Talks on the new sales agreement between De Beers and the government of Botswana, which came to an end last December, were extended by three more months, and so was the old trade arrangement.
Rough&Polished’s Mathew Nyaungwa filed questions to De Beers’ spokesperson Lynette Gould to find out what had stalled the negotiations.
She also commented on Zimbabwe and De Beers’ prospect for new mines.
Below are the excerpts.
Media reports say De Beers and the Botswana government have extended the $3 billion-a-year diamond sales agreement by three months until March 31?
I can confirm that the sales agreement has been extended by three months until 31st March 2011.
What has necessitated this inability to conclude negotiations before the initial December 31, 2010 deadline?
Some key members of the negotiating teams were unavailable for a while during last year, hence negotiations could not be concluded before the end of the year. I wouldn’t read anything into this. There have also been delays in previous negotiations and we always come to a conclusion. The point is that we are engaged in discussions now.
Botswana is said to be pushing for a deal that will see Debswana’s output (about 10 percent) being sold outside the DTC framework from next year. How will this impact De Beers’ operations and Botswana?
Both Government and ourselves have entered these negotiations to find the best possible solution for a sustainable downstream diamond industry in Botswana. Given that these discussions have not yet concluded it would be inappropriate to comment any further at this time.
WikiLeaks documents also suggested that Botswana was trying to create a diamond trading group made up of De Beers, Anglo American and Namibia that would consolidate 30 percent of the global diamond trade in the country. What is De Beers’ view on this proposal?
We haven’t seen the Wikileaks document you refer to nor are we aware of a trading group of this nature. Having said that we recognise the importance of natural resources as vehicles for economic development, growth and diversification which is why we are fully supportive of local beneficiation initiatives such as the proposed establishment of the Diamond Hub.
Is De Beers ready to move its aggregation activities to Botswana from London and what is the significance of such a move?
Moving aggregation to Botswana has been part of our commitment to driving sustainable economic development in southern Africa. Aggregation is key to ensuring long-term sustainable demand for every diamond from every mine, which translates into stable revenues for Botswana.
Zimbabwe is increasingly showing signs of being a player in the world’s diamond mining although the country’s operations, especially in Marange, are still shrouded in controversy. Is there any room for De Beers re-considering setting up operations in the country?
No there are no plans for De Beers to set up operations in Zimbabwe.
Whilst not significant in financial terms, the production coming out of Marange could provide tremendous benefit to Zimbabwe and its people - if mined appropriately. Just next door to Zimbabwe is [Botswana] where diamonds have been a blessing for the citizens of that country bringing in investments in health, education and infrastructure that have lifted Botswana from one of the poorest countries in Africa to a middle income country today.
In which countries is De Beers currently prospecting for new mines?
Angola represents one of our most exciting prospects, given its 90-year history of diamond mining and the high prospectivity of the underlying craton. Our focus will be on the work programme to deliver the Mulepe-1 cluster to an Inferred Resource by mid-2012.
In Canada, the work programme on the Victor kimberlite cluster should reach conclusion and define which of the pipes warrants further drill sampling, based on size. We will also move to re-establish an early stage portfolio of prospective greenfield target areas in which new discoveries can be made.
In Debswana, South Africa and India the work will continue to focus on defining high priority target areas, through technical reviews of the databases and the execution of work programmes to establish discovery portfolios.
What is De Beers’ prognosis of the diamond market this year?
As we said at results we are encouraged by the strengthening demand for diamonds throughout 2010, and the better than expected performance throughout the year in China and India and in the US during the Christmas buying period.
Global economic growth, especially in emerging economies, and strong retail confidence are expected to continue to underpin positive consumer demand growth for diamond jewellery in 2011. We expect the US diamond jewellery market to continue to recover and for growth in China, India and other Far East markets to continue to be strong.
The rough market, which has started the year confidently, is expected to benefit from these trends. Global economic expansion and retailer sentiment are supportive of further growth in 2011.
Significant risks remain in forecasting demand for diamond jewellery given the macro-economic, financial and socio-political uncertainties facing diamond consumer markets in 2011. The most significant risks include economic and political shocks, consumer price inflation, financial system fragility, potential weakness in demand from established diamond consumer markets and exchange rate volatility.
Mathew Nyaungwa, Rough&Polished, from Namibia
