In response to the depressed diamond market, Debswana has revised its production target and is scaling down operations at its four mines.
Jim Gowans, the Managing Director of the company, owned 50/50 by Botswana government and De Beers, said the market place challenge gives them the opportunity to operate the mines differently without shutting them.
“There are no plans to shut down any operations,” he said in response to a question that Damtshaa, the company’s tiny mine maybe sacrificed as it happened at the height of global economic crisis in 2009.
The company, which operates Damtshaa, Orapa, Letlhakane and Jwaneng mines was forced to shut down operations in a bid to offset the impact of economic downturn and falling demand.
This year, Debswana will produce 19.9 million carats, which is 10 percent less of what was produced in the prior year in response to slowing economies of China, India and the struggling U.S economy.
The U.S accounts of the 40 percent of the global diamond market, but it was expected that Thanksgiving would boost sales. Gowans expects the market to be flat for another year and have become flexible on the back of global uncertainties, adding that the company has enough ‘inventories to back us up’.
The diamond market is projected to stay soft until the end of the year and perhaps get worse in 2013.
“For the long term, I think the diamond market is very positive,” Gowans said.
Debswana said the slope failure at Jwaneng mine also affected production as the company was forced to halt mining for a month to conduct investigation on the disaster that claimed the life of a miner.
The Department of Mines has since concluded its own investigation, but Gowans revealed a technical investigation is underway to enable the company to understand the geological makeup of the rock structure.
Three employees are still on suspension with pay following the disaster that dented the reputation of the mines Safety, Health and Environment (SHE) standards and its General Manager.
“Although this represents a reduction from last year’s production for the same period, the Company had to reduce production targets by 10 percent in June in response to challenging market conditions. In addition, production was affected when Jwaneng Mine stopped mining for four weeks in July, following by the slope failure incident,” the company said in a statement.
“The company had planned to produce 23.9 million carats this year; this target has been reduced to 19.9 million carats. The reduction by 4 million carats is reflective of depressed market conditions which resulted in the company reducing production by 2.6 million carats, as well as the impact on production by 1.4 million carats due to the slope failure incident,” it added.
Despite the challenges at the marketplace, at the end of October 2012, Debswana has distributed P8.9 billion to Botswana government as a shareholder.
The company is currently working at expanding the resource in a bid to keep the money flowing to Botswana government coffers. Key projects in the pipeline include the multibillion Pula Cut 8, which will prolong the Jwaneng mine life.
A total of 660 million tonnes of waste is expected to be mined with 99 million tonnes of ore to be delivered. The P3 billion Cut 8 infrastructure is partly complete and to date Majwe Mining Joint Venture has mined 190 million of tonnes since the launch of the project in 2010.
The first ore from Cut 8 to the plant is expected in 2015. Debswana is also in testing face of its Morupule Coal Mine. The mine is a wholly owned subsidiary of the company. Discussions are ongoing with Eskom for Morupule to supply the South Africa’s power utility with coal.
“We are already in negotiations with them,” said Gowans, adding that the move will create business opportunity for the group. Morupule has concluded a once-off deal with NAMPOWER, a Namibian power utility.
Under the contract, Morupule supplied 60 000 tonnes of grade A peas to supply Nampower Van Eck Power Station in Windhoek, Namibia.
“It is our sincere belief that through this deal, greater opportunities will present themselves for Botswana coal in the SADC and international markets and we are well poised to meet these opportunities. Botswana as a country has excellent and abundant coal resources that can be tapped to diversify the economy and ease the pressure of our nation’s reliance diamonds,” the then general manager of the mine, Albert Milton, said at the time.
