De Beers and Botswana reach deal on diamond sale after tense talks

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De Beers has pulled out of Botswana to market diamonds after talks with President Mokgwetsi Masi’s government failed to continue a 54-year partnership between one of Africa’s richest countries and the world’s biggest diamond company by value. renewed an agreement for

The 135-year-old Anglo American-owned company late on Friday entered into an “in-principle agreement” with the Botswana government for a new 10-year sales agreement for rough diamonds produced by its Debswana joint venture and a further 25-year extension. mining licence.

The two parties said in a joint statement that the “transformative” new agreement “reflects the aspirations of the people of Botswana, drives both Botswana and De Beers forward, and underlines the future of their Debswana joint venture through long-term investment” “.

A previous deal in 2011 saw the southern African country sell 25 percent of its diamond production, while the rest was given to De Beers. Both sides said that these terms would remain in force under the interim agreement until a formal deal is finalised.

Masi’s government indicated it was prepared to split if it did not get a better production share in negotiations with De Beers, which owns 15 percent in Botswana. De Beers relied on the country for about 70 percent of its rough diamond supply last year, or 24 million carats.

In turn, diamond mining contributes a third to the landlocked country’s GDP and has helped it become Africa’s sixth-richest country per capita. Only Russia produces the largest number of precious stones.

Masisi’s Botswana Democratic Party wants to go to the polls next year to retain its hold on power since independence in 1966. Massisi said he wanted to move the country further up the diamond value chain, from mining to hosting more diamond cutting and polishing. The stone itself in Botswana.

De Beers has long argued that Botswana derives most of the value from its diamonds when taxes and royalties are included.

Analysts say the future of the relationship has been complicated by uncertainty over the cost of life extension of Zwaneng, Debswana’s flagship and the world’s largest diamond mine.

The settlement comes after a challenging four months since Al Cook took over at De Beers, as the diamond mining industry also faces pressure from G7 countries to introduce a traceability system to identify Russian diamonds .

The talks have raised uncertainty over the strategic value of the diamond miner to Anglo American. Analysts at Berenberg said last week that “Anglo American should question whether De Beers should remain in the group portfolio for a number of reasons”, including the potential for worse economic terms as a result of the talks.

Botswana stepped up pressure on De Beers by agreeing a deal to take a 24 per cent stake in Belgian diamond producer HB Antwerp – which has yet to be finalized – giving the country an alternative way of marketing its diamonds. can provide.