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De Beers has renewed a deal to market diamonds from Botswana following talks with President Mokgwetsi Masisi’s government to continue a 54-year partnership between one of Africa’s richest nations and the world’s largest diamond company by value.
The 135-year-old Anglo American-owned company late on Friday “agreed in principle” with the Botswana government on a new 10-year sales contract and a 25-year extension for rough diamonds produced by its Debswana joint venture. Mining license.
The two parties said in a joint statement that the “transformational” new agreement “reflects the aspirations of the people of Botswana, moving both Botswana and De Beers forward and underpinning the future of their Debswana joint venture through long-term investment”.
A previous deal in 2011 saw the South African nation sell 25 percent of its diamond production, while De Beers got the rest. Those terms will remain under an interim agreement while a formal deal is being finalized, the two sides said.
Masisi’s government has indicated it is prepared to walk away if it does not get a better share of production in negotiations with De Beers, which is 15 percent owned by Botswana. De Beers depended on the nation for about 70 percent of its rough diamond supply, or 24 million carats, last year.
In turn, diamond mining contributes a third of the landlocked country’s gross domestic product and has powered its rise to become Africa’s sixth-richest nation per capita. Only Russia produces more precious stones.
Masisi’s Botswana Democratic Party plans to contest elections next year to maintain its grip on power since independence in 1966. Masisi said he wants to take the country further up the diamond value chain, from mining to further cutting and polishing of diamonds. Stones only in Botswana.
De Beers has long argued that Botswana derives most of its 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 extending the life of Debswana’s flagship and Zwaneng, the world’s largest diamond mine.
The agreement comes after a challenging four months since Al Cooke took charge of De Beers, as the diamond mining industry faces pressure from G7 countries to introduce a traceability system to identify Russian diamonds.
The negotiations have created uncertainty about the strategic value of diamond mining for Anglo American. Analysts at Berenberg said last week that “Anglo American should question whether De Beers should remain in the group’s portfolio for a number of reasons”, including the possibility of weaker economic terms as a result of the negotiations.
Botswana has stepped up pressure on De Beers by agreeing a deal – which is not yet final – to take a 24 percent stake in Belgian diamond producer HB Antwerp, which could offer the country an alternative way to market its diamonds.