Botswana intends to renegotiate its proposed purchase of a stake in Belgian gem dealer HB Antwerp to double the size of its shareholding at no extra cost following the downturn in the diamond market, the country’s mines minister said on Tuesday.
Botswana is the world’s biggest diamond producer by value, meaning its economy has been disproportionately hit by a drop in demand for diamonds caused by a global economic slowdown.
Lefoko Moagi told Parliament the weaker diamond market had also affected the company’s valuation, giving the country room to renegotiate.
“We will not be injecting more capital, but we will get more shares for the same amount proposed in 2023,” Moagi said. “Instead of the 24%, we will negotiate to get 49.9% for the same amount initially proposed.”
Finance ministry budget documents showed in February that the country had set aside 890 million pula ($65.95 million) for the 24% stake, valuing the Belgian company at about $275-million.
The HB Antwerp deal was announced during Botswana’s negotiations for a new sales contract with Anglo American’s diamond unit De Beers in March 2023.
As Botswana sought to increase its power to market its stones outside a decades-old agreement with De Beers, it said the HB Antwerp deal would strengthen its presence in the downstream diamond industry.
It includes supplying the trader with rough diamonds for five years through the state-owned Okavango Diamond Company (ODC).
Diamond producer Lucara Diamond Corp sold 76 387 ct of diamonds, generating $41.3-million in revenue, during the second quarter ended June 30.
The company recovered 92 419 ct of diamonds at a grade of 12.9 ct for every 100 t of direct milled ore.
Additionally, 8 349 ct were recovered from processing historic recovery tailings. The company recovered 206 special diamonds, defined as rough diamonds weighing more than 10.8 ct, representing 6.9% by weight of the total recovered carats from the second quarter’s processed ore. This aligns with the company’s expectations, Lucara said.
Noteworthy recoveries during the period included a 491 ct Type IIa diamond, a 225.6 ct Type IIa diamond and a 109 ct Type IIa diamond.
Significant progress was made in shaft sinking for the ventilation and production shafts during the second quarter, with the critical path ventilation shaft ahead of the July 2023 rebase schedule. By the end of the quarter, the production and ventilation shafts had reached depths of 557 m below collar and 550 m below collar, respectively.
Operational highlights from the Karowe mine for the quarter included ore and waste mined of 700 000 t, with ore processed totalling 700 000 t.
Financial highlights for the second quarter revealed operating margins of 67%, compared with 59% in the second quarter of 2023. This strong operating margin is attributed to robust pricing for the company’s larger stones and cost reduction initiatives, supported by a strong dollar.
The operating cost was $26.32/t processed, a 6% decrease from $27.97/t in the second quarter of 2023 and consistent with the $26/t in the first quarter of this year.
Lucara believes the impact of inflationary pressures, particularly in labour, was well-managed by the operation, with a strong dollar offsetting a slight increase in costs compared with the previous period.
Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) were $18.8-million, up from $16.5-million in the second quarter of 2023, driven by increased revenue and lower operating expenses.
During the second quarter, the company invested $11.2-million into the Karowe Underground Project (KUP), excluding capitalised cash borrowing costs. The ventilation shaft sank 128 m, and development of the 470-level station, located at about 550 m below collar, began.
Production shaft activities included the sinking of 104 m and the completion of three probe hole covers, with no water being intersected. A total of 26 m of lateral development on the 470-level, along with the 470-level station development, was completed.
As of June 30, Lucara reported cash and cash equivalents of $21.9-million and working capital of $21.7-million. The company had drawn $165-million on the $190-million project facility for the KUP, with an additional $25-million drawn on the $30-million working capital facility and a cost overrun reserve account balance of $37.5-million.
The Karowe mine registered no lost-time injuries during the second quarter, taking the mine to more than three years without a lost-time injury.
“Lucara’s performance this quarter reaffirms our position as a leader in the diamond industry. Our . . . safety and operational excellence [record] continues to drive our success, with both our openpit operations and underground construction progressing admirably. The Underground Expansion Project, in particular, is advancing well, with shaft sinking progress surpassing our expectations,” Lucara president and CEO William Lamb said on August 12.
Lucara noted that, in the diamond market, the long-term outlook for natural diamond prices remains positive owing to improving supply and demand dynamics, largely driven by long-term reductions from major producing mines.
However, the market for smaller-sized diamonds remains soft, impacted by a weak Asian market and the rise of laboratory-grown diamonds.
Lucara said demand for larger diamonds over 10.8 ct remained robust, as reflected in the company’s sales.
However, the G7 sanctions on Russian diamonds over 1 ct, effective March this year, have caused some trade delays owing to new regulations requiring these diamonds to be processed through the Antwerp World Diamond Centre for origin verification.
Lucara, with its established operations producing Botswana diamonds, stands to benefit from this heightened focus on origin verification.
Sales of laboratory-grown diamonds increased steadily through 2023 and into this year, with many smaller retail outlets increasingly adopting these diamonds as a product.
In the second quarter, diamond producer De Beers announced that it would cease creating synthetic diamonds and focus on selling natural diamonds. This decision aligns with several major brands confirming they would not market laboratory-grown diamonds.
Lucara said the long-term impact was expected to support the natural diamond market, with a bifurcation between the natural and laboratory-grown diamond markets expected in the medium term.
The company believes that the longer-term market fundamentals for natural diamonds remain positive, as demand is expected to outstrip future supply, which has been declining globally over the past few years.
A loose 0.94 carat Argyle Pink – one of the last recovered from the iconic mine in Western Australia – is being sold at auction.
It is the highlight of a 416-lot online event (ending 11 August), featuring many items that belonged to Graham Jackson, former owner of Loloma Jewellers, located in Townsville, Australia, who died aged 92 in May.
The cushion cut fancy intense VS1 gem is designated as 6P – 6/10 for intensity of hue and P for pink as the dominant hue.
It was sold at the 2021 Argyle Pink Tender-Rio Tinto’s Final Collection, the last tender from the mine, which closed in November 2020 after 37 years, during which it produced 90 per cent of the world’s pink diamonds.
The stone is being sold by Sydney-based First State Auctions, with an estimate of AUD$700,000 to AUD$800,000 (US$455,000 to U$520,000).
Last January Tiffany & Co. has bought a parcel of 35 Argyle pinks – from 0.35 carats to 1.52 carats – for “select clients”.
Petra Diamonds has once again postponed the sale of roughs, holding on to the diamonds from its South African operations that would have been offered during the August/September event of the year, amid low demand.
The tender of diamonds from Petra’s Williamson mine in Tanzania will proceed as planned, the company said. It noted that this decision aimed to “support steps taken by major producers to restrict supply during this period of weaker demand.”
Rough diamond parcels from the miner’s South African operations, originally earmarked for sale as part of the first tender of fiscal year 2025, are now planned to be offered in the second tender, expected to close mid-October 2024.
Petra will sell diamonds from its Williamson mine in Tanzania during August/September as planned.
Petra’s South African producing operations include the Cullinan and Finsch mines.
“Our expectation is that supply discipline, together with the expected seasonally stronger demand as we head towards the festive season, will provide some pricing support later in the calendar year,” chief executive Richard Duffy said in the statement.
Petra had differed in June the majority of what would have been its sixth sale for its 2024 fiscal year to the August/September offering, or tender one of fiscal 2025.
The company said recent steps taken to improve its financial position have provided it with the ability to adjust the timing of its tenders based on market conditions.
Watch and jewelry sales in the US picked up significantly in June, with their biggest single monthly increase in two years. The year-on-year increase was 6.2 per cent, according to the latest figures published by the US Department of Commerce. The last time we saw such an increase was in July 2022 (also 6.25 per cent). The trend for the last three months has been of continued growth, but at a slower rate (March 4.5 per cent; April 3.7 per cent; May 3.3 per cent). The rise in sales follows a year or so of almost relentless decline (October 2022 to October 2023). Revisions to figures for April and May by the Bureau of Economic Analysis (BEA) at the US Department of Commerce show sales were higher than initially reported. The year-on-year increase for April was 3.7 per cent (revised up from 2.7 per cent based on actual transactions rather than estimates) and for May it was 3.3 per cent (revised up from 1.4 per cent).
The Index tracking fancy color diamond prices fell during the last quarter, for the first time in almost four years.
The Fancy Color Diamond Index, which monitors pricing data for of all sizes and intensities of fancy color diamonds, fell by 0.7 per cent during Q2 2024, according to an update published yesterday (30 July) by the Fancy Color Research Foundation (FCRF).
The last recorded fall was back in Q3 2020 – in the depths of the Covid crisis – when the Index also fell by 0.7 per cent. That came after two quarters when sales were too slow for the FCRF to produce figures at all.
The trend over the last year or so has been of slower growth. The Index was up 1.3 per cent in Q1 2023, followed by +0.5 per cent (Q2); +0.4 per cent (Q3); +0.1 per cent (Q4) and +0.1 per cent (Q1 2024).
The New York-based FCRF played down the Q2 dip, describing it as “a minor fluctuation when compared to broader market movements”.
It said in a statement: “This stability is particularly evident relative to the sharper declines in the white diamond market and the Dow Jones index, which fell by 3.6 per cent and 1.7 per cent respectively during the same period.
Yellow diamonds (all sizes, all intensities) suffered the biggest drop, down 1.7 per cent. Pinks and blues were both down 0.3 per cent.
The FCRF said its Index had enjoyed an overall increase of 211 per cent since it began compiling data in 2005. During that time it said the price of yellow diamonds had risen by 56 per cent, pinks by 398 per cent and blues by 248 per cent.
According to Botswana’s central bank data, sales of rough diamonds at Debswana Diamond Company fell by 49.2%, amounting to $1.29 billion compared to $2.54 billion in the same period last year.
In local currency, sales of rough diamonds decreased by 47.3% to 17.555 billion pula compared to the same period last year.
This decline in sales is a major blow to the South African nation, which derives 30%-40% of its revenue, 75% of its foreign exchange earnings, and a third of its national output from sales of rough diamonds.
The report highlighted the downturn in the global diamond market as the primary reason for this sharp decline.
In response to the weak consumer demand, Anglo American cut its diamond production by 19% in the first six months of the year.
The report highlighted the downturn in the global diamond market as the primary reason for this sharp decline.
Botswana derives 30%-40% of its revenue, 75% of its foreign exchange earnings, and a third of its national output from sales of rough diamonds.
The Debswana Diamond Company is a joint venture between the government of Botswana and Anglo American Plc’s De Beers. Anglo American Plc’s De Beers sells 75% of its output to De Beers, while the balance is taken up by the state-owned Okavango Diamond Company.
Despite the current economic challenges, Botswana and De Beers signed a ten-year diamond sales agreement in June.
This deal will gradually see the share of Debswana’s output sold by the state-owned company increase from 25% to 30% before it goes up to 40% in five years and eventually 50% by the end of the new contract.
According to the key points in the agreement, this strategic move aims to boost Botswana’s revenue from its diamond resources.
Rio Tinto today reported a slump in half-yearly sales and production as its Diavik diamond mine in Canada slid into the red.
The Australian mining giant reported a 15 per cent increase in overall profits across all divisions to $5.8bn for the six months to 30 June, but its diamond operation suffered a $65m loss. During the same six months of 2023 it made a $44m profit.
The Half Year Results made passing mention of “lower volumes” of diamonds, but chief executive Jakob Stausholm offered no explanation.
Revenue from diamond sales was down 40 per cent during H1, from $250m to $149m. Production fell 25 per cent, from 1.924m carats to 1.441m carats.
Earlier this month the company said production at Diavik had fallen by by 28 per cent during Q2, impacted by the transition to underground operations and the plane crash in January that killed four of its workers and two crew members. A chartered Jetstream twin turboprop airliner crashed shortly after take-off from Fort Smith Airport.
Lucapa Diamond announced Monday the recovery of the fifth +100 carat diamond found this year, a 176 carat Type IIa gem diamond from the Lulo alluvial mine in Angola.
The 176 carat diamond is the 45th +100 carat stone to be recovered from Lulo and the eighth largest, since alluvial operations began in 2015, the company said.
In 2021, Lucapa announced a 35% increase in the resource carats at Lulo, and the mine’s in-situ resource now sits at 135,900 carats at a modelled average diamond value of $1,440/carat.
176 carat diamond recovered from Lulo mine in July. Image from Lucapa.
The continual recovery of these and other large, high value diamonds has been a major source of revenue for Lulo over the years – in December 2023 Lucapa fetched $17 million for four diamonds recovered from Lulo – as well as being a major informant to the kimberlite exploration program.
Lucapa continues to hunt for the source of these large gems via the kimberlite exploration program which is currently bulk sampling kimberlitesin close proximity to the mining blocks where the 176 carat diamond was recovered.
“The recovery of this 176 carat diamond is yet more confirmation of the massive potential of the kimberlite province where we are focussing our exploration efforts to find the source(s) of these magnificent gems. As can be seen from the image below, the diamond has not travelled far as it still displays sharp, angular edges,” Lucapa CEO Nick Selby said in a news release.
The firm has a 40% stake in Lulo, which hosts the world’s highest dollar-per-carat alluvial diamonds. The rest is held by Angola’s national diamond company (Endiama) and Rosas & Petalas, a private entity.
Lucapa Diamond Company has sold six diamonds recovered from the Lulo mine, in Angola, in a special tender for $12.4-million.
The diamonds totalled 447 ct and consisted of five white Type IIa diamonds, as well as a pink diamond.
The average price per carat was about $27 700.
MD and CEO Nick Selby deems the tender result pleasing. “Our alluvial project, in Angola, continues to deliver fantastic diamonds that are always in demand through all market cycles and achieve very competitive values.”
