Gem talks at crucial stage

DE BEERS says it is close to finalising protracted negotiations on the renewal of a five-year sales contract with the Namibian Government.

De Beers Country Manager Daniel Kali yesterday confirmed to The Namibian that headway was being made. Kali was approached for comment after De Beers Managing Director Gareth Penny announced at De Beers’ interim results conference in Johannesburg last week that the talks were constructive and progressing well.Kali was unable to say when the negotiations would be wrapped up.It’s difficult to commit to an exact date …All I can say is we are satisfied with the progress we are making and we will conclude in due course,” he said.De Beers, the largest corporate contributor to State revenue, and Government have been embroiled in negotiations since November, with reports alluding to snags being encountered along the way.’THE INEVITABLE’Kali said yesterday that he could not comment on what had been taking place, nor the actual content of what was on the table between the two parties.However, he emphasised that it was an important contract.Kali also noted that the negotiators were not sitting daily but when time was available for them to get together.However, regardless of how Namibia redraws the agreement, word is that many in the industry feel that giving producer countries greater access to the diamond value chain is inevitable – and not just in diamond cutting.Namibia is reportedly the last country after Botswana and South Africa to conclude such negotiations with De Beers.Mining Weekly reports that Botswana and South Africa, have taken radically different approaches in their negotiations with De Beers.Botswana, the world’s largest producer by value, has effectively asserted control over supplies in a new joint venture called DTC Botswana.In the process Botswana has reduced the after-tax profit share to De Beers in the mines from 25 per cent to 15 per cent.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 the new mining laws – has created a State Diamond Trader whose main job is to ensure that local cutters receive supplies.According to the article, Namibia is understood to be leaning towards similar terms set by the South African government, which in most likelihood will include a centralised body that receives local supplies, as well as supplies from De Beers selling arm, the Diamond Trading Company (DTC) in London – thus mirroring the South African State Diamond Trader.Under the negotiations, De Beers is expected to agree to the creation of a joint venture.An inevitable consequence of the negotiations will be reduced profits, if only through a reduction in contributions previously paid by the Government, such as marketing costs.However, it is expected that the negotiations will impact more directly on the current overall take that De Beers enjoys under its current arrangements.Should De Beers agree to such a structure, industry players would be looking at the rough supplies that the new body in Namibia will receive from Namdeb, as well the DTC, said Mining Weekly.These will be high-value goods, which the Government would like to see manufactured in Namibia.According to the publication’s insiders, the so-called section 59, which the Minister of Mine and Energy can at any time invoke, whereby 10 per cent of any production will be sold separately to test the market, is expected to remain in place.However, whatever the outcome of the talks, the conditions applied by Botswana and South Africa have set a precedent for Namibia to follow.* Additional reporting from Mining WeeklyKali was approached for comment after De Beers Managing Director Gareth Penny announced at De Beers’ interim results conference in Johannesburg last week that the talks were constructive and progressing well.Kali was unable to say when the negotiations would be wrapped up.It’s difficult to commit to an exact date …All I can say is we are satisfied with the progress we are making and we will conclude in due course,” he said.De Beers, the largest corporate contributor to State revenue, and Government have been embroiled in negotiations since November, with reports alluding to snags being encountered along the way.’THE INEVITABLE’ Kali said yesterday that he could not comment on what had been taking place, nor the actual content of what was on the table between the two parties.However, he emphasised that it was an important contract.Kali also noted that the negotiators were not sitting daily but when time was available for them to get together. However, regardless of how Namibia redraws the agreement, word is that many in the industry feel that giving producer countries greater access to the diamond value chain is inevitable – and not just in diamond cutting.Namibia is reportedly the last country after Botswana and South Africa to conclude such negotiations with De Beers.Mining Weekly reports that Botswana and South Africa, have taken radically different approaches in their negotiations with De Beers.Botswana, the world’s largest producer by value, has effectively asserted control over supplies in a new joint venture called DTC Botswana.In the process Botswana has reduced the after-tax profit share to De Beers in the mines from 25 per cent to 15 per cent.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 the new mining laws – has created a State Diamond Trader whose main job is to ensure that local cutters receive supplies.According to the article, Namibia is understood to be leaning towards similar terms set by the South African government, which in most likelihood will include a centralised body that receives local supplies, as well as supplies from De Beers selling arm, the Diamond Trading Company (DTC) in London – thus mirroring the South African State Diamond Trader.Under the negotiations, De Beers is expected to agree to the creation of a joint venture.An inevitable consequence of the negotiations will be reduced profits, if only through a reduction in contributions previously paid by the Government, such as marketing costs.However, it is expected that the negotiations will impact more directly on the current overall take that De Beers enjoys under its current arrangements.Should De Beers agree to such a structure, industry players would be looking at the rough supplies that the new body in Namibia will receive from Namdeb, as well the DTC, said Mining Weekly.These will be high-value goods, which the Government would like to see manufactured in Namibia.According to the publication’s insiders, the so-called section 59, which the Minister of Mine and Energy can at any time invoke, whereby 10 per cent of any production will be sold separately to test the market, is expected to remain in place.However, whatever the outcome of the talks, the conditions applied by Botswana and South Africa have set a precedent for Namibia to follow.* Additional reporting from Mining Weekly