Diamond contract expected by year-end

PROLONGED negotiations between Namibia and diamond giant De Beers on their partnership contract renewal could be wrapped up by the end of the year.

That is the aim, “the goal”, says Stephen Lussier, the Executive Director of External and Corporate Affairs for the De Beers Group. In an interview with The Namibian in London last week, Lussier shrugged off earlier reports that hinted at snags in the negotiations.Rather, Lussier said, they were “very complex” and “unbelievably important” for both parties.Negotiations between the two parties have been ongoing since November last year.Government and De Beers are 50-50 shareholders in Namdeb Mining Corporation, the single largest contributor to Namibia’s GDP.The contract under negotiation is renewable every five years.Among others, it defines profit sharing from diamond sales.Lussier described the negotiations as a creative process, the end result of which would have to stand the test of time.”We are looking into the future … and that’s not easy.There are many considerations.”Lussier indicated that the contract would set the trend for the next 10 to 15 years and it was therefore imperative that both parties made sure that it was solid.”We are looking at the whole nature of the relationship, how we put the business together in different ways,” he said.Lussier also cited trends such as marine mining and technological developments as factors that had to be taken into consideration.He did not elaborate.Further, in hammering out a contract that benefited both shareholders, a key consideration was sustainability.Under the circumstances, the negotiations were bound to take time.”That’s the nature of the beast,” he said, referring to the lengthy process which preceded the recent signing of a Memorandum of Understanding between Botswana and De Beers.”We are creating a business for a sustainable future.It’s a long-term deal.”In September, Namdeb’s Managing Director Inge Zaamwani told a press conference in Windhoek that conclusions had been reached on some key issues.Earlier, De Beers’ Managing Director Gareth Penny was quoted as saying that the negotiations were progressing well.Botswana and South Africa have taken completely different approaches in their negotiations with De Beers.Mining Weekly online reports that Botswana has effectively asserted control over supplies in a new joint venture called DTC Botswana.In the process, Botswana reduced the after-tax profit share to De Beers in the mines from 25 per cent to 15 per cent, Mining Weekly reports.With the formation of the DTC Botswana joint venture, it reduced De Beers’ 10 per cent marketing margin by three per cent, and it increased its stake in De Beers from 10 per cent to 15 per cent.In South Africa, the government – under its new mining laws – has created a State Diamond Trader, whose main job is to ensure that local cutters receive supplies, Mining Weekly said.”Namibia is understood to be leaning towards similar terms set by the South African government, which in most likelihood includes a centralised body that receives local supplies, as well as supplies from De Beers’ selling arm, the Diamond Trading Company (DTC) in London,” Mining Weekly suggested.”Under the negotiations with the Namibian Government, De Beers is expected to agree to the creation of a joint venture,” it added.According to industry insiders, Section 59 of the Diamond Act – which Namibia’s Minister of Mines can invoke – is likely to stay intact.It allows for 10 per cent of any diamond production to be sold separately to test the market.Although Namibia does not produce the largest volume of diamonds in southern Africa, the quality of its alluvial production is seen as having a disproportionate impact on the quality of the mix of diamonds that De Beers is able to offer in what is termed its London Mix.In an interview with The Namibian in London last week, Lussier shrugged off earlier reports that hinted at snags in the negotiations.Rather, Lussier said, they were “very complex” and “unbelievably important” for both parties.Negotiations between the two parties have been ongoing since November last year.Government and De Beers are 50-50 shareholders in Namdeb Mining Corporation, the single largest contributor to Namibia’s GDP.The contract under negotiation is renewable every five years.Among others, it defines profit sharing from diamond sales.Lussier described the negotiations as a creative process, the end result of which would have to stand the test of time.”We are looking into the future … and that’s not easy.There are many considerations.”Lussier indicated that the contract would set the trend for the next 10 to 15 years and it was therefore imperative that both parties made sure that it was solid.”We are looking at the whole nature of the relationship, how we put the business together in different ways,” he said.Lussier also cited trends such as marine mining and technological developments as factors that had to be taken into consideration.He did not elaborate.Further, in hammering out a contract that benefited both shareholders, a key consideration was sustainability.Under the circumstances, the negotiations were bound to take time.”That’s the nature of the beast,” he said, referring to the lengthy process which preceded the recent signing of a Memorandum of Understanding between Botswana and De Beers.”We are creating a business for a sustainable future.It’s a long-term deal.”In September, Namdeb’s Managing Director Inge Zaamwani told a press conference in Windhoek that conclusions had been reached on some key issues.Earlier, De Beers’ Managing Director Gareth Penny was quoted as saying that the negotiations were progressing well.Botswana and South Africa have taken completely different approaches in their negotiations with De Beers.Mining Weekly online reports that Botswana has effectively asserted control over supplies in a new joint venture called DTC Botswana.In the process, Botswana reduced the after-tax profit share to De Beers in the mines from 25 per cent to 15 per cent, Mining Weekly reports.With the formation of the DTC Botswana joint venture, it reduced De Beers’ 10 per cent marketing margin by three per cent, and it increased its stake in De Beers from 10 per cent to 15 per cent.In South Africa, the government – under its new mining laws – has created a State Diamond Trader, whose main job is to ensure that local cutters receive supplies, Mining Weekly said.”Namibia is understood to be leaning towards similar terms set by the South African government, which in most likelihood includes a centralised body that receives local supplies, as well as supplies from De Beers’ selling arm, the Diamond Trading Company (DTC) in London,” Mining Weekly suggested.”Under the negotiations with the Namibian Government, De Beers is expected to agree to the creation of a joint venture,” it added.According to industry insiders, Section 59 of the Diamond Act – which Namibia’s Minister of Mines can invoke – is likely to stay intact.It allows for 10 per cent of any diamond production to be sold separately to test the market.Although Namibia does not produce the largest volume of diamonds in southern Africa, the quality of its alluvial production is seen as having a disproportionate impact on the quality of the mix of diamonds that De Beers is able to offer in what is termed its London Mix.