Namibia’s Diamonds Dwindle

- November 24th, 2009

Namibia is having to contend with strong under currents these days. The economic recession has put paid to the country’s main life-line: diamond exports. The road ahead?

By Kishori Krishnan Exclusive To Diamond Investing News

Namibia is world-renowned for its gem quality placer diamonds that occur along the Orange River as well as, onshore and offshore activities along the coastline of Namibia.

Originally transported via the Orange River into the Atlantic Ocean, the Namibian diamonds were distributed northwards by long-shore currents.

The country is having to contend with stronger under currents these days though.

The economic recession has put paid to the country’s main life-line: exports.

For many diamond-producing countries, especially in Africa, diamond mining is one of the main sectors contributing to the economy. It is an important generator of export earnings, and a catalyst for poverty alleviation and the provision of essential services.

Namibia attaches great importance to the Kimberley Process Certification Scheme (KPCS), but the first half of the year has not been easy.

The Kimberley Process is a joint government, industry and civil society initiative to stem the flow of conflict rough diamonds used by rebel movements to finance wars against legitimate governments.

The KPCS “has proved to be remarkably successful in breaking the linkage between conflict and illicit trade in diamonds, thereby protecting the peace, livelihood and security of millions of people around the globe,” according to Deputy Mines and Energy Minister Bernard Esau.

Maintaining that “we owe our advances in development to the exploitation of mineral resources, especially diamonds, which account for more than 40 per cent of our export earnings, 10 per cent of gross domestic product (GDP), and seven per cent of government revenue”, Namibian news agency (Nampa) quoted Esau as adding that the industry would see “cautious recovery.”

Tough times

For diamond giant De Beers, the worst is not over yet. Production stopped for four months in the first half of the year and 600 workers lost their jobs – most of them at the Orange River operations, the centre of Namdeb’s land-based operations.

Namdeb is a 50:50 joint venture between De Beers and Namibia’s government. Established in 1994, Namdeb also owns 30% of De Beers Marine, which mines the company’s offshore Atlantic concession.

The United States accounts for more than 50 per cent of Namdeb’s customers.

Estimates for total production this year is less than one million carats. But Namdeb isn’t planning to increase production.

The company maintains that “it’s too early to make that call.”

Continued struggle

Also cautious is Okahandja-based NamGem, where the government is a 50 per cent shareholder in the company,
The chairperson of the Diamond Manufacturers’ Association of Namibia, Burhan Seber, maintains that “a number of factors continue to affect the extent of the manufacturing industry’s recovery.”

On the demand side, Seber says that with demand levels still falling below pre-crisis levels despite significant improvements since the crisis, “we as manufacturers need to cater to the new realities of a less bullish market. The recovery is still very fragile and thus companies must remain extremely cautious”

He adds that given the decreased production during the crisis, the amount of rough diamonds currently available to cutters and polishers worldwide is much less than before the crisis.

The struggle continues for some diamond firms.

Glimmer of hope

But for chief executive officer, Andrew Cranswick, of the African Consolidated Resources, “the business environment has improved dramatically over the last 12 months and will continue to do so.”

The company has opted for the legal route in the battle for the control of the Chiadzwa diamond claims.

Last week, in a regulatory filing to the Alternative Investment Market, the company said it has raised £10 million, through a share placement, for expansion projects in Zimbabwe.

Zimbabwe escaped a ban from the Kimberly Process Certification Scheme, at a meeting held in Windhoek, Namibia, early this month.

“African Consolidated Resources has conditionally raised up to £10 million by way of a placing by Ambrian Partners Limited of 70,7 million new ordinary shares of one pence each in the capital of the company with new and existing shareholders at a price of 13,75 pence per share,” read part of the statement.

The net proceeds from this placement will top £9,5 million, which is estimated to be at US$16 million at the present exchange rate.

New power

There just might be some more sparkle.

The government last week introduced Africa’s first fully nationalised diamond valuators.

The slump in global demand is also prompting the government to explore uranium mining and gas fields, in a bid to diversify the economy.

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