Okavango Diamond Company sales jump 80%

Okavango Diamond Company (ODC) 2016 sales jumped 80% to $546.5 million as global consumer demand for diamonds rebounded.

The increase signals a significant recovery in the market after sales for the state-owned rough diamond marketing company fell 45% in 2015.

ODC Deputy Managing Director, Marcus ter Haar told BusinessWeek that overall volumes also rose by 115% to 3.44 million carats after accounting for various post sale adjustments through the year.

He said;

“2016 was a good year for ODC with sales up 80% from a low base in 2015.  In 2016, ODC was able to supplement its sales of regular Debswana intake, with goods made available from inventory.”

ODC, which held 10 tenders in 2016, is expected to sell 15% of Debswana’s production of, a joint venture between Botswana government and Anglo American’s diamond unit De Beers. Figures released by Anglo American this year show that production at Debswana was flat in 2016, rising by only one percent to 20.5 million carats.

While sales were significantly higher in 2016, ter Haar said the average weakened to $158.78 per carat from $183.78/carat in 2015.

“The fall in average price per carat is attributable to the different mix of diamonds sold over the two periods. In the year, the average price achieved by ODC was lower than De Beers.”

Figures released by Anglo American recently show that De Beers achieved an average realised price of $187 per carat in 2016, which was 10% lower than in 2015, reflecting the lower average rough price index.

ODC, which will hold 10 tenders in 2017, is expected to sell 15% of Debswana’s production through auctions this year, as Botswana seeks to develop its own price book through the independent window outside of De Beers’ channels.

ODC buys partially sorted diamonds from De Beers Global Sightholder Sales (DGSS) and then sorts the goods into its own sales assortment before inviting its customers to view and purchase the stones through an auction process.

Looking ahead in 2017, analysts expect rough demand to improve in the first quarter as manufacturers start to ramp up production to meet resurgent polished demand.

De Beers CEO Bruce Cleaver said;

“We saw good demand across the majority of our assortment during the first sales cycle of the year, as the industry entered the period when rough diamond demand is traditionally strongest.”

He also said that the gap between the final sales of last December and the first of this year bolstered demand.

At the start of the sale in Gaborone, where the company holds 10 sales events annually after it relocated its sorting, aggregation and sales business from London, Cleaver had warned of the negative effect on rough diamond sales from India’s demonetisation programme to change high-value bank notes in the country.

“While the reopening of some diamond polishing operations in India saw something of an increase in demand for smaller, lower quality rough diamonds, we maintain a cautious outlook for these categories as the Indian industry continues to adjust to the post-demonetisation environment,” Cleaver said.

Following a sluggish 2015, diamond sales appear to have turned a corner in 2016, a development that will be music to the ears of fiscal authorities faced with a forecast P6 billion-budget deficit in the financial year ending this March.

Latest financial statistics from the Bank of Botswana show that, thanks to higher mineral revenues, the national budget recorded a P1.65 billion quarterly surplus in the three months ending September 2016.

Source: MmegiOnline, af.reuters.com
Image courtesy of www.odc.co.bw

8 months ago