Tuesday, May 26, 2020

Botswana diamonds profit share in De Beers shoots up

Botswana government’s diamond mining profits in De Beers increased by 10 percent in the first six months to June, reflecting the impact of the newly signed agreement between the two parties, a report said last week.

A United Kingdom- based diamond research organization, WH Ireland, said Botswana government’s total “take” has increased from 75 percentÔÇöas compared to the previous periods ÔÇô to 85 percent.

“The company said very little in its results (underlying earnings down 14 percent in US dollar terms) about the impact of all important Botswana to its bottom line,” the research said.

Botswana government and De Beers own 50 percent stake each in Debswana Diamond Mining Company, which operates four diamond mines in the country and sells all its produce directly to De Beers’ London-based Diamond Trading Company. And, at the same time, Botswana government owns 15 percent in De Beers.

“Put another way, De Beers’s net share of mining profits in Botswana has fallen from 25 percent to 15 percent which, together with reduction in the DTC’s marketing margins, from 10 to seven percent on Botswana goods, could cost De Beers bottom line up to US $ 200 million in a full year,” it added.
De Beers, which contributed 41 percent of the world diamondsÔÇöout of close to 155 million carats sold last year ÔÇö is 70 percent reliant on Botswana production, which alone, stood at 31 million carats.
Explaining its marginal increase in sales to US $ 3.25 billion in the first six months to June this year, it said it signed a suite of agreements with Botswana government, including the renewal of mining licenses, the establishment of DTC Botswana and marketing Botswana production which eats heavily on its budget.

“Some would say that is avoiding the issueÔÇönamely on what terms were those arrangements made?
“Put simply, it had to bite the bullet. The point of this remark is to stress that De Beers has its agenda and it has its own problems and that its remarks on the industry as a whole should be taken with that in mind,” the report stated.

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