The Managing Director of Gem Diamonds Botswana, Haile Mphusu remains optimistic that despite the current market downturn of diamond prices, the Ghaghoo Diamond Mine operated by his company in the Central Kalahari Game Reserve will ultimately prove a worthwhile investment.
In an interview with the The Telegraph, Mphusu said since production started at the mine last year there have been a few setbacks, the biggest of which has been the collapse in world diamond prices. At operational level he said striking a water fissure that led to the mine getting filled with high water volumes has also been an impediment that slowed down the pace of production.
“Things have been moving on but certainly not at the speed we had set ourselves. The issue of water has limited our ore delivery to the plant,” said Mphusu.
He said the operation has recovered some diamonds and has so far had two selling rounds (one in February and the other in July) and is preparing to go into the third selling round. By far the biggest challenge for Gem Diamonds Botswana, said Mphusu has been the worldwide prices that have significantly collapsed. For Ghaghoo Mine the collapse in prices has had disproportionate effects because the mine produces diamonds that are small in size. It is the small diamonds that turn out to be most affected when prices go down. But still there is an upside to it. As a small operation, Gem Diamonds Botswana is for now able to ride on the back of its parent company which has operations in a number of countries across the world including in Lesotho.
This allows for the Botswana operation to not be continually desperate to sell even when prices are not good. Additionally, because they are small, it is easy for them to sell all their produce if they strike a good deal.
“One thing that has always been clear about Ghaghoo Mine is that it was never going to be another Jwaneng or another Orapa. It was always going to be a marginal mine. But our business model was always going to deliver value,” said Mphusu. He said the key thing under the economic trading circumstances is to mine at the lowest cost possible. This he said is important because there is nothing that they can do about the diamond prices. “When you deal with this kind of market scenario the important thing is to retain profitability by always considering cost per ton,” he said. Ghaghoo Mine has two kimberlites pipes under its license. The first kimberlite is Geo25 which is currently being mined. About five kilometers away there is Geo136 which Mphusu says operations on it can only start in earnest once the market conditions improve.
On another matter he says his company remains immensely grateful to the Government of Botswana for the flexibility that authorities have shown during these trying market conditions.
While like other mines the selling is prescribed by law to follow tendering, government of Botswana has in other instances allowed direct negotiations with potential customers. “There is not a lot of convincing to do with government of Botswana when it comes to diamonds. They are always ahead. Their knowledge of the industry is unmatched. When markets go up or down they are the first to know. In that regard we have had great support from them and really we have nothing to complain about,” said Mphusu.
