€¨â€¨Rough imports decreased 35 percent to $870.4 million and rough exports fell 38 percent to $884.5 million.
Net rough imports, representing imports minus exports, increased 81 percent to negative $14.06 million during the month.â€¨â€¨Belgium’s net diamond account, representing total polished and rough imports less total exports, decreased 51 percent to reduce the deficit to $61.7 million.
â€¨â€¨During the first nine months of the year, polished exports decreased 7 percent to $10.22 million, while polished imports fell 6 percent to $10.18 billion. Rough imports fell 25 percent to $8.61 billion and rough exports dropped 27 percent to $8.74 billion.â€¨â€¨Belgium’s net diamond account for the year to date went from a $10.27 billion deficit to a $167.11 million surplus.
The RapNet Diamond Index (RAPI™) for 1-carat, GIA-graded diamonds dropped 3 percent in September. RAPI for 0.30-carat diamonds declined 2.7 percent, while RAPI for 0.50-carat diamonds slipped 2.2 percent. RAPI for 3-carat diamonds fell 4.8 percent during the month.
The Hong Kong Jewelry and Gem Fair signaled that the recent Chinese stock market slump and the government’s anti-corruption campaign are having a lasting negative impact on discretionary spending. Jewelry retail sales during the National Day Golden Week that began on October 1 were weak and expectations are low for the important Chinese New Year in February.
Continuation of depressed global diamond prices do not augur the country’s intension to diversify the economy within and away from diamond mining and to lure jewelers to invest in Botswana.
“We want people to go as far down the value chain as possible and that’s why we want to start a new conversation about how can we help bring jewelers to Botswana,” Mokaila told a Rapaport Breakfast at the JCK Las Vegas show. “How can we have a relationship that can be meaningful to them? We will listen and do what is necessary to ensure that we diversify our economy.”
For Botswana, economic diversification remains a panacea because the country remains highly reliant upon the diamond industry and, more specifically, diamond mining. Through its partnerships with De Beers, royalties and taxes, approximately 80 percent of royalties from diamonds mined in Botswana go to the government. 30 percent of the country’s budget and about 80 percent of its export revenue comes from diamonds.
Still, experts maintain, diamond mining has its limits, even if the country’s diamond mining resource will extend to around 2050, as Mokaila told the meeting diamond life span will continue well beyond the initial 2030 projection.
Debswana, which is an equal partnership between De Beers and the Botswana government, has the bulk of production yielding about 22 million carats a year from its four mines – Orapa, Letlhakane, Damtshaa and Jwaneng. The Ghaghoo development, the country’s fifth mine, is being readied for production by Gem Diamonds later this year.
While the country’s diamond resource is celebrated, the government is also acutely aware of the need to diversify. The country has come a long way to move downstream in a short time.
In the past year and a half, De Beers relocated its sorting and sales operations from London to Gaborone, and the state-owned Okavango Diamond Company launched its own rough sales.
In addition, a number of new diamond manufacturing companies have begun operations, bringing the number of DTC Botswana sightholders to 20. Significantly, a number of auxiliary services such as brokers, banks, shipping companies and grading laboratories have set up shop in Gaborone.
Mokaila told Rapaport that he sees “the next step as bringing jewelers to the country and expanding Okavango’s role.”
Similarly, the government is cautious to ensure that Okavango’s operations are sustainable. The company currently has access to 14 percent of Debswana production – approximately 3 million carats – which it sells via auction.
Mokaila stressed that he wants to make Okavango a major competitor on the global market, which he hints might include introducing rough contract sales, polished tenders and gaining access to a greater chunk of Debswana production.
As a result, Okavango, along with the Diamond Hub – which has overseen the project from the start, is central to the government’s diversification program.
The Bulb World Chief Executive Officer (CEO) and entrepreneur, Ketshephaone Jacob has been selected as a 2021 Top 50 Africa’s Business Hero.
Jacob was chosen from a pool of 12,000 applicants – many of whom are highly-skilled and accomplished entrepreneurs.
Africa’s Business Hero, sponsored by technology entrepreneur, Jack Ma, aims to identify, support and inspire the next generation of African entrepreneurs who are making a difference in their local communities, working to solve the most pressing problems, and building a more sustainable and inclusive economy for the future.
The initiative is as inclusive as possible and applications were open in English and French to entrepreneurs from all African countries, all sectors, and all ages who operate businesses formally registered and headquartered in an African country, and that have a 3 year-track record.
Every year, finalists are selected to compete in the ABH finale pitch competition and participate in a TV Show that will be broadcast online and across the continent.
The finalists will compete for a share of US $1.5 million in grant money.
The Bulb World, is home grown LED light manufacturing company, which was partly funded by Citizen Entrepreneurial Development Agency (CEDA) at the tune of P4 million, to manufacture LED lighting bulbs for both commercial and residential use in 2017.
The Bulb World operate from the Special Economic Zone of Selibe Phikwe. Early this year, The BulB World announced its expansion to South Africa, setting in motion its ambitious Africa expansion plan.
During the first quarter of 2021, production in Botswana’s economic nucleus- the mining sector contracted by 12 percent. This is according to Mining Production Index released by Statistics Botswana this week.
The country’s central data body revealed that Index of Mining production stood at 74.4 during the first quarter of 2021, showing a negative year on-year growth of 12.0 percent, from 84.6 registered during the first quarter of 2020.
The main contributor to the decline in mining production came from the Diamonds sector, which contributed negative 11.7 percentage points. Soda Ash was the only positive contributor in the mining production, contributing 0.1 of a percentage point. However Soda Ash’s contribution was insignificant to offset the negative contribution made by Diamonds.
The quarter-on-quarter analysis by Statistics Botswana experts shows an increase of 16.3 percent from the index of 64.0 during the fourth quarter of 2020 to 74.4 observed during the period under review.
Diamond production decreased by 12.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. The decrease was as a result of planned strategy to align production with weaker trading conditions mostly linked to Covid-19 protocols restrictions.
Botswana’s diamond sector is underpinned by Debswana, the country’s flagship rough producer- a 50-50 joint venture between government and global mining giant De Beers Group. The other producer is Canadian based Lucara Diamond Corp through its wholly owned Karowe Mine which is a relatively small but significant production that has made a name for itself worldwide with rare diamond recoveries of unprecedented carat size.
On the other hand, quarter-on quarter analysis shows that production has improved, registering a positive growth of 17.5 percent during the first quarter of 2021 compared to the preceding quarter – 2020 Q4.
Though production was significantly lower in the first quarter, the two producers ended Q2 with rare diamond recoveries. Debswana early last month found the world’s third largest gem diamond – weighing 1098 carat at Jwaneng Mine, its flagship gem quality diamonds producer, also regarded the world’s richest diamond mine.
A week later Lucara announced its second biggest recovery, the 1174 carat clivage near-gem dug from its Karowe Mine. The diamond is the world third in carat size after the plus-3000 carat Cullinan found in South Africa back in 1905 and the 1758 carat Sewelo unearthed at its Karowe mine in 2019. Debswana and Lucara are investing billions of pulas in underground mining projects to extend the life of its mines, Jwaneng & Karowe respectively.
In terms of Gold which is produced at Mupani mine near Botswana’s second city of Francistown output decreased by 17.9 percent during the first quarter of 2021 compared to the same quarter of the previous year.
Similarly, quarter-on-quarter analysis reflects that production decreased by 21.4 percent during the first quarter of 2021, compared to the preceding quarter. The decrease was as a result of the deteriorating lifespan of the mine as well as the impact of COVID-19 which slowed down the mining activities.
Soda Ash production increased by 11.1 percent during the first quarter of 2021 compared to the same quarter of the previous year. In terms of quarter-on-quarter Soda Ash production also showed an increase, picking up by 2.1 percent during the period under review. The increase in production is attributable to the effectiveness of the plant following refurbishment which occurred in the third quarter of 2020.
Salt production decreased by 34.0 percent during the first quarter of 2021, compared to the same quarter of the previous year. Similarly, the quarter-on-quarter analysis shows that salt production registered a decrease of 32.9 percent during the period under review. Both salt and Sodash are produced by partly government owned Botswana Ash (BotsAsh) operating from Sowa town near Makgadikgadi pans.
Coal production decreased by 11.2 percent during the first quarter of 2021, compared to the corresponding quarter of the previous year. The decrease was attributed to the reduced demand from Morupule B Power Station following the remedial works being undertaken, as one boiler was in operation during the period under review.
Although production fell, Statistics Botswana says there was no shortfall in supply of coal due to stockpiling. On the other hand, the quarter-on-quarter comparison shows that coal production increased by 20.4 percent compared to the preceding quarter.
Botswana’s flagship coal producer is Morupule Coal Mine; a wholly state owned mining company located in Palapye producing primarily for Botswana Power Corporation (BPC)’s power generation plants Morupule A & B.
The other coal producer is Botswana Stock Exchange listed Minergy which operates a 390 MT Coal Resource mine in Masama near Media in the southwestern edge of the Mmamabula Coalfields.
Department of Mines in the Ministry of Mineral Resources, Green Technology & Energy Security has awarded mining licence to Tshukudu Metals-a subsidiary of Aussie firm Sandfire Resources ,giving the company a green light to start piecing the ground at its Motheo Copper Project near Gantsi.
Lefoko Moagi, minister in charge of mineral resources in Botswana confirmed to weekendpost on Tuesday. Minister Moagi revealed that “the licence has been approved , but Sandfire Resources as a listed company will report to its shareholders and investors then make an official public statement” he said.
Based on a forecast copper price of US$3.16/lb (reflecting current long-term consensus pricing) the Base Case 3.2Mtpa – Ghantsi copper project is forecast to generate US$664 million (over P7 billion) in pre-tax free cash-flow and US$987 million (over P10 billion) in EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation), at a forecast all-in sustaining cost of US$1.76/lb over its first 10 years of operations.
In December 2020, the Board of Sandfire Resources approved the commercial development of the Motheo Copper Mine located in the Kalahari Copper Belt in Botswana, marking a key step in its transformation into a global, diversified, and sustainable mining company.
Tshukudu Metals Botswana (Pty) Limited (Tshukudu) a 100% owned subsidiary will be the owner and operator of the Motheo Copper Mine which is scheduled to produce up to 30,000 tonnes per annum of copper in concentrate over a 12 year mine life.TMB is targeting development of its Motheo Copper Mine in 2021 and 2022, with its first production in 2023.
GOVERNMENT NOT TAKING UP 15 % STAKE ON OFFER
Beginning of this year presentations were made to the Department of Mines as part of the Mining Licence approval process and to the Ghanzi Regional Council, additional information was requested by Department of Mines in April and was duly supplied by the company.
As part of the Mining Licence approval process, the Government of Botswana has a right to acquire up to a 15% fully contributing interest in all mining projects locally. Quizzed on whether government through Mineral Development Corporation Botswana (MDCB) would be taking up stake in the project Minister Moagi said, “No consideration is being made on that regard”.
“Government is not considering taking up a stake in the Ghantsi Copper Mine project, every opportunity is assessed on all risks, but Government makes money all the while from leases, taxes and royalties, remember if you take stake you are liable for liabilities of the project as well,” Moagi said.
Last month Sandfire announced that it has awarded over P5 billion worth mining contract to African Mining Services (AMS), a subsidiary of Perenti, to deliver the open cast operation.
The contract, which has an estimated value of US$496 million (over 5 billion), is the largest single operational contract for the new Motheo Project covering a period of 7 years and 3 months, with provision for a one-year extension.
The contract according to Sandfire Resources was awarded following a competitive 3-stage tender process which saw a number of key factors taken into consideration when selecting the preferred contractor.
These included Citizen Economic Empowerment, safety culture, equipment suitability and availability, commercial terms and identified improvement opportunities. Under the terms of the contract, AMS has agreed to form a 70:30 Joint Venture with a suitable local Botswana partner or partners.
The JV is expected to be finalized ahead of commencement of mining in early 2022. African Mining Services has been operating in Africa for over 30 years. AMS’ parent company, ASX listed diversified mining services group Perenti, already has a presence in Botswana through Barminco, their underground mining division, at the large-scale Khoemacau Copper Mine located 200km north-east of Motheo.
Last month Sandfire executives said the award of the open pit mining contract represents another key milestone in advancing the Motheo Project towards production, with all components of the contract in line with the key parameters outlined in the December 2020 Definitive Feasibility Study (DFS).
The company said full-scale construction of the US$279 million (over P 3 billion ) mine development is expected to commence immediately upon receipt of the Mining Licence, with mining scheduled to commence in early 2022 ahead of first production in early 2023. This week Sandfire Resources advertised over 10 positions in calling on applications from geologists, mining engineers and geotechnical engineers.
The Motheo mine has an initial mine life of 12.5 years based on production from the T3 pit. The initial development is expected to generate approximately 1,000 jobs during the construction phase and 600 direct full-time jobs during operations, with at least 95% of the total mine workforce expected to be made of up of Botswana citizens.
Later in the week Sandfire Resources announced in the company website that it has received the licence. Sandfire’s Managing Director and CEO, Mr Karl Simich, said the award of the Mining Licence represented a major milestone that would see a significant increase in construction and development activities on site.
“We are absolutely delighted to now be in a position to move to full-scale construction at Motheo, with our construction crews expected to mobilise to site over the next few days. I would like to thank the Government of Botswana for their support throughout the approvals process, which will see Motheo come on-stream in 2023 as one of very few new copper mines commencing production globally.”
Simich said the project is expected to generate approximately 1,000 jobs during construction and 600 full-time jobs during operations, and represents the foundation for Sandfire’s long-term growth plans in Botswana.
“Our vision is that Motheo will form the centre of a new, long-life copper production hub in in the central portion of the world-class Kalahari Copper Belt, where we hold an extensive ground-holding spanning Botswana and Namibia,” he said.