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De Beers has renewed a deal to market diamonds from Botswana after negotiations with President Mokgweetsi Masisi’s government regarding the continuation of a 54-year partnership between one of Africa’s richest countries and the world’s largest diamond company by value.
The 135-year-old company owned by Anglo American entered into an “agreement in principle” with the Botswana government late Friday on a new 10-year sales agreement for rough diamonds produced through their joint venture Debswana and an extension of 25-year mining licences.
The new “transformative” agreement “reflects the aspirations of the people of Botswana, moves Botswana and De Beers forward, and supports the future of their joint venture in Debswana through long-term investment,” the parties said in a joint statement.
The previous deal, struck in 2011, gave the South African country 25 percent of its diamond production for sale, with the remainder going to De Beers. Both parties said those terms would remain in place under an interim agreement while a formal agreement was finalized.
Masisi’s government has indicated it was ready to walk away if it did not get a better production share in talks with De Beers, which owns 15 percent of Botswana. De Beers relied on the nation for about 70 percent of its supply of rough diamonds, or 24 million carats, last year.
In turn, diamond mining contributes to a third of the landlocked country’s GDP and has led to its rise to becoming the sixth richest country in Africa per capita. Only Russia produces more gems.
Masisi’s Botswana Democratic Party is seeking in elections next year to maintain the grip on power it has held since independence in 1966. Masisi has said he wants to push the country up the diamond value chain, from mining to hosting more cutting and polishing of diamonds. The stones are in Botswana itself.
De Beers has long argued that Botswana gets the most value from its diamonds when taxes and royalties are included.
Analysts say the future of the relationship has been complicated by uncertainty about the costs of prolonging the life of Jwaneng, Debswana’s flagship and the world’s largest diamond mine.
The agreement comes after a challenging four months since Cook took charge of De Beers, as the diamond mining industry also faces a push from G7 countries to introduce a tracking system to identify Russian diamonds.
The negotiations created uncertainty about the strategic value of the diamond mine to Anglo American. Berenberg analysts said last week that “Anglo American has to wonder whether De Beers should remain in the group’s portfolio for a number of reasons,” including the possibility of worse economic terms as a result of the negotiations.
Botswana has increased pressure on De Beers by agreeing to a deal – not yet finalized – to take a 24 percent stake in Belgian diamond manufacturer HB Antwerp, which could offer the country an alternative way to market its diamonds.