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Okavango Unveils New Way of Selling Rough

Sales Spike 80% in 2016

Dec 22, 2016 4:04 AM   By Avi Krawitz
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RAPAPORT... Okavango Diamond Company will test selling rough diamonds via term auctions next year, providing customers with consistent supply during a period, managing director Toby Frears told Rapaport News.

“In response to requests for committed supply arrangements, we will be piloting the sale of term contracts by auction in February,” Frears said in an email. “The introduction of term auctions will complement our regular spot auctions and create new opportunities for customers who are seeking consistent and predictable supply over several cycles.” 

Customers will be able to bid for committed supply over a three-cycle sales period, he explained. That will give them the ability to plan their production for approximately three months as they’ll be guaranteed the supply over the period for the goods they won. Okavango will pilot the program in select assortments, while continuing with its regular spot auctions. 

The state-owned company, which was set up in 2013 to advance rough diamond trading in Botswana, has access to 15 percent of production by Debswana, a mining joint venture between De Beers and the government of Botswana.

It holds 10 auction sales per year at its headquarters in Gaborone, following a similar schedule to De Beers sightholder sales that take place in the city.   

Good Year for the Industry

Sales jumped 80 percent to $546.5 million in 2016, while sales volume more than doubled to 3.442 million carats, Frears reported. The company supplemented its regular intake from Debswana with inventory remaining from 2015. The average price fell 14 percent to $159 per carat, according to Rapaport calculations.

Okavango’s overall rough price index of like-for like items was broadly flat for the year after an initial increase when the industry restocked in the first quarter, Frears said.

Demand for 3 to 6 grainer and 2 to 4 carat rough was resilient throughout the year, he reported. Demand for lower-value goods was weaker, in part due to India’s demonetization program which impacted auction prices in November and December, Frears added.

“It’s been a good year for the industry as a whole, with the mid-stream benefiting from improved margins and steady polished sales after the well documented challenges of 2015,” Frears explained. “While we’re optimistic on the back of customer feedback that these conditions should prevail into the early part of 2017, much will depend on the production volumes and pricing strategies of the major producers.”
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Tags: Avi Krawitz, De Beers, Debswana, Okavango, Okavango Diamond Company, Rapaport, Toby Frears
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