Debswana Mining Company this week announced a slight rise in the value of rough diamond sales for the second sales cycle of 2016, citing a continued positive trend in rough diamond demand.
Debswana Managing Director Balisi Bonyongo told the business community on Thursday that De Beers Group, which owns Debswana, sold US$610 million worth of rough diamonds in the second cycle of 2016, taking in to account global sightholder sales and auction sales. In the first cycle the group recorded sales of US$545. De Beers holds 10 sales cycles each year, and figures provided by Debswana on Thursday show signs of improvement in the second cycle. The improvement has been linked to excess inventory that continued to work through the system in recent months.
Bonyongo however warned that, “These results are however not an indication of a full market recovery”.
At the end of 2014 weaker than expected consumer demand left retailers holding higher stocks, leading to a build-up of inventory throughout the pipeline and Sightholders purchasing lower volumes of rough diamonds from De Beers. A year later, financial results showed that the rough diamond market weakness weighed on the world’s largest diamond company. In the financial year ended December 31, 2015, the group recorded a 36 percent decline in rough diamond sales which pushed total revenue down to US$4.7 billion.
At the same time, weaker than expected consumer demand coupled with a build-up of stocks and a cash-crunch among diamond traders put downward pressure on the polished diamond prices and the mid-stream industry. Bonyongo admitted on Thursday that subdued demand for diamonds continues to put De Beers under pressure as Debswana could not continue with its initial production target. In 2015 the local diamond mining giant reduced its carat production by 3 million carats against budget in response to prevailing market conditions.
“We are beginning to see the benefits of the actions we took and our first two sales cycles of the year have been very positive. But it is still a very volatile and uncertain economic environment.”
Meanwhile Debswana says 2016 carat production has been maintained at 20 million carats taking into account inventory levels at the end of 2015 and the need to conserve cash. At the same time, the company says to optimise revenue and distributions it will maximize production at its core assets and scale down production at lower value and lower margin assets. The company has since placed Damtshaa Mine on full care and maintenance while operations at Orapa No. 1 Plant have been scaled down.
