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De Beers, Botswana sign 10-year contract

2011-09-16

Editor’s note: This story has been updated to include comments from Diamond Trading Co. Managing Director Varda Shine.

Gaborone, Botswana -- After nearly a year of negotiations, De Beers and the Government of the Republic of Botswana have inked a new contract that will mean the transfer of all Diamond Trading Co. (DTC) activities from London to Botswana in a little more than two years.

The DTC will relocate its sights and sales operations, including professionals, skills, equipment and technology, from London to Gaborone, Botswana, the nation’s capital, by the end of 2013. From this new base in Botswana, the DTC will aggregate production from De Beers’ mines and its joint venture operations worldwide, and sell to international sightholders.

When it happens, the move will mark the end of 70 years of the DTC’s sightholders flying from diamond trading centers in Antwerp, Israel and India to London to receive their boxes of rough diamonds from the DTC. What will be left of an already downsized De Beers in London is Forevermark, its branded diamond arm, legal services and corporate finance, which will remain in the company’s current building on Charterhouse Street. 

In an interview with National Jeweler on Friday, DTC Managing Director Varda Shine said a total of 120 to 150 employees are slated for inclusion in the move, though she recognizes that not all employees will be willing to relocate.

“I know the reality,” she said. “I know everyone is not going to go.” But, she said, the DTC believes it will get “sufficient” numbers to move. For those positions left open, they will recruit locally, in Botswana or from the DTC in South Africa.

The Diamond Trading Co. Botswana (DTCB) will continue to sort and value the production of Debswana, the 50/50 joint mining venture between De Beers and Botswana, before selling it to the DTC. The DTC, in turn, will continue supporting the country’s cutting and polishing industry and will make more diamonds available for diamond manufacturers there.

In addition, the agreement allows gives Botswana’s government an independent sales outlet for selling diamonds from Debswana’s run-of-mine production. That will begin this year at 10 percent of production and increase to 15 percent over a five-year period.

“This agreement, and the tangible outcomes it will deliver, will enable Botswana to achieve its aspiration to be a major diamond center engaged in all aspects of the diamond business,” said Dr. Ponatshego Kedikilwe, Botswana’s minister of Minerals, Energy and Water Resources.

He said the agreement gives the country direct access to the market, which will help in developing Botswana’s downstream diamond industry and bring more employment and other opportunities to the country.

Kedikilwe notes, however, that the new agreement is just the beginning. “Our agreement is only the first step -- much work needs to be done during the next several years to make this transformation a success,” he said.

The 10-year contract, which is retroactive to Jan. 1, 2011, is the longest sales contract ever signed between De Beers and the Government of Botswana. All the past contracts have been five-year deals.

Shine said the DTC wanted a 10-year contract because of the enormity of the task of moving aggregation operations from London to Gaborone. “We needed assurance with a longer agreement. Five years wasn’t good enough,” she said. “That was the main reason from our perspective and I think Botswana recognized that.”

The signing of the contract, which took place in Gaborone on Friday, was nine months overdue.

Commenting on the agreement, De Beers Chairman Nicky Oppenheimer said, “Botswana has preserved and enhanced a highly successful route to market, focused on maximizing 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,” he said. “This is a once-in-a-generation opportunity for Botswana and De Beers to shape the future of the diamond industry.”