Yet another mine in Botswana sinks

By Mpho Tebele

GABORONE- THE mining sector in Botswana has suffered another setback, after Ghagoo Diamond Mine announced this week that it will cease production with immediate effect due to weak diamond market.

The London Stock Exchange-listed Gem Diamonds, which owns the mine, says the latest development would lead to job losses of over 250 employees. The closure of Ghagoo comes on the heels of the liquidation of BCL copper mine late last year due to depressed commodity prices.

Like other countries in the region, Botswana’s projected economic growth for the year depends on good mining output and better commodity prices.

Managing Director of Gem Diamonds Botswana, Haile Mphusu, says the mine would remain under care and maintenance until returning to full production makes economic sense again.

It is anticipated that after one-off settlement cost, annual care and maintenance cost would amount to US$3 million.

“The decision had to be made despite the fact that the development of the Ghaghoo mine has progressed well, so much so that the mine will soon be in a position to start full commercial production,” says Mphusu, adding, “The material fall in the prices of its diamonds from US$210 per carat in early 2015 to US$142 per carat at its most recent sale in December 2016, emphasizes the weak state of the diamond market for this category of diamonds.”

According to Mphusu, the mine would be closed for about two years, but if there is an improvement in diamond prices before that, the better. The company says with its focus profitable production, the decision has been made to place assets on care and maintenance and to continue to monitor market conditions for a time when commencing full production would make commercial sense.

Gem Diamonds officially opened the Ghaghoo diamond mine, the first underground mine in Botswana, in September 2014. It represented a significant milestone for Gem Diamonds, as the company looked forward to operating its second major producing diamond mine, in addition to the Letšeng mine in Lesotho.

The liquidation of BCL and closure of Ghagoo diamond mine comes on the backdrop of last year’s statement issued by the Mining Industry Association of Southern Africa (MIASA), which is an association of chambers of mines in SADC.

It warned of more job losses in Southern Africa’s mining sector, saying the Southern African Development Community (SADC) lost approximately 70,000 jobs across all commodities.

“Considering a multiplier effect of seven, this translates to total jobs lost amounting to 490,000. This means up to five million people have been deprived of their daily subsistence considering that each employee supports between seven to 10 dependants. To make matters worse, a further 50,000 employees face the risk of losing their jobs if something drastic is not done urgently,” the association said.

MIASA had highlighted the need for policy consistency by governments to help the mining industry in the SADC region survive. MIASA represents chambers of mines from Botswana, Democratic Republic of Congo, Madagascar, Namibia, South Africa, Tanzania, Zambia and Zimbabwe.

February 2017
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