De Beers clears the air on open tenders

MBONGENI MGUNI
Staff Writer | Friday August 6, 2010 00:00

 

Firestone Diamonds is soon expected to approach the market with a parcel of diamonds from its BK 11 Mine which commenced production last month, while African Diamonds has also sealed a mining licence empowering it to market its diamonds in the open market.

Market sources recently told BusinessWeek that local diamond manufacturers had been liaising with their international parent companies to determine whether they can participate in Firestone and African Diamonds' expected tenders.

In entering production, BK 11 becomes the second operational diamond mine outside the Debswana/Diamond Trading Company Botswana (DTCB) production and retail chain. Firestone and African Diamonds' mining licences and their push for independent marketing provisions mark the first time produce from Botswana will be sold outside the De Beers system.

In 2008, DiamonEx's Lerala Mine became the first diamond mine to commission in Botswana outside Debswana. However, the mine suspended operations early last year, citing cash flow constraints brought on by a collapse in the price of diamonds.This week, DTCB officials said the 16 cutting and polishing firms, who hold exclusive rights to Debswana's production, were free to participate in tenders outside the De Beers supply chain.

DTCB, like Debswana, is a 50/50 venture between De Beers and the government of Botswana.

'The contracts that DTC and DTCB have with sightholders do not prohibit them from acquiring rough or polished diamonds from any other source,' said DTCB corporate communications and public affairs manager, Kago Mmopi.

'The only condition is that the diamonds acquired from other sources must carry a Kimberley Process Certificate, as is the case with diamonds supplied by DTC and DTCB.'

DTCB also dismissed as 'purely speculative' reports that De Beers has in the past attempted to hinder sightholders from procuring supply outside the DTC chain.

For their part, De Beers officials said production from Firestone and African Diamonds would not negatively alter the supply/demand dynamics in the market.

'We don't anticipate that the production from Firestone and African Diamonds will 'flood the market' as you suggest,' said De Beers Botswana spokesperson, Chipo Morapedi.

'In any case, the increasing consumer demand we are seeing, in particular in the Asian markets, is likely to significantly outpace what is forecast to be lower levels of diamond supply for many years to come. This will mean an upward trend in rough prices, not the other way round.'

It is understood the 16 cutting and polishing firms are keen to sample supplies from BK 11, to gauge sizes and colours and whether these fit with their established retail lines. While BK 11 is not expected to challenge the large volumes from Debswana, it is expected to provide variety for sightholders.

BK 11 is expected to yield approximately one million carats over a 10-year mine life, with the gemstones valued in March at about US$155 per carat (P1,088 per carat).

Where the current mine pit is located, Firestone expects to extract 5.4 million tonnes of kimberlite with an average grade of 12.6 carats per hundred tonnes valued at US$175 per carat (P1,228.50 per carat). Current production is under the Phase 1 production plant, which has a capacity of 650,000 tonnes per annum. Construction is ongoing at the Phase 2 production plant, which is scheduled to come on line later this year with 850,000 additional tonnes per annum.