Jwaneng Banking on a Bounceback
June 19, 25
The Jwaneng diamond mine is unquestionably a cornerstone of Botswana's economy.
It has, historically, accounted for more than half of De Beers total diamond production in the country, and over 40 per cent of the miner's global output.
But today, the vast open pit, located in an ancient volcanic crater in the eastern part of the Kalahari Desert, is quieter than usual.
Debswana, the joint venture between De Beers and the Botswana government, has paused work for three months on Jwaneng Cut 9, the huge $2bn project that will unlock an estimated 53m carats of rough diamonds.
The reason is simple: the global slump in demand. Debswana reported a 46 per cent drop in sales for 2024, and has cut its 2025 production forecast by 16 per cent.
But it's not all doom and gloom. In spite of current troubles, Debswana is pressing ahead with a project that's even bigger than Cut 9 - the switch to underground production.
Open pit mining will come to an end by 2034 and digging deep underground - around 1km - using sublevel caving (SLC) and other complex methods will extend its life for an additional 20 years.
Will there still be sufficient demand for natural diamonds in the year 2054 to justify the investment? Will a new generation still be buying them, or will lab growns, currently around 20 per cent of the market by value, have completely taken over?
We don't know. But we do know that Debswana is doing all it can to raise the finance for the expansion, and that it is looking beyond its own coffers, and those of its shareholders, to international capital markets.
The future may look a little bleak right now, but Debswana is counting on the current weakness in the diamond market being cyclical (short-term) rather than secular (long-term, structural).
Put another way, things can only get better.
The current economic downturn may well be cyclical, the hangover from the 2021-2022 buying frenzy may well be cyclical, and China's slow post-pandemic recovery may well be cyclical.
History shows that if we zoom out to secular, long-term factors, luxury markets in general, and diamonds in particular, have a habit of bouncing back.
Lab growns have, undoubtedly, disrupted the market, but many analysts believe they'll plateau before too long and the natural sector will ride the storm.
Debswana has already invested $1bn in the Exploration Access Development Phase of the underground plan, and is now hoping to secure the bulk of the funding from global financial markets.
At a time when prices for both rough and polished are at the lowest point for at least a decade and a half, it's putting its money - or somebody else's money - where its mouth is.
With what could well be the biggest ever capital investment in any diamond mining project, ever.
Have a fabulous weekend.