Wednesday, August 17, 2022

Anglo American stalls diamond marketing contract – analyst

Anglo American, a senior partner in De Beers’ formation, is alleged to be stalling the marketing┬áagreement between Botswana┬áGovernment and the world’s leading diamond mining giant.

Writing in Diamond Intelligence Brief, Chaim Even-Zohar, an internationally renowned diamond expert said┬áAnglo American is “unhappy” with┬áshare that┬áBotswana government is getting under the current arrangement.

De Beers is 45 percent held by Anglo American, 40 percent by┬áCentral Holdings (a company owned by Nicky Oppenheimer’s family) while Botswana government┬áholds the remaining 15 percent by Botswana.

Under the existing arrangement De Beers remains with 18 percent of the proceeds after Botswana Government has taken its share, taxes and royalties.

But┬áthe┬áprevious shareholders’ agreement signed under Festus Mogae’s regime that called for the diamond beneficiation indicated that┬á10 percent of Debswana’s production will be given to Botswana government to promote the envisaged diamond stock exchange.

The produce allocated to Botswana will steadily increase to 20 percent of Debswana’s┬áproduction over the next 10 years.

However, Even-Zohar┬ásaid all the parties are looking to reach “a consensus”┬áto the long drawn negotiation of the renewal of the┬áten marketing agreement┬ábut they do not know how.

The agreement was supposed to have been signed in December 2010, but that has failed. In the meantime the shareholders are operating under an extended short term contract.

“Anglo American has apparently had it with Botswana. A senior┬áfinance┬áofficial at Anglo American has intimated to various confidants that the company is being held hostage by┬áBotswana.”

“Though De Beers holds 50 percent of Debswana, it only gets┬á18 percent of its profits. The basic Botswana agreement is not good for Anglo American,” a senior finance official at Anglo American is reported to have said.

The tricky part is that the figures thrown around by Anglo American are not part of the deal but the fear is that Botswana’s revenue will increase dramatically if it is to be allocated a certain percentage to market it independently through the stock exchange.

Botswana had engaged Gemdax, a Belgian diamond boutique to help it with the setting up of the diamond stock exchange that would entail selling produce from non  De Beers operations in Botswana.

The Botswana agreement has what┬áthe shareholders┬ásay┬á“is a technical problem” which has become a dilemma for Anglo American. Under the agreement, there is a clause that allows Botswana┬áto demand┬áa renegotiation of the contract in the event that┬á the control in De Beers changes hands.

Further, the other problem is that De Beers has not delivered on all the promises┬ácontained in the shareholders’┬áagreement of DTC Botswana, such as the transfer of the aggregation process from London to Botswana.┬á┬á┬á

Botswana government is understood to have raised the flag claiming that De Beers has breached the agreement, which technically Botswana could force Dee Beers to sell it all its shares in DTC Botswana either at arms length or willing buyer willing, seller principle.

The other┬áproblem that De Beers shareholder have to deal with is that the┬ácompany without┬áDebswana┬ámakes the “property┬áfar less attractive” to any new shareholder,” Even-Zohar commented in his article.

He said Botswana government is┬áincreasingly getting “impatient” with lack of progress in the negotiations┬árelating to the renewal of the contract and is about to issue an ultimatum to other shareholders.

The ultimatum is┬á expected to fix┬á a date on which an agreement is expected to have been reached or otherwise re-negotiate the whole deal all over again and┬á government┬á would raise┬á the “breach of┬á DTC Botswana shareholders agreement”┬á a move that┬á might jeopardise the future of other partners.

Technically, that would give Botswana an upper hand and make significant profits out of the De Beers business.


Read this week's paper