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De Beers has renewed a deal to market diamonds from Botswana after negotiations with President Mokgweetsi Masisi’s government went down to the wire over the continuation of a 54-year partnership between one of Africa’s richest nations and the world’s largest diamond company by value.
The 135-year-old company owned by Anglo American struck an “agreement in principle” with the Botswana government late on Friday for a new 10-year sales deal of rough diamonds produced by their Debswana joint venture and a 25-year extension to its mining licences.
The two parties said in a joint statement that the “transformational” new agreement “reflects the aspirations of the people of Botswana, propels both Botswana and De Beers forward, and underpins the future of their Debswana joint venture through long-term investment”.
The agreement will give the southern African nation 30 per cent of diamond output to sell through the state-owned Okavango Diamond Company, rising to 50 per cent by the final year of the contract, De Beers said.
The new terms shift in favour of the Botswana government compared with a 2011 agreement that gave it a 25 per cent share. Those terms would remain in place under an interim agreement while the new deal is finalised, the two parties announced on Friday.
Masisi’s government signalled that it had been ready to walk away if it did not receive a better production share in the talks with De Beers, which is 15 per cent owned by Botswana. De Beers relied on the nation for about 70 per cent of its rough diamond supply, or 24mn carats, last year.
In return, diamond mining contributes a third of the landlocked nation’s gross domestic product and has powered its rise to become Africa’s sixth richest nation per capita. Only Russia produces more of the precious stones.
“The agreement represents our commitment to deliver investments in Botswana’s diamond production, Botswana’s diamond value chain, Botswana’s knowledge-based economy and, above all, the people of Botswana,” Al Cook, chief executive of De Beers, said.
De Beers added that it could contribute up to $750mn over the next 10 years in a fund to accelerate the diversification of Botswana’s economy away from diamonds.
In elections next year, Masisi’s Botswana Democratic party is seeking to maintain the grip on power it has held since independence in 1966. Masisi said he wants to move the country further up the value chain of diamonds, from mining to hosting more cutting and polishing of the stones in Botswana itself.
De Beers has long argued that Botswana receives most of the value from its diamonds when taxes and royalties are included.
The future of the relationship has been complicated by uncertainty over the costs of extending the life of Jwaneng, Debswana’s flagship and the world’s largest diamond mine, analysts say.
The agreement comes after a challenging four months since Cook took charge of De Beers, as the diamond mining industry also faces a push by G7 nations to introduce a traceability system to identify Russian diamonds.
The negotiations have raised uncertainty over the strategic value of the diamond miner for Anglo American. Berenberg analysts said last week that “Anglo American should question whether De Beers should remain in the group portfolio for a number of reasons”, including the likelihood of poorer economic terms resulting from the negotiations.
Botswana increased pressure on De Beers by agreeing a deal — not yet finalised — to take a 24 per cent stake in Belgian diamond manufacturer HB Antwerp, which could offer the country an alternative way to market its diamonds.
