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De Beers Q2 production down 54 %, sales drop 95 %

Diamonds

Rough diamond production for global mining giant, De Beers Group declined by 54% to 3.5 million carats in the second quarter of 2021. This is primarily due to the Covid-19 lockdowns across the mining producer countries.

A production report released by Anglo American, De Beers parent company recently , reveals that Debswana, Botswana’s De Beers operation spearheaded the decline, registering 68 % drop in production for the second quarter of the year 2020.

Debswana is jointly owned by both Botswana Government & De Beers Group on equal shareholding. Botswana government has 15 % direct shareholding on De Beers Group, with the remaining 85 % owned by mining conglomerate Anglo American.

Debswana, which is De Beers‘s flagship rough diamond producer has only managed to deliver to 1.8 million carats in quarter 2, principally due to a nationwide lockdown from 2 April to 18 May in Botswana. In addition De Beers says the 68 % production drop is also attributable to curtailed output in both plant and human resource as a result of Covid-19 measures implemented to safeguard the workforce. Operations restarted from mid-May, with production targeted at levels to meet the lower demand.

Since COVID-19 pandemic engulfed the world beginning of the year, demand in polished diamonds significantly dropped as a result of closure of jewelry and retail outlets in the United States.
This then disrupted the entire value chain from downstream backwards, leaving midstream businesses with full and dense inventories subsequently shrinking demand for rough goods from upstream producer entities.

In Namibia where De Beers operate a model similar to that in Botswana, production decreased significantly at NamDeb, the inland mining outfit jointly owned by Namibian Government and De Beers Group on 50-50 shareholding.

However the decrease was offset by Debmarine, a unique mining operation where De Beers recovers diamonds on the Namibian coast of Atlantic Ocean. In 2016 De Beers invested P5 billion on a new vessel of unprecedented sophistication for Debmarine to take coastal diamond mining to another level.

For the quarter under review, the magic was delivered by Mafuta crawler vessel which was under maintenance in Q2 2019. Overall production in Namibia increased by 7% to 0.4 million carats.
In South African where De Beers operates Venetia Mine in Limpopo province, production decreased by 3% to 0.6 million carats primarily due to Covid-19 measures. The production shutdown was partly offset by higher grades from the open pit material prior to transition to the underground.

Production in Canada decreased by 27% to 0.8 million carats, primarily due to Victor reaching the end of its life in Q2 2019. At Gahcho Kué, production decreased by 11% to 0.8 million carats due to Covid-19 measures.

SALES

During Q2, the demand for rough diamonds was significantly impacted by a combination of Covid-19 restrictions impacting consumer demand and access to Southern Africa, as well as severely limited midstream cutting and polishing capacity due to lockdowns, particularly in India.

Rough diamond sales totalled 0.3 million carats (0.2 million carats on a consolidated basis) compared with 9.0 million carats (8.3 million carats on a consolidated basis) in Q2 2019. The third Sight of 2020 was cancelled due to Covid-19-related travel restrictions and, in response to the unprecedented industry conditions, De Beers also offered sightholders the option to defer up to 100% of their allocations at the fourth and fifth Sights.

Rough diamond consolidated sales in Q2 2020 decreased to $56 million, signaling a catastrophic decline from $1.3 billion raked in second quarter 2019. The sharp decline was driven by lower volumes and prices.

The H1 2020 average realized rough diamond price decreased by 21% to $119/carat (H1 2019: $151/carat), driven by a higher proportion of lower value rough diamonds sold and an 8% reduction in the average rough price index.

De Beers has however maintained their production guidance at 25-27 million carats (100% basis), subject to continuous review based on the disruptions related to Covid-19 as well as the timing and scale of the recovery in demand. The guidance was in the first quarter revised from the initial 32-34 million carats forecasted beginning of the year, slashed by 20 % to the current guidance in response to declining demand.

Business

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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