macroeconomics

[judo]

I''m doing some research on the industry in Angola and wonder if anyone can answer this question:

If a company claims to produce four million carats in a particular year - what sort of money should that be bringing in?

 

[DiamondExpert]

Depends strictly on the quality of the rough recovered...4M ct. of industrial quality won't be worth as much as 4M ct. of gem quality, etc. The proportional distribution of all quality categories (size, color, clarity) varies region to region also.

 

[judo]

Wherein lies all sorts of potential for ambiguity. OK, what would the minimum (assuming all industrial) and maximum (assuming 100 % gem quality) be?

 

[valeria101]

4M cts per year sounds more like total production than facetable goods.
For a more finely tuned revenue estimate, a look at www.diamondrough.com. There are some data about the 'average' composition of production usually spelled out for the sake of "diamond rarity", for what they are worth.

Given that prices are starkly different for unevenly distributed categories within the production volume, I would take a step back from ball-parking.

You may find an esier estimate by analogy with the Canadian mines: a much more transparent side of the business. You have an estimate for the value of their production HERE if you get the volume from one of those related articles, you're done.

Of course, mines have different overall production qualities, but for an orientative estimate this could be ok. Also, the rough market is tight enough not to allow for huge price differentials accross sources. Check out the testimony of "Furthermore" here on the forum: he made a living out of this, not I...

Why on earth is this a matter of macroeconomics? Just from one fellow economist to another... you'd be the second one tackling this kinda data though.

 

[judo]

I am no economist, as I am sure is evident by now. I used the word "Macroeconomics" because my interest is really in the country's financial management - what I am trying to do is get a sense of how much diamond production is worth (I have an official figure in carats, which is why I asked my admittedly naive question) and then compare that with how much money from the industry is actually registered in the state accounting system. I suspect there is a large disparity.

 

[valeria101]

Are you using IFS national accounts or trade data. Both have their flaws and may not be the best way to evaluate industrial size in developing countries. Mining revenues are particularly tricky. I did go through this exercise a few times, but not for that place on Earth. That "kimberly process" issue did spur some litarature on African diamond mining... did you try to track any of that down at UNDP?

If fiscal and trade revenue look "understated" this may refect two things: hidden "off budget" items for the public and quasi-public sector, and a big gray-black market with unrecorded trade flows & blurred (if any) tax reporting. For these reasons, better estimates have to rely on firm-by firm revenue analysis (which could be possible in such highly concentrated industries); sometimes the donor agencies go through these research pains, sometimes they don't. Of course, it all depends o how badly you need that number.
Surely you know a large part of this, but.... I couldn't keep my typing hands quiet

 

[valeria101]

----------------
On 12/4/2003 1:12:22 AM judo wrote:

My interest is really in the country's financial management----------------

You diamonds

, me oil... congrats! you got a hell of a job

There is a word in the jewelry business that "gems grow in all the bad places" and you know what? It is theoretically and empirically true. Sounds familiar?


A ROUGH Estimate:

Angola is a relatively minor African producer (1.8% of world output in 1996), from land deposits, which makes it's production of comparable quality with, say, Botswana, but not Namibia where the prevailing offshore extraction produces substantially higher quality rough. To note, South Africa also exploits maritime deposits, but these are not the main component in the mix.

Based on these, here are some numbers

:
Jwaneng mine in Botswana produced 10.5 million carats (a value of approx. $1.2 billion) in 1995. Based on geologic simmilarities (and any miner would laugh, but we are not miners and a 5% approximation is what we are looking at I guess) Angola should make a propotional income: or 0.457 USD billion (these are 1995 dollars, so you have to adjust for US inflation, and 1995 diamond prices, which are hopefully good enough).

Really, this kinda stuff is easy to find. The above come from the website of the American Museum of Natural History (HIC). For a precise view the factors I mentioned in the previous post should be taken into account. I suspect that whatever sources like this honorable one would not bother to take into account the local industry structure and market conditions.

Is this want you are after?

Best of luck!

 

[mike04456]

----------------
On 12/4/2003 2:42:51 AM valeria101 wrote:










Based on these, here are some numbers

:
Jwaneng mine in Botswana produced 10.5 million carats (a value of approx. $1.2 billion) in 1995. Based on geologic simmilarities (and any miner would laugh, but we are not miners and a 5% approximation is what we are looking at I guess) Angola should make a propotional income: or 0.457 USD billion (these are 1995 dollars, so you have to adjust for US inflation, and 1995 diamond prices, which are hopefully good enough).

----------------

Aiee, no, no, no. Jwaneng is one of the largest diamond mines in the world; Angola's deposits are entirely alluvial. The two are not comparable. An alluvial deposit will produce a much higher proportion of gem-quality diamonds.

Here are some 2002 figures for Angola from the London Mining Journal:

Total carat production: 5,871,000

Value of production: $803,145,000

Unit value US$/ct: 137 (this is about 1.5x that of Botswana)

Hope that helps.

 

[valeria101]

Wow, LawGem!

I knew that one way to coax the truth would be to make a mistake! Thanks...

I was always wandering how different these mines are, but this is by no means my piece of pie, and five minutes of reseach produced 50% error

Back to my sticky black stuff, and never look back!