Botswana in no hurry to start diamond auctions - PHK

While Botswana is not in a hurry to start her independent diamond auctions, she will hold an inaugural tender before the end of the year, Minister of Minerals, Energy and Water Resources Ponatshego Kedikilwe has said, according to Brian Benza writing on www.mmegi.bw. In an interview with BusinessWeek on the sidelines of a recent mining conference in Gaborone, Kedikilwe said, close to a year after the signing of the agreement, government has not taken up  her share of the Debswana run on mine production that is to be sold outside the Diamond Trading Company (DTC) framework.
 
According to the 2011 sales agreement with DTC's parent company, De Beers, government through the Okavango Diamond Trading Company is entitled to between 10 and 15 percent of Debswana's run on mine production, which she will sell outside of the DTC system, in a bid to verify the market.
 
To break the decades-old convention of relying on the DTC price book for diamond sales, government was last year entitled to purchase and sell 10 percent of Debswana's production last year (2.2 million carats) and 11 percent of this year's 24 million targeted production (2.6 million carats) to verify market prices through independent auctions. In monetary terms, Okavango is expected to independently auction an estimated $300 million to $350 million (P2.2 billion to P2.6 billion) worth of diamonds on the open market per annum from Debswana's average $3 billion-a-year supply.
 
But government says it is not yet ready to enter the diamond selling market, which is currently depressed, but hopes to start the auctions by the end of the year, more than a year late.  "We are still putting our house in order. We have appointed an interim board and we are just about to appoint a CEO. Hopefully we should hold our first auction before the end of the year or the latest before the start of the next financial year (April 2013). But we are not in a big hurry to start the auctions, besides the agreement stipulates that if one party doesn't take up their share, the other can buy the stock," he said.
 
As part of efforts to turn Gaborone into a world recognised diamond centre, the government has also given the green light to local miners, Lucara Diamonds and Firestone Diamonds, to sell part of their production by open tender outside the DTC framework.
 
Lucara's Karowe mine, which expects to produce 400,000 carats in its first year of production this year, recently held its first tender in Gaborone. The sale of the Karowe production on the open market has emboldened Gaborone's fledgling diamond market that was kick-started by Firestone Diamonds in December 2010.
 
In a separate interview, Diamond Hub coordinator Jacob Thamage said they have finalised contract negotiations with the new CEO of Okavango. "We had to search on the international market to find the right person for the job and negotiations are just about complete," he said.  "The downturn in the market has also come as a blessing in disguise for us as prices and demand are currently depressed. The whole purpose of the window is to verify trends in the market," he added.
 
DTC CEO Varda Shine told BusinessWeek that high stock levels, liquidity constraints, a weaker rupee in India and softer demand from China have contributed to lower global demand this year. "After firming by a significant 25 percent last year, diamond consumer demand is slower this year and will probably end the year at around 10 percent.  Last year, in China there was a lot of   buying and they are holding a lot of stocks. The exchange rate adjustments in India have also affected the market as buying diamonds priced in dollars has become more expensive for the Indians," she said.
 
Shine was however hopeful that demand will pick up before the end of the year due to the growth of the economies of the US and China as well as the approaching wedding season in India.