De Beers and Botswana yet to agree new deal as current Sales Agreement ends this month
Signed in 2011, with three further extensions since then, the latest coming in 2020, after 12 highly successful years, the current deal between the Botswana Government and De Beers Group elapses at the end of the month (30 June).
While the two long-term partners, whose relationship dates back to the mid 60s, have been locked in negotiations for months now, they are still to finalise terms on a new agreement.
It seems the biggest stumbling block is Botswana’s determination to get a bigger piece of the lucrative pie.
Currently, govt and De Beers co-own Debswana Mining Company on a 50/50 basis.
Despite the equal shareholding, 75 percent of production from Debswana’s operations goes to De Beers, while Botswana pockets the remaining 25 percent, which it sells through the state-owned Okavango Diamond Company.
Although it is unclear exactly how much they seek, government want more and are standing firm for an improved deal.
Both entities need each other; as one of the oldest diamond mining companies in the world, De Beers possess the technical know-how while Botswana, which boasts a 15 percent stake in De Beers, sits atop some of the best and biggest diamonds in the world.
The country also leads the way when it comes to De Beers’ diamond production, outshining the likes of Canada, South Africa and Namibia, where De Beers also has a footprint.
According to Professor Goemeone Mogomotsi, an Associate Professor of International Environmental Law and Policy, the fact that Botswana owns a stake in De Beers proves the country’s strategic importance to the group.
“Contrary to the well known De Beers tagline that ‘Diamonds are forever’ the reality is that no mineral resources is forever. It is essential that while they are still there they are used sustainably and that includes deriving maximum benefits from their sales to the benefit of the nation. That does not mean that we are not appreciative of the relationship we have had with De Beers over the years. Botswana has to participate more in sales and value addition of the diamonds, in fact that should have be done with every natural resource that we have. It is only that way that jobs will be created and more value derived for the benefit of the nation,” insisted Professor Mogomotsi.
Last year, Botswana collected $2.8 billion from its partnership with De Beers. From the amount, $2.6 billion came from Debswana, whose production for the year stood at 24.1 million carats. The remaining $0.2 billion was generated from Botswana’s stake in De Beers.
The signs are promising for another bumper year.
In the first quarter of 2023, rough diamond production in Botswana increased by 12 percent to 6.9 million carats, with 3.782 million carats coming from Jwaneng while Orapa churned out 3.117 million carats.
With De Beers investing enormous amounts to ensure production continues at such levels, they are reluctant to drop down from the current 75 percent agreement.
Further, decisions need to be made on major expansion projects due at the Jwaneng and Orapa mines. These are: the Jwaneng Cut 9 which is set to extend the mine life to 2035 and yield 53 million carats while Orapa mine Cut 3 project is set to expand the lifespan of the mine to at least 2050.
As a result, belief is that De Beers cannot make such investments, which amount to billions of dollars, with an uncertain future for Debswana and expiring mining rights in 2029.
Meanwhile, in an interesting move, the government intends to acquire a 24 percent stake in HB Antwerp and supply the manufacturer with rough stones through Okavango Diamond Company.