De Beers and Botswana lock in historic pact
De Beers Group and Botswana government have successfully concluded negotiations for a new rough diamond sales agreement and an extension of existing mining licenses.
The deal includes an option for a five-year extension beyond 2035, when the initial ten-year sales agreement is set to conclude.
Minerals and Energy Minister, Bogolo Kenewendo says the government and De Beers will officially sign the agreement before the end of February and that further details will be disclosed after the signing ceremony.
“We hope this agreement will bring some level of stability and rebuild the confidence in the diamond market. We are looking forward to a continued partnership with De Beers over the next ten plus years, as the agreement stands at the moment with an option to extend further five years. We are in the process of finalising the mining rights but we will sign shortly. We are equal partners so even for extra five years we will negotiate based on the performance of the industry and outcome of the current deal,” said Kenewendo at a joint press briefing this week.
Negotiating this deal has been a prolonged process. The previous contract, which expired in 2021, was extended multiple times. While an agreement in principle was reached in June 2023 and a “heads of terms” document signed in September, finalization remained pending until now.
Addressing a media briefing on Monday, De Beers Group CEO Al Cook praised the Botswana government for facilitating a smooth conclusion to the talks.
“This agreement has been almost five years in the making and what I find extraordinary is that through energy and determination we have concluded it within the first 100 days of this new government. What we are announcing with the conclusion of negotiations is the extension of the partnership that has lasted for more than 50 years out until the middle of this century and beyond, with mining agreements that go to 2054. I believe that this is the greatest Public-Private Partnership on earth. It is now a source of pride to set out this partnership beyond the middle of this century,” remarked Cook.
The agreement not only extends the Botswana-De Beers partnership but also introduces a new framework for joint marketing initiatives.
For the first time, both parties will collaborate on marketing strategies to appeal to emerging consumers globally, ensuring Botswana’s continued competitiveness in the diamond industry.
“Way back in 1967 diamonds were discovered in Botswana and since then successive governments have successfully developed this resource below the ground to turn it into incredible wealth and resources above the ground. There are couple of aspects of this agreement which we are proud of such as the Diamond for Development Fund and the robust marketing strategy which we will embark on together with government,” said Cook adding that both parties have the ability to extend the agreement over the ten years and emphasizing the strong business environment in Botswana.
Under the new sales agreement, Debswana’s rough diamond production will be distributed according to the “agreement in principle” signed in July.
Initially, 30% of Debswana’s production will go to Okavango Diamond Company (ODC), Botswana’s state-owned trading business, with the allocation increasing progressively to 50% over the ten-year term.
Additionally, Debswana’s mining licenses, originally set to expire in 2029, will now be extended for 25 years.
The agreement also establishes a framework for the sale of exceptional diamonds, ensuring both parties share in the profits from polished stones. Furthermore, it includes the creation of a Diamond Development Fund, with De Beers committing an initial P1 billion investment, followed by contributions of up to P10 billion over the next decade.
These funds will be used to diversify Botswana’s economy, create jobs, enhance skills development, and increase local diamond beneficiation.
The diamond industry is expected to welcome this agreement, given Botswana’s status as the world’s second-largest diamond producer after Russia.
There are also hopes that this deal will reverse declining diamond revenues.
Government earnings from De Beers peaked at $7 billion annually but fell to $4.2 billion in 2023 amid weakening global diamond sales.
