De Beers Bots offers supplies in tight market

LONDON – New diamond cutters are setting up shop in Botswana, the world’s biggest diamond producer, to gain supplies in a tight market even though margins may be lower there, a top official of De Beers said on Tuesday.

De Beers, which accounts for around 40 per cent of global rough diamond supply, is due to launch a new local marketing arm in Botswana this month to help boost the country’s jewellery sector and create jobs. The move reflects an effort by African countries to move beyond exporting raw minerals and get a slice of lucrative downstream activities.”For the first time, goods will be sorted, valued and mixed in Botswana,” Sheila Khama, chief executive of De Beers Botswana, told Reuters Global Mining Summit in London.”The move to Botswana is significant in many ways…it moves the relationship between De Beers and the government downstream.”De Beers and the Botswana government are already 50-50 partners in Debswana, which mines the bulk of the nation’s diamonds, and will also jointly own the new marketing arm.Khama acknowledged that Africa cannot compete with cheap labour in China and India, major diamond cutting centres, which is likely to limit the size of African cutting industries.African cutting factories will focus on larger, more expensive stones for which the labour component is a smaller proportion than low-value gems, a speciality of India.ENLIGHTENED SELF-INTEREST Following pressure by governments, De Beers has agreed to set aside certain supplies, only making them available to diamond cutting firms that establish factories in the three main African diamond producers – Botswana, South Africa and Namibia.Some 16 diamond cutting factories have agreed to open in Botswana and will receive supplies from the Diamond Trading Company (DTC) Botswana, to be formally launched next week.By the end of 2009, the Botswana marketing unit plans to supply diamonds worth US$550 million a year to the factories and will eventually take over many marketing functions from London.Previously, nearly all of Botswana diamonds were shipped to the DTC headquarters in London to be mixed and marketed.Although labour costs in Botswana are up to five times higher than in India, the cutting businesses want to secure supplies amid a tightening market.”In real terms, this is not a cheap place to operate…(but) this is enlightened self-interest,” said Khama.”The supply of rough is very limited.They are laying their hands on rough.If they don’t lay their hands on rough, they would be even worse off.”With no recent big discoveries of new mines, De Beers’ diamond output is due to be largely flat over the next several years while demand is still growing, she added.From next year, the Botswana marketing arm will expand its reach, acting as a regional mixing and marketing centre for diamonds from all three big African producers.De Beers is 45 per cent owned by mining group Anglo American Plc, 40 per cent by the Oppenheimer family and 15 per cent by the Botswana government.Nampa-ReutersThe move reflects an effort by African countries to move beyond exporting raw minerals and get a slice of lucrative downstream activities.”For the first time, goods will be sorted, valued and mixed in Botswana,” Sheila Khama, chief executive of De Beers Botswana, told Reuters Global Mining Summit in London.”The move to Botswana is significant in many ways…it moves the relationship between De Beers and the government downstream.”De Beers and the Botswana government are already 50-50 partners in Debswana, which mines the bulk of the nation’s diamonds, and will also jointly own the new marketing arm.Khama acknowledged that Africa cannot compete with cheap labour in China and India, major diamond cutting centres, which is likely to limit the size of African cutting industries.African cutting factories will focus on larger, more expensive stones for which the labour component is a smaller proportion than low-value gems, a speciality of India.ENLIGHTENED SELF-INTEREST Following pressure by governments, De Beers has agreed to set aside certain supplies, only making them available to diamond cutting firms that establish factories in the three main African diamond producers – Botswana, South Africa and Namibia.Some 16 diamond cutting factories have agreed to open in Botswana and will receive supplies from the Diamond Trading Company (DTC) Botswana, to be formally launched next week.By the end of 2009, the Botswana marketing unit plans to supply diamonds worth US$550 million a year to the factories and will eventually take over many marketing functions from London.Previously, nearly all of Botswana diamonds were shipped to the DTC headquarters in London to be mixed and marketed.Although labour costs in Botswana are up to five times higher than in India, the cutting businesses want to secure supplies amid a tightening market.”In real terms, this is not a cheap place to operate…(but) this is enlightened self-interest,” said Khama.”The supply of rough is very limited.They are laying their hands on rough.If they don’t lay their hands on rough, they would be even worse off.”With no recent big discoveries of new mines, De Beers’ diamond output is due to be largely flat over the next several years while demand is still growing, she added.From next year, the Botswana marketing arm will expand its reach, acting as a regional mixing and marketing centre for diamonds from all three big African producers.De Beers is 45 per cent owned by mining group Anglo American Plc, 40 per cent by the Oppenheimer family and 15 per cent by the Botswana government.Nampa-Reuters