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27 february 2012

Firestone Diamonds, which has a 75 percent interest in Liqhobong Mine, in Lesotho and a 90 percent stake in the BK11 Mine, in Botswana is optimistic that 2012 will continue to register growth in rough diamond prices driven by a shortfall in supply.

Although the group management technical assistant Boikanyo Kgosi could not reveal the sales figures the company obtained from its January tender she told Rough & Polished recently on the sidelines of the Investing in African Mining Indaba that they had registered an increase in prices for the “higher quality” stones.

She also spoke on the diamond junior’s operations in Lesotho and Botswana among other things.

The first half of 2011 saw diamond prices on an upward trajectory but tapered off in the second half of the year. Did this trend continued in the New Year?

Well, the prices did not really taper off in the second half of 2011. There was rather a sharp rise in the early parts of 2011 and that was not sustainable, the markets knew that. So the dip experienced in the first quarter of 2011 was a more normal position. I mean there was a 50 percent rise, and a 15 percent drop, so you have a residual of 40 percent, which was still an increase from 2010. So it was actually the markets re-aligning themselves but the general rise is still expected. 

What is your projection on diamond sales during this first half of the year?

Well, we just had our first tender for 2012 and although we registered an increase in prices for the “higher quality” stones, we are yet to reveal the sales figures. So it will be safe to see how we performed compared to the last quarter of 2011. We are however still enthusiastic and believe that the prices will still be sustainable during the first half of the year.

What is the expected output at your Liqhobong mine, in Lesotho during the financial year 2012?

We are looking at increased tonnage from just a little under 300 000 tonnes per annum to over 600 000 tonnes per annum, from 93 000 carats to over 200 000 carats.

Europe and the United States are experiencing some economic problems and most people have sort of shifted their eyes to developing economies such as China and India for diamond trading. Has your company received enquiries from these countries?

Interest from the Far East or Asian markets has been increasing, showing that they are now becoming more aware of diamonds and we all know that diamonds are luxury goods. So obviously when there is a pinch in the market they will be the first one to realize because they are not a necessity. The Asian and the Indian markets are some of the main basis for projecting positive figures for 2012.

Do you have any competitive advantage over your fellow diamond miners in Botswana, for example, where you mare marketing your own diamonds?

Well, the issue here is that we are in a unique position, Firestone Diamonds, was the first company to set up an independent tender house in Botswana. De Beers is on a different level, we are not on the same level of production with them, so the comparison is not the same as comparing apples and oranges. So we cannot really reference ourselves to De Beers for they operate a Sightholdership model while we operate an open tender, highest bidder takes first. In terms of our competitors like Lucara Diamond, they just came online and will obviously come up with their own sales model. However the competitive advantage really stands on the fact that we were first in and the response has been good. The world is hungry for diamonds and they will pick them wherever they can.

We saw late last year Botswana reaching a new sales agreement with De Beers that will see it selling 10 percent of Debswana’s total output per annum. Will that have a bearing on your operations?

No, that will not have a bearing on our operations, and like I said, we are really independent. So if anything, it could be a ‘thing’. The more buyers we have in the region the better for everybody.

The government of Botswana has been pushing the need for the country to beneficiate its diamonds. What is Firestone Diamonds to complement the government’s drive?

Our focus at the moment is on just the sale of rough diamonds and obviously there is a future to look ahead of. Right now we are just improving our business model but we do support the government of Botswana, its policies and initiatives. So if we are in a position to affect those policies, Firestone will certainly implement them.

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished