Private mining companies are calling for improved support from government, following the recent closure of some diamond mining companies which could not continue mining due to high operational costs, funding challenges and weak diamond prices.
Mining companies have been closing down, the latest being Kimberly Lerala diamond mine and according to some industry players, it is difficult for diamond mining companies to continue mining due to high costs of mining in an environment where funding is declining.
Gem Diamonds Botswana Managing Director Haile Mphusu has indicated that to minimize closure of mines, government should improve support in terms of funding infrastructural developments around mining areas to attract more investment in mining. He expressed concerns that in some areas in the country, mining companies have to contend with constructing roads, water and power lines before they commence mining and that normally consume project funding. “Mining costs lot of money. I think to reduce the costs, ensure sustainable diamond mining and minimize closure of mining companies, government should put more infrastructure around mining areas,” he said.
Botswana Diamonds’ John Teeling added that exploration companies also need funding support to continue exploring for more diamonds and supply global market, following projections that the market for diamonds could experience supply-demand gap. It is projected in 2017 that global demand for diamonds will expand by 11 percent, while global supply is expected to increase by 5.2 percent. According to the projections the, 11 percent growth in demand is driven by the growing middle class population in China and India and the cyclical recovery in US consumer spending in luxury goods, while the 5.2 percent growth in supply will be driven by De Beers’ Gahcho Kue mine 4 million carats and Renard 1.5-2 million carats. Analysts have indicated that production from existing mines is getting depleted and many existing mines will begin to see declining output by 2020.
Teeling said exploration companies which are expected to look for more diamonds for mining and to supply the market are faced with challenges of raising funds for exploration and they have been struggling to find major discoveries in the past 12 years. “As exploration companies, we sell hope, not reality. We have to persuade people to give us money then drill to look into the ground. And most of the time we don’t discover commercially mineable deposits and most of potential investors and funding institutions are hesitant to give us funding for exploration,” said Teeling.
He stated that over the years his company which is exploring for diamonds in Botswana attracted funding from his family and friends. “Some potential funding institutions and individuals think it would be foolish to give out money and sponsor a company that digs holes without guarantee of mineable deposits,” said Teeling. The mining engineer indicated that due to less funding, exploration is limited and this could result with further decline of diamond supply.
Botswana has a wealth of diamonds which have been exploited with a total of 65 kimberlites discovered around the country.