De Beers Production Plummets

De Beers Production Plummets
De Beers production fell 91 percent in the first quarter of 2009 after the company scaled back its mining in line with weakened rough diamond demand. The company’s output declined to 1.1 million carats during the three months that ended March 31, 2009, compared with 11.8 million carats in the same period a year earlier, parent company Anglo American reported.

De Beers closed all of its Botswana mines for six weeks and will keep two of its mines there, the Damtshaa mine and the Orapa No. 2 Plant, closed until the end of 2009. Temporary operations suspensions were also implemented at its Namibia, Canada and South Africa mines. Anglo’s statement noted that the firm expects production to ramp up again in the second quarter as many of its mines come back on stream. Representatives from De Beers operations in Botswana and Namibia said they expect production to decrease by 60 percent and 50 percent at their respective operations.

TanzaniteOne Posts Loss
TanzaniteOne reported a sizeable loss in the final quarter of 2008, which a company statement attributed to tanzanite gemstone prices declining by up to 45 percent. There were also a number of one-time factors that contributed to the deficit. They totaled $6.7 million, including a $2.7 million inventory write-down, fees of $1.7 million to fight off a tender offer from AIM-listed rival gem miner Gemfields Resources and $1.9 million of exchange losses due mainly to the South African rand’s weakening against the dollar.

Despite this news, TanzaniteOne issued an operational update that indicated steadying sales. In the final half of 2008, sales totaled $6 million against an expected $21 million. But in the first four months of this year, turnover topped $4.6 million as operating costs were reduced.

South Africa’s Diamond Production Tanks
South Africa’s diamond production fell 52.2 percent in the first quarter of 2009, compared with the preceding quarter, according to data published by Statistics South Africa (SSA). Diamond production showed the sharpest decline of all the nations’ minerals, along with chromium, and diamonds contributed 3.9 percent to South Africa’s overall mining production decline of 12.8 percent during the quarter. The only mineral group that contributed more to the country’s production drop was platinum group metals, which accounted for 6.9 percent of the decline. Actual production figures were not provided in the report. SSA’s figures were calculated with reference to levels of production in 2000, the index’s base year.

Petra Weighs Layoffs , Suspends Work at Kono
In the midst of the global economic downturn, Petra Diamonds is considering layoffs and other cost-saving options. Johan Dippenaar, Petra Diamonds’ chief executive officer (CEO), told the Mail & Guardian that the recession has caused diamond prices to fall by as much as 45 percent since 2007, forcing the company to streamline operations and cut jobs.

Petra management held its first meeting with South Africa’s National Union of Mineworkers (NUM) and the two smaller unions at its Cullinan mine to outline the terms of a savings package. Maxwell Hlalethoa, NUM’s chairperson at Cullinan, claimed that Petra’s management wants to erode a range of benefits, including allowable sick days and maternity leave, according to the Mail & Guardian. He also said that even now, 15 years after apartheid ended, race relations are poor at the mine.

Teon Swanepoel, Cullinan’s general manager, denied that there is discrimination at the plant and told the newspaper that any existing imbalances were inherited from previous owner De Beers.

Petra refuted the Mail & Guardian story in a statement: “Petra Diamonds can confirm that its remuneration structure and other terms of employment are not discriminatory....Petra Diamonds conducts itself according to the highest ethical standards and is proud to provide employment to approximately 3,000 people. By acquiring a number of older mines from De Beers, namely the Cullinan, Koffiefontein and Kimberley Underground mines, Petra is actively retaining and creating employment in South Africa.”

In addition, Petra suspended operations at its Kono project in Sierra Leone, which was in the advanced stages of exploration. The firm explained in a statement that the decision will be reviewed when market conditions improve.

— Additional reporting by Acquire Media.

Namakwa Diamonds’ Loss Deepens
Namakwa Diamonds reported a loss of $76.7 million during the first half of its fiscal year 2009, compared with a loss of $19.4 million one year ago. The junior miner laid off 562 employees during the first half of the fiscal year, which ended on February 28, 2009. At the end of the half year, the company claimed $21.4 million cash on hand, a diamond inventory of $21.9 million, receivables of $8 million and total assets of $52.2 million. After conducting an operations review in November 2008, Namakwa placed four mines on care and maintenance and implemented various cost-cutting measures to preserve cash, Nico Kruger, chief executive officer (CEO), explained in a statement.

Zimbabwe Seeks to Profit from Marange Diamonds
Zimbabwe’s government is developing a model to exploit its controversial Marange diamonds and ward off attempts to ban these precious stones from the world market, Murisi Zwizwai, deputy minister for mines and mining development, explained to World News Connection. Therefore, the government will dispatch teams to countries that have profited from their mineral resources, such as Botswana and South Africa.

The World Federation of Diamond Bourses (WFDB) has called for a ban on trade in Marange diamonds, suggesting that their proceeds were used to fund human rights violations by President Robert Mugabe’s government. — Additional reporting by Acquire Media.

Gem Diamonds’ Prices Down
Gem Diamonds reported that average prices from its Letseng mine in Lesotho dropped 52 percent to $1,017 per carat in the first quarter of 2009. Sales from Letseng declined 2 percent to $22.6 million in the three months that ended March 31, 2009, despite production increasing 16 percent to 21,790 carats.

Pangea DiamondFields Tenders Net Lower Prices
Pangea DiamondFields reported that it generated $239,776 in sales at the second tender of diamonds from its Bakerville project in South Africa. The tender sold 1,016 carats at an average of $236 per carat, well below the average price achieved to date from the project. So far, a total of 1,233 carats have been sold from Bakersfield for an average of $449 a carat. The first tender of diamonds from the project, held in July 2008, achieved an average price of $1,448 per carat.

Sales from Pangea DiamondFields’ recent tender of approximately 5,710 carats of diamonds from the firm’s Longatshimo River and Tshikapa River projects in the Democratic Republic of the Congo (DRC) and its Dimbi project in the Central African Republic (CAR) garnered $670,000. The average price achieved on the 3,710 carats of diamonds from the DRC was $117 per carat, while the 2,000 stones from the CAR sold for $116 per carat.

Diavik Production to Sink
Production at the Diavik Diamond Mine in Canada is expected to drop 41 percent in 2009 as owners Harry Winston and Rio Tinto scale down output to match the slump in demand. Harry Winston foresees production of 5.4 million carats at Diavik this year, compared with 9.2 million carats in 2008. The mine is scheduled to close for two separate six-week periods for care and maintenance, beginning July 14 and December 1, respectively.

Harry Winston has budgeted $130 million for capital expenditures at the mine in the next three years, allocating $47 million to the fiscal year that will end January 31, 2010. The company had a 40 percent ownership share in the Diavik mine that fell to a 31 percent economic share when Kinross Gold Corporation invested $150 million in Harry Winston in March. Rio Tinto, which operates the mine, owns the remaining 60 percent.

Article from the Rapaport Magazine - June 2009. To subscribe click here.