Botswana government said Friday that it was combing a number of options aimed at raising US $ 150 million (about P 1.5 billion) that is to be injected into the debt ridden De Beers.
The three shareholders of De Beers have agreed in “principle” to proportionally raise up to US $ 1 billion in a bid to rescue it from US $ 1.5 billion that falls due in March 2010.
“The (diamond) industry is our industry. It will impact on other things, including confidence in the future of the diamond industry,” Minerals and Energy Minister, Ponatshego Kedikilwe, said Friday when justifying why government has to participate in the right issue open until March next year.
“We take this matter very seriously and we have to ensure that the company stays afloat,” he added.
However, he indicated that the Botswana government’s finances were also affected by the global economic downturn ÔÇö that has impacted on the delivery of some of National Development Plan 10 projects.
Government revenue streams were impacted by the administrations free spirited spending mood and global economic crisis that hit hard on the diamond industry which is the backbone of the economy.
DiamondsÔÇöincluding downstream activities– contributes as much as 40 percent of the GDP and supports over 50 percent of government spending.
“The shareholders of De BeersÔÇöAnglo American plc, the Oppenheimer family and government of BotswanaÔÇöhave agreed in principle, and subject to satisfactory refinancing terms of the company’s existing debt, to further investment in De Beers by way of rights issue, thereby reducing the level of debt needed for refinancing,” spokesperson for De Beers, Lynette Gould was quoted by Idexonline on Tuesday.
De Beers’ total net debt stands at US 4.06 billion and of this bank borrowing is at US $ 3.22 billion. Another US $ 734 million are shareholders loans. In February this year De Beers asked its shareholders to pump in US $ 500 million in the form of loan.
“By reducing De Beers’ level of external debt and improving its capital structure, this investment would better enable the company to take advantage of new opportunities and demonstrate shareholders’ confidence in De Beers’ continued market leadership as recession gives way to recovery,” she said.
However, De Beers implemented a raft of cost cutting measures from the close of 2008 until April this year when it scaled-down production in all of its mines in Africa and closing those in Canada .
Kedikilwe told reporters that although the economy is faced with a number of challenges, government is looking at various ways available regarding the issue of rights issue but did not disclose the details.
“Government is currently considering options available to it with regard to the rights issue. In considering the matter, the government is mindful of its responsibilities as shareholder of the group (De Beers) and the need to ensure that there is no value destruction to government’s investments not only in De Beers but also in Debswana,” he said in a well loaded statement.
Botswana hold 15 percent in De Beers, while the Oppenheimer family has 40 percent and the remaining 45 percent belongs to Anglo America. In Debswana, Botswana government and De Beers stand at 50/50 percent stake.
De Beers, which has operations in Botswana, Canada, Namibia and South Africa is the world’s largest producer of rough diamond, accounting for 42 percent of the global produce.