Debswana is targeting production of around 24 million carats in 2012, but the Botswana diamond company is currently mining at diminished levels as global economic uncertainties continue to impact its operations.
”We’re tailoring our production a little bit to the market,” Jim Gowans, Debswana’s chief executive, told Rapaport News. “We were on a schedule to make about 24 million carats in 2011 but we pulled back a bit in the fourth quarter because the market flattened off in terms of consumption and prices dropped a little bit.”
Gowans (pictured) added that while the volume of production has been lower in this first quarter of 2012, prices have held steady, and this trend should continue through the first half of the year.
Debswana, which is a joint venture between the Botswana government and De Beers, has four diamond mining operations, including its Jwaneng, Orapa, Letlhakane and Daamtshaa mines. Total production rose 3 percent year on year to 22.89 million carats in 2011 and accounted for 73 percent of De Beers Group output.
De Beers recently stated in its annual report that it shifted its operations to focus on waste mining and is carrying out care and maintenance during the period of softness in the diamond market. Gowans explained that in doing so, Debswana is absorbing slightly higher costs but is positioning itself to ramp up production towards the end of this year, or in 2013, when the market is expected to be more robust.
Gowans noted that Debswana’s life of mine plan enables production of up to 30 million carats but the current price level for rough would not support such a quantity. “The market is very sensitive at the moment so if we ramped up to 25 million carats I believe that would have a detrimental impact on the market,” he said. “It would mean an oversupply which would result in prices softening.”
Debswana has lowered its price forecasts for 2012 and is working according to an average production value of around $150 to $160 per carat, compared with an average of about $170 per carat in 2011. Gowans added that production mixes have also changed as the company has pulled back its output at Jwaneng and is currently more dependent on the Orapa goods, which tend to be of lesser quality.