De Beers, govt finally strike deal

Brian Benza
Staff Writer | Thursday September 15, 2011 00:00

 

Confirming the deal, a spokesperson of the Ministry of Minerals, Energy and Water Resources, Potso Thari, told Mmegi yesterday: 'The new contract will be signed on Friday at the Diamond Trading Company Botswana building.'

The last agreement under which Botswana sold all its diamonds from Debswana - a staggering P20 billion-a-year business - to De Beers's subsidiary, the Diamond Trading Company, expired last December.

Tomorrow' s signing follows more than a year of intense negotiations for the new deal as both parties sought to get the maximum from the new contract that is set to transform Botswana from a mere gem producer to a global diamond sales and distribution centre.

De Beers Chairman, Nicky Oppenheimer, is expected to sign on behalf of the company while the Minister of Minerals, Ponatshego Kedikilwe, will represent GoB. The  signing ceremony will signal that a deal breaking issue that has been at the centre of the delay has been put to bed.

As reported by Mmegi, the negotiating teams concluded their negotiations four months ago. However, it emerged two weeks ago that signing was being delayed by a disagreement among De Beers' Shareholders.

Said diamond industry analyst, Chaim Even-Zohar: 'The investment community didn't like the idea that there is trouble between Anglo, De Beers and Botswana. Anglo gave in, and we should see the shareholders (Anglo and Central Holdings) showing up for the signing.'  Unlike previous agreements that spanned three or five years, Mmegi understands the parties have agreed on a 10-year contract this time around. More importantly, the new deal seals government's acquisition of an independent 10 percent marketing window that will increase to 20 percent over the lifespan of the new contract.

The opening of the marketing channel will enable Botswana to better assess market conditions, enhance added value, move beneficiation forward and bring more skills to Batswana.

The enormous volumes unlocked by the window - between $300 million (P2billion) and $400 million worth of rough diamod on average - will also give government flexibility through pricing and distribution policies to ensure success of the country's beneficiation aspirations.

At present, Botswana's 16 diamond-polishing and cutting factories need about $800 million worth of supplies annually. When the window opens, Botswana will process about $1.2 billion-worth locally.

As part of efforts to turn Gaborone into a world class 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 four tenders since December last year.

Relocation of aggregation activities to Gaborone, which was already agreed to in the previous contract, will be carried out gradually. Aggregation currently takes place at DTC London, but the process was initially expected to move fully to Gaborone in the second quarter of 2009 as the last phase of the mining licence agreement. However, De Beers stalled the process, citing the global economic crisis.