Reports filtering through from Botswana show that the long-drawn talks between De Beers and the southern African government are now over.
The parties negotiated throughout the second half of 2010 in a bid to reach a deal to replace the current sales agreement.
De Beers and Botswana were forced to extend their $3 billion-a-year diamond sales agreement by three months following their inability to conclude negotiations before the December 31, 2010 deadline.
The March 31 deadline came but no announcement of a new agreement was made.
Now almost three months later, Mmegi reports, citing unnamed sources privy to the proceedings, that a 10-year diamond sales and marketing contract had been agreed by both parties and would “set the platform for Botswana's transformation from a mere gem producer to a global diamond sales and distribution centre”.
Previous media reports had indicated that Botswana was aiming for a deal that would see some of the Debswana output, possibly 10 percent, being sold outside the DTC framework from next year.
Sources told Mmegi that lawyers for both parties were fine-tuning the new diamond deal set to be signed in July when the new De Beers chief executive Philippe Mellier takes office.
The daily noted that unlike the previous sales and marketing agreements that saw Botswana sell all of its diamonds from Debswana to De Beers subsidiary for a period between three and five years, the new deal would push the contract to 10-years.
The idea, Mmegi reports, was to make DTC Botswana a catalyst of value-addition through the relocation of all aggregation activities to Botswana’s capital, Gaborone.
The new deal would fulfil Botswana’s dream of acquiring an independent 10 percent marketing window.
This would likely increase to 20 percent over the lifespan of the new contract, Mmegi reports.
"The heart of the contract-in-the-making, which will last until 2021, is in the annexes which specify local sales thresholds and beneficiation employment thresholds,” industry analyst, Chain Even-Zohar was quoted as saying by Mmegi.
“In the new deal, I am told Botswana did not only manage to negotiate the 10 percent marketing window which up to now De Beers has steadfastly refused to give Botswana, but the window could increase to as much as 20 percent over the lifespan of the contract."
De Beers Botswana refused to comment on the negotiations.
The volumes unlocked by the window - between $300 and $400miliion worth of rough, on average - would also give Botswana elasticity through pricing and distribution policies to ensure success of the country's beneficiation ambition.
The current 16 diamond polishing cutting factories need about $800 million worth of supplies annually.
However, when the window opens, Botswana would process about $1.2 billion locally, Mmegi reports.
"If the window grows over time, and if one also adds the present and future Firestone and Boteti productions, Botswana will indeed become a major rough manufacturing and distribution centre,” said De Beers Botswana’s spokesperson Chipo Mrara.
Meanwhile, the relocation of aggregation activities to Gaborone would be carried out gradually as additional staff was required.
Aggregation currently takes place at DTC London, but the process was initially expected to move fully to Gaborone in the second quarter of 2009 as the last phase of the mining licence agreement.
De Beers delayed the process, citing the global economic crisis.
Botswana was also expected to push De Beers to fulfil its beneficiation undertaking by imposing penalties on the company if it abdicates on that promise.
Mathew Nyaungwa, Rough&Polished
