De Beers has agreed to hand over more diamonds to Botswana’s government, further weakening the one-time monopoly’s hold on the global gem market, in negotiations that concluded just as the latest deadline for a deal expired.
(Bloomberg) —
De Beers has agreed to hand over more diamonds to Botswana’s government, further weakening the one-time monopoly’s hold on the global gem market, in negotiations that concluded just as the latest deadline for a deal expired.
The arrangement between the gem giant and the world’s second-largest producer is crucial to both sides and plays a central role in the global diamond supply chain.
President Mokgweetsi Masisi has been increasingly vocal in criticizing the 54-year-old agreement, and threatened to walk away if it didn’t provide more benefit to his country, including a provision for Botswana to receive a larger allocation of the gems produced there.
Under the new terms, Botswana’s state-owned diamond trader will get 30% of output from Debswana, the De Beers unit that generally accounts for about two-thirds of the group’s annual production. The government said there’s also an agreement — still tentative at this stage — for that share to eventually increase to as high as 50%.
While it will a relief to De Beers to finally sign an agreement for another decade, it further weakens the company’s hold on the market, since more diamonds will be sold by a third party.
De Beers and its Russian competitor Alrosa PJSC have dominated the global supply of diamonds for years, and have been willing to withhold supplies when demand or prices weaken.
“We will take it bit by bit, because if we just do that all at once without a proper plan about how to sell the diamonds, the price in the market would fall,” Emma Peloetlets, permanent secretary to Botswana’s president, said on state TV. “But we have told ourselves that we will not go beyond ten years without getting to that 50%.”
Botswana’s Okavango Diamond Company currently gets 25% of Debswana production. The agreement with De Beers also includes new 25-year mining licenses for Debswana.
De Beers, a unit of Anglo American Plc, has been negotiating with Botswana’s government for a new deal since 2018. The previous agreement expired in 2020 but was extended several times, initially because of the pandemic.
The negotiations were extended as the two parties couldn’t agree on how much supply Botswana should get. Tensions also arose over the role of Belgian gem trader HB Antwerp, which has established a close relationship with the government.
Earlier this year Botswana said it was taking a 24% stake in the company, without disclosing how much it paid, and would get some supply from ODC.
While the partners finalize the formal sales and mining agreements, an interim agreement will preserve the terms of the most recent sales agreement that expired on Friday.
“The transformational new agreement between Botswana and De Beers 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 two sides said in the statement.
(Updates with details throughout.)
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