Lucara diamond corp has cut its revenue forecast for its subsidiary Karowe mine due to weaker diamond market; from the previous guidance of $230-$240 million to $200 and $220 million.
The weaker market has prompted the diamond company to cut its forecast.
The diamond mine which is celebrated for its exceptional stones “will be milling at a slower rate for the second half of the year,” the company stated.
In its latest financial report for the period up to 30 June 2015 Karowe was consistent with previous guidance at between 2.5-2.8 million tonnes and waste mined of between 12.0-12.5 million tonnes.
Lucara raised almost $69 million in its first exceptional tender of diamonds from its Karowe mine. All 14 diamonds totalling 1,674 carats were sold for approximately $41,000 per carat.
Looking ahead, Karowe diamond corp is expected to process between 2.2 to 2.3 million tonnes of ore from a previous guidance previous guidance of 2.3-2.4 million tonnes and to sell 350,000 to 400,000 carats of diamond in 2015 from a previous guidance.
Karowe’s operating cash costs for the year are still forecasted within guidance of between $33 and $36 per tonne of ore treated. Karowe had no lost time injuries during the quarter resulting in a year to date Lost Time Injuries Frequency Rate of 0.65.
The Company maintains its forecast total cost for the plant optimization project to remain within its guidance of $55 million for the plant optimization project and it’s sustaining capital expenditures of between $4.5-$5.5 million for the year.
The Company is also in line with its guidance of $5 million for the purchase and installation of a mill relining machine of which up to $3 million is forecast to be spent in 2015. The Company maintains its forecast to spend between $7.0-$8.0 million on exploration.
Meanwhile, the plant optimization circuits have now been commissioned and fully integrated into the process facility. The XRT machines processing the larger sized material have performed extremely well with many of the large high value stones sold in the July exceptional stone tender being recovered post commissioning of the XRT machines.
The Company highlighted that it is focused on improving the recovery of its smaller, lower value diamonds. “As part of this process the Company will be milling less ore in the medium term, which will slow the recovery of diamonds across all sizes. This deferral of diamond recovery enables these stones to be recovered and sold at a later date and potentially into a stronger diamond market,” the company stated.
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”