The De Beers Diamond Shocker

Staff Writer
A team of Botswana government officials who left Gaborone on Monday last week to discuss prospects of the diamond industry with De Beers in London, were shocked by the news that De Beers might not transfer its DTC diamond aggregation to Gaborone next year as formerly planned.

De Beers made the announcement on Tuesday, two days before the diarised Thursday meeting with Botswana government officials. Government officials said on Friday that they are waiting for the Botswana delegation to return from London today to brief them on the latest developments.

Aggregation involves the blending of categories of rough diamonds like-for-like, regardless of their country of origin. These are then split into the appropriate types and quantities to be sold to clients or sight holders.

Since the renegotiation of the De Beers sales agreement for the renewal of its diamond mining licence in Botswana a few years ago, De Beers set up diamond sorting and rough diamond sales  arm, DTC to Gaborone.

Although aggregation currently takes place in the London DTC office, the process was expected to move fully to Botswana in 2009.
This postponement comes following reports that the De Beers diamond company has imposed blanket travel restrictions to cut costs.

Confusion reigned at the government enclave last week after the company announced from its London headquarters that it will not be relocating its aggregation activities to Botswana next year as previously agreed.
The Botswana government was not consulted prior to the announcement and they got the news through the Internet.

The announcement last week has shocked officials at the Ministry of Minerals, Energy and Water Resources who told Monitor on Friday that they, do not know anything about the De Beers decision.

The De Beers shocker coincided with a visit to the company headquarters by a high powered Botswana team, the Mineral Policy Committee, led by Permanent Secretary to the President, Eric Molale, which was scheduled to have a meeting with De Beers on Thursday.

Permanent secretary in the Ministry of Minerals, Energy and Water Resources, Gabaake Gabaake, confirmed on Friday that his Ministry and the Diamond Hub, led by Dr Akolang Tombale, had not been consulted about the latest action announced by De Beers.

"They have not notified us officially about the changes, if any. As a government, we do not have communication from De Beers to the effect that they now have a change of heart and that the aggregation activities are no longer coming to Botswana in 2009.

Our delegation went to London and they were scheduled to meet De Beers on Thursday. We will know on Monday what the out come has been," Tombale said.
The Minister of Minerals, Energy and Water Resources, Ponatshego Kedikilwe, also said he did not know anything about the De Beers' decision not to go ahead with the transfer of DTC activities as scheduled.

The De Beers Botswana office

on Friday said De Beers remains fully committed to moving "aggregation" to Botswana. "We have completed a detailed feasibility study which has identified a small number of key issues which need to be resolved to ensure a smooth and successful transition of this important function," Charmaine Muir-Revaka said.

"Engagement with the government of Botswana to ensure conditions in Botswana are 'right for success' are ongoing and, while we expect these to all be resolved in time, it is unlikely that aggregation will move in 2009.

We believe it is essential that this initial stage is completed prior to beginning the transition of aggregation activities. This will allow the aggregation function to remain fully focused on their task, which is particularly important in this difficult trading environment," the response further said.

"We will be working with our teams to ensure the impact of this deferral is minimised," said the De Beers spokesperson.De Beers did not detail what "the small number of key issues to be resolved" are, however people are already suspecting that the diamond giants might be deliberately frustrating Botswana's efforts to turn into a global player in the diamond industry, Gabaake, however hoped that the latest stance by De Beers is not an act of revenge as some are beginning to think.

As a government, we were very helpful in the dispute. We were simply trying to facilitate the opening of the AK 6 mine," Gabaake said.Asked whether perhaps the Mineral Policy Committee that went to London last week knew about the impending announcement, Gabaake said the team went there to discuss how best De Beers and Debswana could take advantage of the current world recession to buy out smaller producers.

"We see more opportunities in the diamond industry than the doom and gloom that is being pictured. The diamond business is the highest profitable business. Now is the opportunity for Debswana to look at opportunities around the world".
"There are smaller producers which cannot cope with the current conditions, and may be willing to sell assets.

They can be bought and that increases your ability to put more carats in the markets," Gabaake said. Gabaake says this position is reinforced by the fact that there is no known diamond deposit to match the Jwaneng mine deposits in the next five years.
"Demand can stay constant. People will always love diamonds because they will always get married.

So the fundamentals of the diamonds business are very good, going into the future, and I do not think it is blind optimism. There are quite exciting opportunities," Gabaake added.



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