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Govt share of Debswana diamonds rises to 11%

Francistown:  Government is now entitled to 11 percent of Debswana's annual production, up a percentage point from the 10 percent secured last September as part of a historic sales agreement with De Beers. At 10 percent and using 2011 estimates, government was entitled to up to P2.6 billion of diamonds from Debswana, with the figure increasing to 15 percent by 2016. The Okavango Diamond Company has since been set up with a board and managing director to spearhead the independent trading of government's share of Debswana production. The unit is expected to begin trading rough diamonds as early as April next year.

In an interview on the sidelines of this week's BOCCIM National Business Conference, the Diamond Hub's Mmetla Masire explained that by the expected commencement of trade by Okavango, government's share at Debswana would have risen to 12 percent. He revealed that government had not yet exercised its rights under the 2011 deal, despite some suggestions that it should take up its allocation and stockpile while awaiting Okavango's full establishment.

"We have not exercised that allowance because there is currently no capacity to trade them," Masire said. "Some are saying, 'take them and stockpile them' but we are buying these diamonds and that would be like holding money in stockpiles."

Analysts have said with the rough diamond market currently depressed, government would be well advised to carefully time the exercise of its allowance and the commencement of trade by Okavango.

Recently, Okavango's founding MD, Toby Frears said the unit was speeding ahead with its development with a view to the commencement of trade in the second quarter of 2013.

"Over the coming months, we will be focusing on developing and implementing the launch plan, putting together a world class team, including the appointment of a deputy MD, developing the company strategy and operating plan, defining a sales model and identifying and equipping suitable premises for the start of trading activities," he said.

Earlier this year, then Minerals, Energy and Water Resources Minister, Ponatshego Kedikilwe told BusinessWeek that government was still putting its house in order and was in no particular hurry to commence diamond auctions.

Meanwhile, De Beers Botswana CEO, Neo Moroka says an outpouring of opportunities is occurring around the relocation of the Diamond Trading Company International and aggregation activities from London to Gaborone. As an example, he pointed out that De Beers had already rented 20 houses for the larger workforce associated with the relocation of activities, and expected to procure 55 more for rental next year.

"We have also looked at our own buildings with 27 town houses refurbished and completely done over at a cost of P24 million," Moroka said, "When you are in business, you take all opportunities. Those who have houses are coming to De Beers to say we have these to offer. Even yesterday I was talking to someone who was enquiring about how to offer his house for rental. We have to move these things for ourselves."

The CEO revealed that P170 million had thus far been spent in developing the Diamond Trading Company Botswana (DTCB) in preparation for the relocation of activities from London. He said the total budget for the expansion was P186 million.

Aggregation activities are due to be launched in Gaborone next August, breaking 80 years of being conducted in London and marking the first phase of the migration of De Beers sorting, sales and marketing business (DTC International) to Botswana. The move will see P45 billion ($6 billion) worth of diamonds passing through Botswana.

23 October 2012
Mbongeni Mguni
News Tags:
Botswana, Mining
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