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Author: 23 Jun 2011 Last updated at 08:02:02 GMT

Diamond to be the mainstay of Botswana mining industry

GABORONE (Scrap Monster): Botswana is one of the major diamond producers in the world and the diamond output will remain the mainstay of Botswanan mining production, boosted by new projects being planned by both Gem Diamonds and Lucara Diamond Corporation.

However, there are also key mining projects being developed in the copper, uranium and coal sub-sectors, such as Discovery Metals' Boseto project. 

The Botswana mining industry received several positive pieces of news during the first half of 2011, with Gem Diamonds being awarded a 25-year mining licence for its Gope diamond project in central Botswana and African Copper receiving an interim mining licence to develop its Thakadu coppersilver deposit.

Lucara Diamond Corporation also announced that it would be commencing full production at its AK06 diamond mine by early 2012, with expectations that the mine should produce 400,000 carats of rough diamonds during its first year of operations. Commissioning of the mine is scheduled to start during Q411. 

These positive developments follow in the wake of earlier announcement by Australian copper miner Discovery Metals that it will be commencing construction on its Boseto copper project within the Kalahari copper belt, with the company's bankable feasibility study (BFS) calling for throughput of some 3mn tpa of copper and silver ore over five years. 

Gem Diamonds has stated that construction at the mine site at Gope will start this year, with diamond production set to commence in 2013 at an initial rate of 100,000 carats per annum, increasing over time to a 'peak steady state' production of 780,000 carats per annum. 

Diamonds continue to be the mainstay of Botswanan mining at present, with figures from the Bank of Botswana released in February 2011 showing a 39% increase in diamond exports over 2010, to reach US$3.01bn. 

Botswana remains the highest-rated African country in Business Environment Rankings for Q311, with a score of 66.7 points out of 100. The country has a stable political situation and a well-developed mining sector, backed up by a sound regulatory framework. 

Moreover, tax rates remain relatively low on a regional basis and the country has relatively flexible labour regulations, which should also bolster growth. The positive view on Botswanan mining is shared by the influential Fraser Institute, which has placed Botswana in 14th place (out of 79 jurisdictions) in its Policy Potential index, as contained within its Survey of Mining Companies 2010/11, published in March 2011.

Exploitation of rich mineral reserves, especially diamonds, has been a significant driver of Botswana's economic growth. Diamonds, along with copper and nickel, are major focus areas in metal and mineral exploration, and earn more than three-quarters of the country's export revenues. More recently, coal and uranium have also emerged as key future revenue generators for the Botswanan mining industry. 

The authorities in Gabarone have an impressive track record in garnering the maximum benefit from the production of diamonds, and the trend is expected to continue over the coming decade. Diamonds currently dominate the economy but, with output set to decline over the medium term as reserves dwindle, the government has enacted a number of measures to ensure that revenues are used to aid diversification.

For example, a fiscal rule has been adopted which states that mineral revenues must be used to expand the economy's productive base, rather than fund consumption expenditure. Owing to this rule and other initiatives enshrined in successive six-year National Development Plans and the long-term policy Vision 2016, growth in the non-mining sectors is burgeoning. 

It is estimated that the sector can show an average annual growth rate of nearly 10% over the 2011-15 period, with the industry reaching a value in excess of BWP60bn (US$10bn) by 2015. 

 

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