Saturday, July 13, 2024

HP Antwerp presents proposal to Botswana gov’t

Belgian diamantaire, HP Antwerp has presented a proposal to the government of Botswana to market part of the big stones mined by Debswana – Sunday Standard investigations have revealed.

HP Antwerp, which a more than 45% increase in Botswana’s diamond revenue, thousands of jobs for Batswana and a huge boost to the country’s GDP has brought out technology and luxury fashion big guns to boost it chances.

The Belgian company has partnered with LVMH, the luxury product company with a net worth of US$ 329 billion controlling around 60 subsidiaries that each manage a number of prestigious brands, 75 in total. These include Louis Vuitton, Christian Dior, Fendi, Givenchy, Marc Jacobs, Stella McCartney, Loewe, Loro Piana, Kenzo, Celine, Sephora, Princess Yachts, TAG Heuer, Bulgari, and Tiffany & Co.

HP Antwerp announced last week that is has also partnered with Microsoft to use blockchain technology and the Microsoft Cloud to create a digital footprint for diamonds to enable it to track each stone from the point of excavation in Botswana to the moment it is delivered to the consumer.

President Mokgweetsi Masisi is believed to be considering the HP Antwerp proposal. At a United Nations General Assembly in September, Masisi said he believes HB Antwerp’s approach can be used in other African countries and help meet sustainable development goals.

“We believe the future of this industry is to transform the diamond in the country of origin,” he said. “This mineral belongs to the people, and it’s the people that will be involved in every step of it.”

This was not the first time Masisi had indicated confidence in HP Antwerp. Speaking at a Gala dinner in Gaborone in April, Masisi stated that, “he no longer wished to operate under any model other than the one set up by Lucara Diamonds and HB Antwerp.”

HB Antwerp and Lucara Diamond Corp surprised the diamond world in 2020 when they entered into a unique supply agreement. This agreement saw HB Antwerp formally commit to purchasing all of Lucara Diamond’s +10.8 carat rough diamonds from the Karowe mine in Botswana.  Both parties recently announced a new long-term partnership agreement.  For a minimum period of 24 months, HB Antwerp will purchase all of Lucara Diamond’s +10.8 carat rough diamonds. Under the terms of this supply agreement, the purchase price paid for each 10.8 carat rough diamond is based on the estimated polished outcome, determined through state-of-the-art scanning and planning technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing. More than a supply agreement, this deal structurally embeds a more transparent and sustainable way of working in the diamond value chain. For the first time, different partners of the supply chain would be fully aligned, sharing complete data and information throughout the process from mine to consumer. This is a break from the De Beers’ opaque system in which Botswana has to operate on blind trust in an organisation that does most of its dealings in tax haves, far from prying eyes.

In a move suggesting that De Beers may not be sure of its future with the Botswana Government, the diamond mining giant last week extended its sightholder contracts by one year, a reflection of what it calls “uncertainty” in the market.

De Beers’ current sightholder contracts, which began in 2021, were originally scheduled to run until the end of 2023. But they have now been extended until Dec. 31, 2024, spokesperson David Johnson has revealed.

“The extension has been put in place in recognition of the uncertain external environment resulting from the global geopolitical situation and associated macroeconomic headwinds,” Johnson says. “As we have in the past, we’re simply looking to be flexible to support our customers during periods of uncertainty.”

The reaction from sightholders was generally positive. In the past, some have found the process of applying for a sight—and then worrying about getting culled from the list—burdensome and stressful.

Yet, given that it’s not uncommon for the diamond business to face uncertain times, some think there may another factor at play here, related to a different contract extension.

In July, De Beers and Botswana—the biggest producer in De Beers’ stable—extended their current agreement for a year. It’s the third time the deal has been extended; it was originally set to expire in 2021 but will now run through June 2023. A long-awaited new deal has yet to materialize.

Some believe that until De Beers knows for sure what’s happening with Botswana—and how much rough it will get from Botswana’s mines—it won’t be able to determine its sightholder contracts or list.

De Beers’ sightholder agreements state, in very broad terms, how much rough clients should expect. It’s hard to determine that without knowing exactly how much rough De Beers will have access to.

The new Botswana contract may also have new requirements regarding beneficiation—particularly regarding the cutting of big stones. That, too, may affect De Beers’ contracts with sightholders.

Sunday Standard has established that HP Antwerp and Microsoft havecollaborated to develop a blockchain ledger on Microsoft Azure and an enterprise resource planning system on Microsoft Dynamics 365. The solution begins collecting data on each diamond from the moment it is mined, recording the exact excavation location and then tracking it through storage, analysis and the processes to transform it from stone to diamond. It is tracked right up until delivery to the consumer.

Over 3,000 verification points are collected for each stone, which are stored in an internet of things device that acts as a ‘minivault’ that cannot be opened without tracking the action in its ledger. Data is then uploaded to Power BI to provide governments and mining companies with a real-time view of their diamonds.

The founders aim to increase visibility in the diamond industry, allowing mining companies to see how much value their stones generate, and enabling buyers to find out where their diamonds have come from.

“For more than a century, the diamond industry has made billions from obfuscating every stone’s journey,” said Shai de-Toledo, co-founder of HB Antwerp in apparent reference to the current De beers’ model.. “Where it’s from, who added value to it, how the value is – or isn’t – benefitting local communities, or even what a fair price should be for consumers. We feel it’s done so much harm that simply ‘disrupting’ feels like an evolution. This is a revolution.”

HB Antwerp, which two years ago was a relatively unknown is now  Belgium’s largest diamond manufacturer and seems determined to shake Botswana’s diamond industry.

In a recent interview HB Antwerp’s founder Rafael Papisme pointed to Botswana, “where HB Antwerp is focused.” He pointed out that the population there is just under 2.4 million. He says approximately 800,000 people in India work in the diamond industry, mostly polishing, which is “not even a fraction” of the country’s GDP. But shifting even 25 percent of that labor to Botswana could offer a significant economic boom to the country where the average age is just 24 years old. This could help the younger population afford school and housing, and offer support for young families, he says.

There have been efforts before, like keeping auctions in the country where diamonds are mined, which Botswana began to require about seven years ago. It was aimed at boosting the local economy. The theory was traders would come to the country, stay in hotels, eat, explore, and support the local economy. But Papismedov says it failed to live up to expectations, with people coming for a single night, buying their diamonds, and leaving.

Through its deal with Lucara, HB Antwerp has transitioned  Botswana’s participating mines away from the auction, and increased the market price per diamond by more than 45 percent, he says. Part of the reason is provenance. There’s no longer a question where the diamonds come from in HB Antwerp’s scenario. Consumers get peace of mind, and there’s value in that. Papismedov sees it as unavoidable for any government to drop the old system.

“We’re living in a world today where it’s very difficult for governments to justify unjustifiable actions. So it will be almost impossible for them to choose a path that goes against logic,” he says. “And if HB Antwerp is able to demonstrate there’s a much higher multiple returning to Botswana, to the people of Botswana, and to the mines, then other governments are only incentivized to try to replicate that approach.”

While De Beers is uncertain of its future in Botswana, HB Antwerp is already making long term plans in the country. In February, HB Antwerp announced a five-year partnership with the Botswana International University of Science and Technology, offering scholarships and innovations to help create job opportunities in the region. Last year, it partnered with the incubator WomHub to recruit Botswana engineering students.

Until December 2021, De Beers cited Covid-19 as the reason for repeated delays to its talks with Botswana over a new sales deal. The old agreement was supposed to expire at the end of 2020. De Beers and the government extended the existing arrangement for a year. With the pandemic’s logistical challenges remaining, they deferred it again for another six months.
The miner is no longer using the virus as an explanation. On June 29, De Beers announced yet another extension, this time through to June 2023. The company referred only to “positive progress” toward a new deal during the first half and said the one-year postponement would “enable the finalization of the ongoing discussions.”
The Covid-19 explanation was likely more than an excuse. Some aspects of the agreement can only be negotiated face-to-face, sources say. That was almost impossible while travel restrictions were in place.

Yet flights between the UK and Gaborone have been renewed.
“Obviously, now Covid-19 can’t be the reason,” a source said on condition of anonymity. “But it could be a reason that things got so delayed [and as a result they] need more time.”


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