Botswana plans extra diamond sales route after De Beers deal

Botswana Minerals

04/08/2023 15:12

* 
      Okavango Diamond seeks to optimise auctions that are too
big
    

        * 
      De Beers says new channel is ODC's chance to reach new
clients
    

  
 (Adds ODC quote in paragraph 12)
    By Felix  Njini and Clara Denina
       NAIROBI/LONDON Aug 4 (Reuters) - Botswana's state
diamond company is planning to diversify how it sells precious
stones to the market as it gears up to receive far more supply
under a multi-year deal the country struck with producer De
Beers in July. 
    The Okavango Diamond Company (ODC) currently sells 25% of
the gems produced by the Botswanan government's Debswana joint
venture with Anglo American  AAL.L  unit De Beers via an auction
process.
    ODC's share of rough stones from Debswana will rise to 50%
over the next decade due to Botswana's new deal with De Beers,
but selling large volumes will be hard due to an uncertain
economic outlook, and in the face of competition from
laboratory-grown gems.
    Botswana, the world's No. 1 diamond producer by value, 
generates about 30% of its revenue and 70% of its foreign
exchange earnings from diamonds, making its economy heavily
exposed to prices of the precious stones, which have fallen
around 12% in the last six months. 
    "ODC auctions are too big and need to be optimized," ODC
Managing Director Mmetla Masire told Reuters via email. "We also
need to de-risk the business and support other customers that
want alternative selling channels."
    While ODC is not moving away from the open tender model, the
new channel should complement and work in parallel with
auctions, Masire added.
    "We are not shifting away from the auction channel, we are
looking at running the auction and adding another channel to
complement and work in parallel with auctions," he said.
    With auctions, "apart from the logistical challenges of
tendering such huge volumes of diamonds, technically what
happens when the market is bad like today, you tender a large
amount of diamonds you can't sell", said James Campbell,
managing director of mining group Botswana Diamonds  BODP.L .
    De Beers uses an alternative selling channel that involves
offering boxes of unpolished gems to customers such as
manufacturers and diamond magnates at sales known as "sights"
held about ten times a year. This helps when the market is weak.
    "ODC will have the freedom to sell to customers directly in
a way that they haven't had before," De Beers CEO Al Cook told
Reuters in an interview.
    "In practical terms, that does provide a structure for
insuring that we get rid of the peaks and troughs that
characterize selling by tender or auction," he added, referring
to De Beers' selling channel.
    Debswana's rough diamond sales dropped 17% in the first six
months of the year, data released by the central bank showed, as
prices for the stones dropped sharply.         

 (Reporting by Clara Denina and Felix Njini; Editing by Jan
Harvey)
 ((Clara.Denina@thomsonreuters.com;))