Sunday, November 27, 2011

Diamond deal sets off scramble for partnerships

Government is inundated with unsolicited overtures from international diamond brokerage and consulting firms seeking partnerships for the trading and marketing of diamonds unlocked by the recent agreement with De Beers of a 10 percent independent verification window, sources on Government Enclave have revealed.

However, reliable sources say the bustle will amount to making much ado for nothing because the government is not looking for partnerships. Only a CEO and other top flight managers will be needed for the envisaged rough diamond trading state company.

Under the 10-year deal signed in September, the Government of Botswana will buy 10 percent of Debswana production, estimated at 25 million carats this year, and sell it independently through open tenders outside the traditional DTC framework.

This means under the deal, which was signed eight months after the last agreement expired, government is this year entitled to about 2.5 million carats that it will buy from DTC Botswana and sell through tenders as a way of "verifying" the market.

Officials close to the proceedings told Business Week this week that they had received over 20 applications from international diamond companies seeking partnership deals and management contracts for the 10 percent supply.

"However, we have made it clear to them that we are not looking for partnerships," said one source. "What we want are employees in the form of a CEO and other managers with relevant experience."

Government is currently in the process of recruiting top management personnel for the rough diamond trading company that will be established soon, setting the ball rolling for independently verifying the diamond market.

The 10-year agreement, which provides for an independent sales window for the government, will start at 10 percent of Debswana's run-of-mine production this year that will rise to 15 percent over a five-year period. As part of efforts to turn Gaborone into a world recognised diamond centre, the government has already given the green light to Lucara and Firestone Diamonds to sell part of their production by open tender outside the DTC framework.

Lucara's AK6 Mine expects to produce 400,000 carats in its first year of production next year, a part of which will be sold in Gaborone through the tender system. The selling of the AK6 production on the open market will add flourish to Gaborone's fledgling diamond market that was kick-started by Firestone Diamonds in December last year.

Firestone, which expects to produce one million carats from its BK11 Mine by 2014, has so far conducted four tenders at the Diamond Technology Park (DTP) in Gaborone. Giving form to the dream, work has already begun on construction of a trading facility at DTP, marking the first stage of what will become a platform for independent tenders for local, regional and international diamond producers and buyers trading in Botswana.

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