Botswana and De Beers, the two shareholders of Debswana Diamond Company are just about to begin negotiations for the diamond production and sales agreement, two years before the current one expires. This came into the open this week during the annual diamond conference in Gaborone.
However, Mineral Resources, Green Technology and Energy Security Minister, Eric Molale and De Beers Chief Executive, Bruce Cleaver were this week not ready to give more specific details on imminent meetings which happen behind closed doors, often in luxurious and secluded locations in Gaborone, Johannesburg and London.
The current ten year diamond sales and mining agreement was signed in September 2011 and will end in 2021.Botswana government will be represented by members of the Minerals Policy Committee (MPC) which comprises Finance and Economic Development Permanent Secretary, Solomon Sekwakwa, his peer at the Minerals Ministry, Cornelius Dekop, Bank of Botswana Governor, Moses Pelaelo, and Attorney General Advocate Abraham Keetshabe. The team will be led by Molale himself.
It will be for the third time Molale becomes part of the arduous, but equally important negotiations with outcomes that are as important to the country as the diamonds themselves. Without letting off much, Molale told the press that, at this point they are crafting heads of agreement which will form the agenda for the upcoming meetings.
“We don’t want to work under pressure (hence they have started early),” said Molale. In addition, Botswana Government often involves high end corporate lawyers to back their team. Cleaver, who was also involved in the previous negotiations, told the media the partnership between De Beers and Botswana will continue.
“We all want a win-win situation,” he said. Earlier when giving the keynote address, President Dr Mokgweetsi Masisi likened the partnership to a marriage. He added the negotiations are just like ‘renewal of vows’. “Through our partnership with De Beers, there has been over the years, increased participation in the diamond pipeline from prospecting through to cutting and polishing,” said the President before leaving for Addis Ababa, Ethiopia for the African Union meetings.
Commentators in the diamond sector have hailed the current sales agreement. Under the deal, Botswana negotiators succeeded in having De Beers relocate its diamond sales and distribution function from London to Gaborone. As things stand, all diamonds produced from De Beers mines in Botswana, South Africa, Canada and Namibia are aggregated locally before being sold into the international market.
Botswana Guardian also understands Team Botswana also pushed for the establishment of an independent pricing method away from the one which is currently being used by De Beers. This led to the establishment of Okavango Diamond Company (ODC), a Botswana-owned rough diamonds seller.
The company led by Marcus Ter Haar, sells about 10 percent of Debswana produced diamonds. Meanwhile, Masisi has told the conference that, there is need to move up the pipeline to jewelry manufacturing and retail. “Participation at these up market levels, however small, will go a long way in promoting the development of Gaborone as a diamond city,” said Masisi.
This week, De Beer’s jewellery unit, Forevermark opened its first shop at Sir Seretse Khama International Airport. Cleaver was upbeat the luxury shop will be successful. The latest round of diamond mining negotiations between the two long term partners come at a time when more has changed in the landscape and there are important decisions to make. Synthetic diamonds are threatening natural diamonds market, although Cleaver dismisses the fear.
There is no new diamond deposit the size of Jwaneng discovered by the parties in recent times, and surely not in the two decade or so. There are more capital intensive projects coming their way such as Jwaneng, Orapa and Venetia expansion. All these projects will force shareholders to dig deeper into their pockets to fund them amidst volatile diamond sales.
De Beers, the leading rough diamond producer this week reiterated that synthetic diamonds are not a threat to natural diamonds, despite fears they may affect the former’s sales in future. The diamond group itself has already launched the man-made diamonds.
Nonetheless, the De Beers top executive, Bruce Cleaver has been quick to point out that, lab diamonds ‘can never replace natural diamonds’ in the sense that, customers treat manufactured diamonds as ‘fashion items’ as opposed to natural diamonds which last forever. “They’re not to celebrate life’s greatest moments, but they’re for fun and fashion,” said Cleaver after the company announced they will enter the manufactured diamonds sector in May.
According to available data, global synthetic diamond market was valued at USD 16.83 billion in 2016 and is expected to reach USD 23.8 billion by 2021, growing at a Compound Annual Growth Rate (CAGR) of 7.14 percent during the forecast period, 2016-2021. The De Beers CEO said to understand why they consider themselves natural diamonds business, one has to look at the investment they have made in the two diamonds business (natural and man-made).
De Beers will spend just over P90 million in the next four years to sustain the synthetic diamonds business. The amount is just a small fraction of what the part-owners of Debswana will continue to spend on mining natural diamonds. “We will always be a natural diamonds business.
This explains why we spend between $10 and $11 billion on our core business (diamond mining),” he said on Tuesday during the annual De Beers Diamond Conference in Gaborone. De Beers, together with its Debswana partner, Botswana Government is currently expanding Jwaneng and Orapa mines under Cut 9 and Cut 3 projects respectively. The above projects, which are yet to kick off, are expected to extend the lifespan’s of the two mines beyond 2030.