Speculation had been ripe in the media that De Beers’ move to focus on economic production at its mines could have a damaging impact on Botswana’s diamond industry. Critics cautioned that this could lead to years of restrained production, low supplies to downstream industries, as well as lower government revenues. Rough&Polished’s Mathew Nyaungwa caught up with De Beers’ media relations manager in Botswana, Chipo Morapedi to find out if the diamond miner agreed with the reports. Below are the excerpts.
Critics say De Beers’ decision to produce diamonds based on demand, will have a damaging impact on Botswana’s diamond industry. What is your take?
On the contrary - De Beers is focused on delivering a profit to our shareholders, which includes Botswana. In order to do this, we must produce rough diamonds in line with client demand. We are always aware that we are mining a unique treasure of nature that doesn’t have a limitless supply. Diamonds must therefore be treated accordingly. We must take care as we mine this finite supply to ensure we are maximising the life and value of the resource.
What does De Beers’ new policy of ‘economic production’ entails?
Profitable production is not a “new policy” at all, nor is it different from the way any other normal company brings goods to market.
Diamond analysts also noted that the new policy marked a full circle turn for De Beers, from when it maintained buffer stocks and production quotas to support high rough prices. Your reaction to this analysis?
As I said before we are producing rough diamonds in line with client demand…as demand increases, so too will our production. We have already said that we expect to mine approximately 31 million carats this year (a 30% increase on 2009) and approximately 40 million carats next year (a 66% increase on 2009).
De Beers has announced a US$4 billion sales target for the 2010-2011 period, which is lower than the previous target. Can this be linked to the company’s new policy, if not, what is the reason behind the revision?
We believe this is an ambitious and healthy forecast. One must remember that we are only a few months removed from some of the most difficult trading conditions the market has ever seen. As price and volumes recover, so too will our sales figures. Given the success we have had at reducing our cost base, we are now able to achieve a profit at a lower level of sales. As the recovery grows, so too will our sales figures.
There had also been a lot of speculation that De Beers was planning a re-listing. What is your reaction to this?
Certainly rumours and speculation about the future of De Beers are nothing new. Any questions about the shareholding structure of De Beers are a matter for the shareholders themselves to comment on. As we begin what has been referred to as the Diamond Decade, the management of De Beers is completely focused on delivering strong growth for our shareholders. We take it as a great compliment that so many people believe our future is as exciting as we believe it to be.
Mathew Nyaungwa, Rough & Polished, Namibia
