A decline in global consumer demand influenced diamond miners within Botswana to implement a production holiday in 2009. This suspension of mining activities caused production output to decline by 45.0 per cent. A decline in global copper prices as a result of the financial crisis also caused the Botswana nickel mining industry to temporarily suspend operations and witness a 19.5 per cent decline in production output.
New analysis from Frost & Sullivan (industrialautomation.frost.com), Production and Investment Forecasts in the Botswana Mining Industry, finds that key investment projects within Botswana's diamond mining sector amounted to $355.0 million in 2010. The Botswana diamond industry's investment is forecast to decline to $134.0 million in 2014.
"A steady rise in consumer demand from China and India, and a modest improvement in demand from North America and Europe, are chief among the factors expected to contribute to the recovery of Botswana's diamond mining sector," states Frost & Sullivan's IPC Industry Analyst James Fungai Maposa. "Botswana's diamond production output is forecast to rise from 22.97 million carats in 2010 to 30.83 million carats in 2014."
To support this anticipated increase in demand, Debswana's investment expenditure is also expected to increase considerably from $355.0 million in 2010 to $555.0 million in 2014. Key projects expected to contribute to the substantial increase in short-term capital spends include the Jwaneng Cut 8 expansion and the Morupule Colliery expansion.
Despite the global financial crisis, which resulted in Botswana experiencing an unprecedented loss of national income as the global demand for diamonds plunged, the country's mining industry is expected to witness a recovery. The steady increase in global diamond demand is also expected to contribute to diamond prices gradually returning to the levels achieved during the first half of 2008 by 2012-2013.
"Mining companies in Botswana are however expected to continue to struggle to raise funds to start or expand operations during the short term," cautions Maposa. "Botswana's mining industry consists mostly of multinational companies that rely on funding from international markets to expand or construct new mine operations.
With most international financing houses focusing on investing in low risk ventures, companies are going to find it difficult to develop their prospects to new mines."
The combination of risk aversion and uncertainty of mineral commodity prices are expected to have a significant impact on Botswana's mining companies, particularly the smaller, emerging mining entities. The Credit Suisse Bank has announced that due to the risk-averse nature of the investment industry, a delay in mining finance of $150.0 billion to $200.0 billion is forecast between 2011 and 2013. Delays in obtaining funding are therefore expected to impact the mining industry negatively between 2011 and 2014.
"Despite the limited access to funding, the International Monetary Fund (IMF) predicts that Botswana's diamond exports could reach between 80 and 85 percent of the levels reached prior to the recession in 2008, during the medium term of the forecast period," concludes Maposa. "This anticipated growth in global diamond demand could restore investor confidence and re-inject the needed capital for the successful implementation of planned expansion projects."
If you are interested in more information about this study, please send an email with your contact details to Samantha James, Corporate Communications, at samantha.james[.]frost.com.
Production and Investment Forecasts in the Botswana Mining Industry is part of the Industrial Automation & Process Control Growth Partnership Service programme, which also includes research in the following markets: Production and Investment Forecasts in the South African Food and Beverages Industry, Production and Investment Forecasts in the South African Cement Industry and Production and Investment Forecasts in the South African Coal Industry. All research included in subscriptions provide detailed market opportunities and industry trends that have been evaluated following extensive interviews with market participants.
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Production and Investment Forecasts in the Botswana Mining Industry / M623