Diamond market 'verification' gathers pace

Brian Benza
Staff Writer | Friday October 7, 2011 00:00

The company, which will be selling 10 percent of the Debswana run on mine production directly to the market, is expected to be operated with the assistance of a technical partner and reports are that ,more than ten international companies have already expressed interest to partner with government.

The 10 percent 'verification window' is part of the ten year diamond market and sales agreement government recently signed with De Beers, which will see the decades old tradition of selling all of Botswana diamonds through the Diamond Trading company falling aside.

In an interview with the Business Week ,Diamond Hub Coordinator, Jacob Thamage said that they are still in the process of determining how many people the company will employ but registration of the company as well as recruitment for the top management is at an advanced stage.

' The company should be fully registered soon and once the top management has been put in place, it will come up with a strategy on how and where the diamonds will be sold.

'I would have liked the company to be operating by now ,but I believe that should happen in about a month or two,' he said.

The ten-year agreement, which provides for an independent sales window for the government, will start at 10 percent of Debswana's run-of-mine production this year and rise to 15 percent over a five-year period.

Debswana, which has a capacity to produce 33 million carats a year, expect to dig up about 25 million carats in 2011 before ramping up production to 30 million carats next year.

During a press conference after the signing ceremony of the ten year deal Minerals, Energy and Water Resources minister said government will pay the market rate for its 10 percent from Diamond Trading Company Botswana, the subsidiary which sorts and values Debswana production before selling it to DTC international.'Because we are no longer in command, to the extent that we were in the earlier years, of how the market works, we now, as government, wish to verify independently how the markets are moving.

'This is no contradiction with our partners (De Beers) and the verification window is precisely what we negotiated, so that we have an independent avenue for ourselves to judge and sniff out what the market looks like in terms of price,' said the minister. In addition the President's permanent secretary, Eric Molale, who headed Botswana negotiating team said;

'De Beers takes 90 percent and sells it, and we take 10 percent and sell it. This is a business - no discounts - and all the profits come to both of us at the end of the day,' At the press conference the minister added that the approach differs totally from the South African approach of legally forcing diamond-mining companies to sell 10 percent of the diamonds they mine to the State Diamond Trader, which, in turn, makes these available to emerging empowered local diamond cutters and polishers. However, Thamage told Business Week, that the Botswana approach would more or less be along the model currently being used in Zimbabwe and Angola where minerals are sold through parastatals

' We should however note that this company would not be a parastatal. This will be a 100 percent government company registered under the company's Act,' he added.

As part of efforts to turn Gaborone into a world recognised diamond centre, the government has already given the green light to Firestone and Lucara to sell part of their production from BK11 and AK6 mines by open tender outside the DTC framework. Firestone has carried out two tenders since December last year.

Giving impetus to the dream, spadework has already begun on construction of a trading facility at Diamond Technology Park (DTP) in Gaborone, marking the first stage of what will become a platform for independent tenders for local, regional and international diamond producers and buyers trading in Botswana.

However, before Botswana can succeed in bringing regional and international producers to trade their production in Gaborone, the new tender house is likely to be the platform for the trading of rough production unlocked from the acquisition of the independent marketing window.

Infrastructure at the three-storey turnkey project that is being built on 1,410 square metres will include sorting rooms, viewing rooms, management offices, a laboratory, a control room, a cafe, technology hardware, diamond equipment and internal security systems that include CCTV and access control.