Botswana's diamond mines record decline in revenue.

Posted On Wednesday, 07 May 2003 02:00 Published by eProp Commercial Property News
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Sales revenue from Botswana's diamond mines declined last year despite an increase in production, and analysts say this indicates that De Beers cut prices paid for Botswana diamonds by about 18%. 









The Botswana mines, the world's richest, are joint ventures between De Beers and the Botswana government. De Beers' latest figures show revenue from the mines was down 22% last year, though production increased from 26,4-million carats to 28,5-million carats.

 Production revenue dropped to $1,8bn, from $2,3bn the previous year, and the net effect was that Botswana received only $63 per carat against $87 in 2001.

 Neil Buxton, of London-based WWW International Diamond Consultants, said improved recovery efficiency from the completely automated recovery plant would have led to a reduction in the average price but probably only by about 10%, because of the greater efficiency in recovering small diamonds.

 The improved efficiency would be beneficial in creating greater value per ton of ore processed, he said.

 The good news is that Debswana, the 50/50 joint venture between De Beers and the government of Botswana, treated more tons last year and saw increases in grade the number of carats per ton from both Orapa and Jwaneng, the major mines in the country.

 However, the productivity success has not translated into additional revenue.

 "The only conclusion that can be drawn is that De Beers reduced the prices paid for the Botswana diamonds by around 18%," said Buxton. He estimates that comparing like with like and taking into account the improved recovery efficiency last year, Botswana saw an effective $400m reduction in revenue.

 Though De Beers promised, when it was delisted last year, that it would continue to provide as much information as before, the group no longer publishes dollar per carat values per mine and has also stopped publicising price increases.

 However, the estimates derived from the Botswana figures on last year's price reductions explain why rough diamonds sold by De Beers through its Diamond Trading Company became far cheaper than so-called "outside rough", or rough diamonds from other sources.

 Botswana may be relatively sanguine about the reduction in last year's revenues as part of the price for the privatisation of the company in which it has a 15% stake. SA and Namibia may be less so, assuming that they also were subjected to the same price reduction, as they have no direct stake in the new private De Beers.

 All this may well explain why De Beers has had two price increases already this year.

Last modified on Thursday, 17 April 2014 14:02

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