Firestone holds 'milestone' inaugural tender

Brian Benza
Staff Writer | Friday December 3, 2010 00:00

Observers have hailed the achievement as indicative of Botswana's efforts to become a global diamond-producing, processing and marketing hub.

Firestone's efforts are expected to become significantly more successful than DiamonEx's ill-fated auction of 10, 613 carats in October 2008 that sold at a fraction of the price due to the global recession.

On Monday, Firestone Diamonds - which started production at its BK11 Mine in July - launched its landmark tender, selling production from its Botswana and Lesotho mines. The tender, which is being conducted at the Firestone offices at the Diamond Technology Park in Gaborone, will close on December 9. Government, through the Diamond Hub, is actively promoting Botswana as an international trading hub for diamonds, with the eventual target of seeing all diamonds produced in Botswana sold in the country either by open tender or through DTC, which is supposed to relocate its aggregation operation to Gaborone.

The tender will include 2, 500 carats of diamonds from the BK11 Mine in Botswana and 12, 000 carats from the Liqhobong Mine in Lesotho.

According to a statement released by the AIM-listed company, most of the invited buyers have confirmed attendance. The company has the capacity to host 40 buyers in the time allowed at the facility, but said it had received applications from over 50 companies for the current tender. Firestone has set a cycle of 10 tenders to be held in 2011 and expects to sell between 40, 000 to 50, 000 carats per tender when both its mines are at full production. The company expects to generate approximately $5 million from each tender projecting annual sales of around $50 million.

'The inaugural diamond tender marks the first opportunity for local and international buyers to obtain diamond parcels made up entirely of goods sourced from a Botswana mine,' Firestone noted.

In an interview with Business Week on Wednesday, the Coordinator of Botswana's Diamond Hub, Jacob Thamage, said although the parcels being sold was small compared to volumes sold through DTC, the tender was a significant achievement for Botswana.

'This was more of a pilot tender with small parcels up for sale,' Thamage said. 'We expect the volumes to pick when Firestone holds another tender again next year.

'We also expect African Diamonds to sell part of their production through tenders next year. This should all help move the country towards the dream of being a diamond trade centre.' Construction of AK6 Mine started last month and production is expected in the fourth quarter of 2011 with first sales in Gaborone in 2012.

Firestone's tender comes at a time when Botswana's much-anticipated pioneering diamond trading facility is set to be operational from the second half of next year.

According to the promoters of the trading project, the Diamond Technology Park (DTP), the platform will include a state-of-the-art tendering facility and a host of other diamond-related services.

The introduction of tenders is part of the government's plan to develop trading in the country as it seeks to diversify its economy beyond diamond mining.

To that end, the government is currently negotiating a new sales contract with De Beers, which will see a chunk - possibly 10 percent - of Debswana production being sold outside the DTC framework from next year.

'The Diamond Technology Park and Safdico are currently putting in place the infrastructure for diamond trading where companies will use their facilities for a fee,' said Thamage in the interview.

'But this will not mean that companies such as Firestone will be forced to do their tenders at the DTP facility; they can continue to use their offices for the tenders.'

As part of efforts to transform into a diamond trading centre, the government has also expanded the airport and built a diamond security facility there to ensure that fraud is kept to a minimum.

The tendering facility comes at a time when there has been revived efforts by emerging diamond buying countries such as India and China to source diamonds directly from Botswana.

The opening of the independent marketing channel is also expected to give Botswana an independent 'window' on the market and enable a better assessment of market conditions.