Sunday, July 14, 2024

Botswana, De Beers strike new 10 year sales deal

The Botswana government and mining giant, De Beers Group have finally reached an agreement for the sales of Debswana’s rough diamond production. The ten year deal which starts this year will go through to 2033.

At the same time, the two parties have also agreed on a new 25-year Debswana mining licence through to 2054.

“While the partners finalise the implementation of the formal Sales and Mining Agreements, an Interim Agreement will preserve the terms of the most recent Sales Agreement which expired on 30 June,” reads part of the statement.

The two parties have been locked in negotiations for over 48 months.

The 2011 sales agreement that governs the relationship between the two parties expired in September 2020, and after three extensions, a deadline was set for end of June 2023.

Botswana and De Beers have a long history. The diamond mining company started prospecting for diamonds between 1932 and 1938 in Eastern Botswana, resulting in the first diamond spotted along Motloutse River, and ultimately led to the discovery of the Orapa kimberlite field in 1967, just a year after Botswana became independent.

De Beers ceded 15 percent of the company to the Botswana government in 1969, and entered in a 50/50 joint venture for the creation of Debswana, which remains as the world’s longest known public private partnership. Over the years, the discovery of diamonds propelled Botswana from one of the world’s poorest country to a middle income country.

De Beers gets diamonds from its owned mines in Canada, South Africa, and Namibia, which are then imported and consolidated with the Botswana diamonds, which account for nearly 70 percent of De Beers’ inventory. The rough stones are then sorted and valued by Diamond Trading Company Botswana (DTCB), a 50/50 joint venture between Botswana government and De Beers. About 75 percent of the rough diamonds are sold to De Beers Global Sightholder Sales (DBGSS), and 25 percent to Okavango Diamonds Company (ODC) – a wholly owned state entity.

De Beers’ rough diamond production in 2022 increased to 34.6 million carats, up from 2021’s 32.3 million carats, reflecting strong operational performance and higher planned levels of production to meet continued strong demand for rough diamonds, particularly in the first half of the year.

The diamond mining behemoth sold $5.67 billion of rough diamonds, which helped bring the group’s revenue to $6.6 billion, up from 2021’s $5.6 billion.  In the end, De Beers reported a profit of $1.4 billion, an increase of 29 percent from 2021’s profit of $1.1 billion. The 2022 earnings are the highest since 2014, when De Beers’ revenue hit $7.1 billion and delivered almost $1.4 billion in profit.

From the profit, government gets 15 percent of its share, which was $210 million. Furthermore, Botswana’s earnings from the joint venture brought in $2.6 billion, and in addition to the 15 percent stake from De Beers, the country made $2.8 billion in 2022 from the partnership.

De Beers is also among the largest tax payers in the country. For 2022, the total taxes paid amounted to P15.2 billion, higher than the P13 billion paid in 2022. The breakdown of the total tax for 2022 includes: P8 billion paid as taxes and royalties, P4.8 billion as corporate tax, and P2.4 billion paid for royalties and mining taxes.


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