London Eclipsed As Botswana Wrests Full Spectrum Of Diamond Control

GABORONE, Botswana (miningweekly.com) - A deal signed in Botswana on Friday strips London of the aggregating, valuing and selling of diamonds and places these roles firmly on the African soil where the precious stones are dug.

The deal also allows the Botswana government to lay direct claim to 10% of the stones emerging as run-of-mine rough from Debswana, of which the government is already in a 50:50 joint venture partnership with De Beers and to sell these independently into the market.

The 10% will rise to 15% over five years in the arrangement announced in the new Diamond Trading Company (DTC) Botswana complex in Gaborone by the government of the Republic of Botswana and the De Beers group.

Botswana will not only be the place where Botswanan diamonds are dealt with, but also the place where diamonds from countries including South Africa, Namibia and Canada will be aggregated and sold to sight holders the world over - the previous preserve of the United Kingdom.

In terms of the agreement, the DTC must also continue increasingly to support the domestic cutting and polishing industry in Botswana, by making more diamonds available for manufacturing businesses operating in Botswana, where the impressive Diamond Technology Park is in the process of expanding to accommodate rising demand.

Already prominent in the Diamond Technology Park is Safdico Diamond Cororation, which is undertaking the expansion, Steinmetz and diamond jewellery maker Shrenuj, a Bombay-listed company

The agreement, backdated to January 2011, underpins a new ten-year contract and ends a 100-year tradition of sending African diamonds to London.

Now, De Beers will transfer its London-based rough diamond sales activity lock, stock and barrel to Botswana, underpinning the long-term future of the partnership and transforming Botswana into one of the world's leading diamond trading and manufacturing hubs.

The agreement, said to be the longest sales contract between the two partners, will see the DTC relocate its sights and sales operations - including professionals, skills, equipment and technology - from London to Gaborone by the end of 2013.

From its new base in Botswana, the DTC will aggregate production from De Beers' mines, and its joint venture operations worldwide, and sell to international sight holders in Botswana, which will provide a tourism fillip.

DTC Botswana will continue to sort and value Debswana's production before selling it on to the DTC, and make more diamonds available for manufacturing businesses operating in the country.

In addition, the agreement provides for an independent "verification window" sales outlet for the Botswana government, which will begin this year at 10% of Debswana's run-of-mine production and rise to 15% by 2016.

Minerals, Energy and Water Resources Minister Dr Ponatshego Kedikilwe explained that the government would thereby also be able to itself keep abreast of international trading conditions and trends.

Kedikilwe hailed the agreement as a major step in securing the future of Botswana's economy, spoke of an expected growth of the country's downstream diamond activity and is looking to increasing diamond

"We have today renewed one of the most successful public-private partnerships in the world," Kedikilwe said.

"This agreement, and the tangible outcomes it will deliver, will enable Botswana to achieve its aspiration to be a major diamond centre engaged in all aspects of the diamond business.

"The agreement gives us direct access to market, which will be helpful for the successful development of the downstream diamond industry in Botswana. The agreement will also bring more employment and other opportunities to Botswana.

"Our agreement is only the first step - much work needs to be done during the next several years to make this transformation a success. As a major player in the diamond trading industry we look forward to welcoming the global diamond industry to Botswana. We are invigorated by the challenge and excited by the possibilities."

De Beers's chairperson Nicky Oppenheimer said the transfer of the centre of diamond gravity to Botswana was good for Africa.

He added that the agreement cemented De Beers's commitment to continue to be the driving force behind Botswana's emergence as a world-leading diamond trading and manufacturing centre.

"The transformation that this agreement sets out is testament to our belief in the future of Botswana, and is a clear acknowledgment that De Beers' success is only possible with a profound understanding that the aspirations of our partners must be at the core of our business.

"Botswana has preserved and enhanced a highly successful route to market, focused on maximising the value of her natural resource, and De Beers has secured long-term and uninterrupted access to the largest supply of diamonds in the world.

"This is a once-in-a-generation opportunity for Botswana and De Beers to shape the future of the diamond industry, and we look forward to working with our partners to provide our sight holders with the continuity and quality of supply they expect while pushing beneficiation to greater levels than ever seen before."

De Beers, established in 1888, is the world's leading rough diamond company with expertise in the exploration, mining and marketing of diamonds.

With its joint venture partners, the company operates in more than 20 countries across six continents employing more than 16 000 people, and is the world's largest diamond producer with mining operations across Botswana, Namibia, South Africa and Canada.

De Beers returns more than US$3-billion to the continent every year.

De Beers communications director David Prager told Mining Weekly Online that the deal gave De Beers ten years of certainty of more than 60% of its diamond supply in a period of supply constraint and exponential consumer demand, which saw China's off take increase by 25% last year and India's by 31%.

"Pretty soon these countries will be consuming more diamonds than the US," Prager added.
He described the agreement as "great for Africa".

"For 100 years diamonds have left Africa for London. This announcement means that Botswana diamonds will stay in Botswana for longer to have more value added and to enable Botswana to derive more from what is a finite natural resource," Prager said.

DTC Botswana will do the aggregation - putting like diamonds together from various mines and countries - which is currently done in the UK for all of De Beers diamonds, including those from South Africa, Namibia and Canada, in facilities that will replicate those in London.

"We will have a carbon copy in Gaborone of what happens in London," DTC Botswana sales head Marcus ter Haar told Mining Weekly Online, which was given a tour of the automated sorting processes for Debswana rough diamonds.

Source: Miningweekly.com in Tautona Times vol. 9 no. 21 (17/9/2011)