Dual listed junior miner-Firestone Diamonds will not open BK 11 diamond mine anytime soon, this is despite fresh projections that prices for the commodity will increase ‘considerably’ through 2020.
Firestone closed BK 11 mine more than a year and a half ago, citing poor market prices, which have been necessitated by a slowdown in the global economy. “We are in an environment which is very tough. Nothing positive has really come out which can make us reopen the mine, but we are doing quarterly reviews (on whether to open or not),” said Polite Khutjwe, the group head of projects and operations.
His pessimism comes days after leading North American financial services BMO Capital Markets announced that diamond prices will grow by 6 percent on average in the next 7 years. The company cited lack of production to meet demand. In terms of production, BK 11 is among the smallest diamond mines in Botswana.
“While output is rising, it’s unlikely to surpass the peak of about 160 million carats a year attained before the world financial crisis,” BMO analyst Edward Sterck said in a report.
“The primary constraint on supply growth is the lack of new discoveries that match the scale of existing operations in Botswana and Russia,” Sterck said. Speaking to BG Business from Maseru on Wednesday, Khutjwe said he is not aware of any latest research suggesting an uptick in the diamond industry.
“People do all sorts of research, but for us, everything has been quite stagnant (in terms of prices),” he said. Meanwhile, the AIM and Botswana Stock Exchange (BSE) listed company spends over P500 000 monthly on maintenance of the mine’s machinery and plants. Khutjwe said they cannot cease the current maintenance programme despite millions of Pula spent on an unproductive mine.
“The machines need to be maintained so that they are ready once production restarts,” he added. Once more, Khutjwe could not commit any time frame for the re-opening of the mine that used to employ well over 200 people.
“BK 11 is not the only mine which has closed. Look what has happened to Lerala mine (Mantle Diamonds), even Damtshaa (Debswana) was closed for more than two years,” he justified. Lerala diamond mine opened in 2012, but closed months later due to unfavourable market forces. On the other side, BK 11 started full production in 2011, but was closed and put in care and maintenance programme last year.
The mine is located near Orapa. Can the mine executives be blamed for commercialising the mine while the market is bad in the first place? “Nobody ever knew when the diamond prices would go down. I don’t think we blundered in opening the mine,” he said. Firestone also operates Lighobong mine in Lesotho. At the close of market this Wednesday the company’s share price was flat at 60 thebe.