De Beers’ Shareholder Forum To Discuss Falling Prices

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Rough diamonds from Debswana mines (Pic By De Beers)

Rough diamonds from Debswana mines (Pic By De Beers)

Botswana government has confirmed that deteriorating prices of rough diamonds will be on the agenda when shareholders of the mining major meet on November 26.

Answering a question from the floor at the Connecting Resources and Society conference held in Gaborone from 23 – 24 November 2015, Kitso Mokaila, the minister of Minerals, Energy and Water Resources said pricing is “one of the issues we will be dealing with”.

“Prices of rough have been coming down and shareholders need something sustainable,” Mokaila said without giving details of neither the meeting nor the location. De Beers has two shareholders – Anglo American (85 per cent) and the Botswana government (15 per cent).

Local research house, Econsult said recently that until the end of 2014, the global diamond market, which is the most important for Botswana, had in some respects felt the impact of the commodities slowdown less severely than other minerals.

The researchers through their lead Keith Jefferis said in the first half of 2015, pressures in the diamond market became more intense, with weakening final demand for jewellery and polished diamond putting downward pressure on rough diamonds prices and sales volumes.

“Unfortunately, any hopes of recovery in Q3 have been dashed, with total sales in the two De Beers global diamond sights held in Botswana in July and August down 70% on the same period in 2014.”

This forced De Beers to reduce rough diamond prices by 8-10%, but this has not been enough to encourage demand, especially as other producers – notably Alrosa of Russia – have cut prices even further.

Reports are that diamond manufacturers have enough stock in the pipeline to cater for demand up to the end of the year, including the busy Christmas season, “so any recovery will only come in 2016”. Botswana’s major diamond marketing channel outside of De Beers – the Okavango Diamond Company – has cancelled its November auction due to the depressed market.

“Inevitably, Debswana has had to respond to weak demand for rough diamonds by cutting production targets, which will in turn feed through to Botswana’s GDP growth. Lower exports and government mineral revenues will most likely lead to balance of payments and fiscal deficits in the second half of the year, perhaps extending into 2016.”

Debswana is a 50/50 joint venture company owned by De Beers and Botswana government. Econsult said with Debswana’s diamond output now projected at 20 million carats for 2015, total diamond production is likely to be more than 10% down on 2014.


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