Firestone said early February that its BK11 mine, in Botswana had continued to encounter technical challenges with respect to the liberation of diamonds from the secondary crushing circuit of the plant.
Despite this concern, the diamond junior appeared sanguine about the future of the mine as it noted that the bulk sampling of the K2 units had returned grades of 8-10 carats per one hundred tonnes, as predicted.
The group even said in an annual report for 2011 that its prospects were better than at any time in the company’s history and that it was well positioned to reach its target of producing 1 million carats per annum by 2014.
Its last tender of BK11 and Liqhobong diamonds held between late January and the first week of February this year registered an increase in prices for the “higher quality” stones.
Although it could not reveal the sales figures, the diamond junior claimed that this indicated continued strong demand.
Bombshell
However, it was not long before Firestone dropped a bombshell, which “shocked” many a people in the diamond industry.
The miner said late February that it had suspended operations at the BK11 mine and placed it on a temporary care and maintenance programme.
The decision, it said, was taken due to a combination of operational challenges and the current weakness in the diamond market.
"We remain committed to the operations in Botswana and the programme at BK11 is a temporary measure that has been designed to enable a rapid re-start of operations when the technical and market challenges have been resolved," - Firestone chief executive Tim Wilkes said.
"The Company will now focus on the flagship Liqhobong Mine in Lesotho which has proven large scale diamond recoveries and remains on track to announce the Definitive Feasibility Study in June 2012 and produce 1 million carats by 2014."
Weakness
To hear that the weakness in the diamond market was one of the reasons why Firestone had decided to suspend operations at BK11 was indeed startling, as this came at a time when De Beers had made a positive projection for the market.
The diamond giant said recently that 2012 would see global consumer demand growth at between 11 percent and 13 percent.
This was after the US, which consumes about 40 percent of the global diamond output had registered a growth of about 8 percent in 2011, whilst China and India continued their strong growth of around 30 percent.
Petra Diamonds also said that the diamond market stabilised in November 2011 and expected this trend to continue after prices strengthened slightly at its first early February tender of the second half of the financial year 2012.
It also said feedback from its client base was “generally positive” concerning current global demand for rough diamonds.
“Whilst uncertainty may continue in the first half of calendar 2012, there is an expectation that demand will pick up in the second half of this year,” it said.
So, if the prospects of the market are said to be positive, why then are we witnessing the closure (albeit temporary) of this mine, in Botswana?
No sense
Is there any reason to worry that the effects of the global economic crisis of 2008 – that saw some mines, in Botswana and Namibia embark on the so-called production holiday - were now upon us once again? Certainly not!
The strong appetite for diamonds in China and India despite concerns over the Euro-zone debt crisis and the struggling US economy would be a major drive of the diamond market in 2012.
The challenges that Firestone is facing at BK11 surely have - to a larger extend - nothing to do with the prevailing market conditions.
The real issue here appears to be more of poor grades recovered at the mine due to the crushing and diamond liberation problems.
It is logical that Firestone wants to focus more on Lesotho, as Liqhobong had proved more profitable than BK11.
It makes no sense for a company that recorded “good prices” during its first tender barely a month ago to say now that it had decided to close the operation due to weak market conditions.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
