Despite the terrible situation that the diamond industry finds itself in, the Chairman of African Diamonds, John Teeling, said the demand, which is a short term hiatus, will recover.
According to a communiqu├® issued after the recent company’s annual general meeting (AGM), Teeling is said to have stated that the financial crisis has had an impact on their business.
“None of us have┬áever experienced┬áthe state of┬áchaos current in world economies. The collapse of the financial sector and the consequent loss of credit are having a dramatic impact on business,” said Teeling.
“The diamond industry is particularly sensitive to the loss of credit as the intermediaries between mine and buyer rely on bank lines┬áof credit. The loss of many credit facilities┬áhas led to a dramatic fall in diamonds purchased at auction. Forced sellers have had to accept prices down by as much as 50 percent”.
┬á However, he was bullish about recovery in Asia that will take the diamond industry to another level.
“But, the fundamentals of the diamond industry remain strong. Supply,┬áwhich was expected to be flat,┬áwill now decline as marginal mines close. Demand, which is in a short term hiatus, will recover. Ladies in China and India want diamonds. The Supply Gap will emerge by 2011,” he added.
Teeling’s comments at the AGM come at time when larger mining houses like Debswana are mulling stream lining activities to accommodate a knock from the financial crisis.
African Diamonds holds a 28 percent stake in AK6 in Botswana, one of the very few proven hard rock high quality diamond discoveries with mining licence obtained last October after a protracted battle with another shareholderÔÇöDe Beers. ┬á
Teeling believes AK6 will high quality diamonds with relatively low operating costs with current plans to bring this mine on stream in 2011 at 2.7 million tonnes a year throughput mining to 4.2 million tonnes in 2013. ┬á
“The AK6 mine┬áwill be one of the lowest cost, highest value producers. The current chaos is causing uncertainty but this can only be temporary. AK6 is a proven gemstone quality deposit with a mining lease in the best diamond address in the world.┬áIn a world┬áwhere good diamonds are scarce, AK6 has a wonderful future.” ┬á ┬á
Financing the $300 million CAPEX is the responsibility of our partner, De Beers, the meeting was told.
┬á “In the light of current world economic turbulence,┬áAfrican Diamonds is at an advanced stage of preparing a low cost earlier production option for AK6. The study will be presented to the joint venture company at the end of February,” it was stated.
Meanwhile, the AGM held in London was told that the company had taken 100 percent ownership of Atlas, which holds prime exploration ground in Botswana, including the AK8 and AK9 kimberlite discoveries.