The world’s biggest diamond mining giant, De Beers S.A’s full year results slipped six percent year ÔÇôon ÔÇôyear as it faced contracting supply from Russia but it raised hopes that the southern African region would fill-up the gap through its newly planned mining activities.
Addressing a press conference from South Africa on Friday, Nicky Oppenheimer and Gareth Penny said they have high hope that Botswana, Namibia and South Africa’s new diamond mines will meet the future challenges.
“It ( 2006) has been a challenging year but we have made some milestones. The continued challenging environment in the wholesale market for rough diamonds, where lack of liquidity, margin pressure and increased financing costs impacted pipeline demand,” De Beers Managing Director, Gareth Penny, said. “However, solid consumer demand for diamond jewellery continued in 2006 across the world with China and India reporting strong sales growth and the USA growing in line with GDP.”
Like-for-like total diamonds sales were US $ 6.15 billion ( about P36 billion) as against US $ 6.54 billion in the prior year as supply from Russia shrunk as it started to enforce the EU competition rules. Part of the charges came from the establishment of DTC Botswana which is set to be operational by 2008.
However, this was the second highest figure in the diamond industry’s history which were largely helped by record production from Debswana mines that produced 34.3 million carats from 31 million in the previous year. The total amount of carat production sold through De Beers was 51 million over the past year.
He said some of the factors which impacted on the lower margins included high spending on explorations and developments in Southern Africa, central Africa, Russia and Canada where the company will spend US $ 2 billion.
The company said in a statement that it is intensely engaged in exploration activities on four projects which include the “exciting AK6” in Botswana.
AK6 is about 15 kilometers south-west of Letlhakane village and, according to African Diamonds, its first production is expected in 2009.
Further, on Friday De Beers chairman Oppenheimer signed an agreement with the South African government over Manaqualand as part of its strategy to meet long term demands.
“We will be focusing on the mines that will bring superior returns,” he said, adding that 2007 will be constrained by Russian supply whose contract comes to an end in 2008.
“When all four are in full production, they will contribute approximately 3.3 million carats and US $ 700 million to De Beers annual production capacity,” Oppenheimer said from Cape-Town.
He further pointed out that DTC Botswana will play a key role in international diamond politics as some of the activities that are currently done in London will be transferred to Gaborone.
“On May 23, the government of Botswana and De Beers signed the renewal of mining license for Jwaneng mine. The renewal will run for 25 years . In addition, the currently held license for Orapa, Letlhakane and Damtshaa mines were extended to run until 2029, in line with the Jwaneng license.
“The agreement also covers the sale of Debswana’s production to DTC for a further five years and the establishment of Diamond Trading Company Botswana, a 50/50 partnership between De Beers and Botswana government, which will sort and value all Debswana’s diamond production.
“In addition, it was announced that Diamond Trading Company Botswana will carry out local sales and marketing activities to support the establishment of local diamond manufacturing operations,” Penny said.
Presently, there are 15 approved diamond manufacturing companies in Botswana.