Canada’s Lucara Diamond has dug up a 1,094 carat diamond from its Karowe mine in Botswana.
This is the sixth diamond weighing more than 1,000 carats to be recovered at the mine, and it comes only weeks after the recovery of a 2,492 carat diamond the second-largest diamond ever recovered.
“This remarkable stone bears striking similarities to the 692 carat diamond announced in August 2023, which was polished by HB Antwerp and yielded polished diamonds that sold for in excess of $13 million,” the company said in a press release.
“This newly recovered 1,094 carat stone will also be polished by HB Antwerp, as part of the ongoing partnership between the two companies,” Lucara said.
The Karowe mine has produced several large diamonds in recent years, including the 1,758-carat Sewelô in 2019, the 1,109 carat Lesedi La Rona in 2015, and the 813 carat Constellation, also in 2015. The mine is also credited for having yielded Botswana’s largest fancy pink diamond to date, the Boitumelo.
Botswana is the world’s largest producer of diamonds, and the trade has transformed it into a middle-income nation.
Karowe remains one of the highest margin diamond mines in the world, producing an average of 300,000 high value carats each year.
Shares of Lucara rose 8% by 11:40 a.m EDT in Toronto. The miner has a market capitalization of C$221 million ($162 million).
Botswana’s state-owned diamond marketing company will increase its borrowing to fund additional rough purchases.
Finance Minister Peggy Serame said last Thursday (29 August) that the government had arranged a $300m credit facility, with the Standard Chartered Bank for the Okavango Diamond Company (ODC).
It hopes to capitalize on a long-awaited recovery the global diamond market.
At the moment ODC’s limited cash reserves mean it can only buy $70m of its allocation of diamonds produced by Debswana, the 50/50 joint venture between De Beers and the Botswana government.
ODC holds 10 auctions a year to sell its 25% allocation from Debswana. That share is set to double to 50 per cent over the next decade, as part of a deal agreed last year between Botswana and De Beers.
Last October ODC halted its rough sales amid weak demand.
Botswana intends to renegotiate its proposed purchase of a stake in Belgian gem dealer HB Antwerp to double the size of its shareholding at no extra cost following the downturn in the diamond market, the country’s mines minister said on Tuesday.
Botswana is the world’s biggest diamond producer by value, meaning its economy has been disproportionately hit by a drop in demand for diamonds caused by a global economic slowdown.
Lefoko Moagi told Parliament the weaker diamond market had also affected the company’s valuation, giving the country room to renegotiate.
“We will not be injecting more capital, but we will get more shares for the same amount proposed in 2023,” Moagi said. “Instead of the 24%, we will negotiate to get 49.9% for the same amount initially proposed.”
Finance ministry budget documents showed in February that the country had set aside 890 million pula ($65.95 million) for the 24% stake, valuing the Belgian company at about $275-million.
The HB Antwerp deal was announced during Botswana’s negotiations for a new sales contract with Anglo American’s diamond unit De Beers in March 2023.
As Botswana sought to increase its power to market its stones outside a decades-old agreement with De Beers, it said the HB Antwerp deal would strengthen its presence in the downstream diamond industry.
It includes supplying the trader with rough diamonds for five years through the state-owned Okavango Diamond Company (ODC).
According to Botswana’s central bank data, sales of rough diamonds at Debswana Diamond Company fell by 49.2%, amounting to $1.29 billion compared to $2.54 billion in the same period last year.
In local currency, sales of rough diamonds decreased by 47.3% to 17.555 billion pula compared to the same period last year.
This decline in sales is a major blow to the South African nation, which derives 30%-40% of its revenue, 75% of its foreign exchange earnings, and a third of its national output from sales of rough diamonds.
The report highlighted the downturn in the global diamond market as the primary reason for this sharp decline.
In response to the weak consumer demand, Anglo American cut its diamond production by 19% in the first six months of the year.
The report highlighted the downturn in the global diamond market as the primary reason for this sharp decline.
Botswana derives 30%-40% of its revenue, 75% of its foreign exchange earnings, and a third of its national output from sales of rough diamonds.
The Debswana Diamond Company is a joint venture between the government of Botswana and Anglo American Plc’s De Beers. Anglo American Plc’s De Beers sells 75% of its output to De Beers, while the balance is taken up by the state-owned Okavango Diamond Company.
Despite the current economic challenges, Botswana and De Beers signed a ten-year diamond sales agreement in June.
This deal will gradually see the share of Debswana’s output sold by the state-owned company increase from 25% to 30% before it goes up to 40% in five years and eventually 50% by the end of the new contract.
According to the key points in the agreement, this strategic move aims to boost Botswana’s revenue from its diamond resources.
Debswana Jwaneng Diamond mine, Botswana, South Africa
De Beers reported a 15 per cent drop in its global diamond production in Q2, as demand remained weak for yet another quarter.
The H1 figure (16.5m carats) is down 19 per cent on the same period in 2023.
The total number of carats recovered during Q2 2024 was 6.4m, down from 7.6m year-on-year. Botswana, which accounts for around two thirds all De Beers’ production, was worst hit, with output down 19 per cent.
De Beers blamed “intentional lower production from short-term changes in plant feed mix at Jwaneng to process existing surface stockpiles”.
Jwaneng, De Beers’ biggest deposit saw output drop 36 per cent during the quarter, from 2.5m carats to 1.9m.
Production in Namibia was down 8 per cent, Canada slipped 1 per cent and South Africa increased by 8 per cent.
In its Production Report for the Second Quarter of 2024, De Beers said guidance for the year remained unchanged at 26m-29m carats.
But parent company Anglo American has indicated that production for the year (originally given as 29m-32m carats) could well be further reduced to manage working capital and preserve cash in a weak market.
Botswana’s economy contracted by the most since the peak of the pandemic in early 2020, after diamond production plunged.
Gross domestic product shrank an annual 5.3% in the first quarter, compared with growth of 1.9% in the prior three months.
The downturn was primarily influenced by a decrease in real value added of the diamond traders and mining & quarrying industries of 46.8% and 24.8% respectively, Statistics Botswana said in a report Friday.
Botswana is the world’s largest producer of rough diamonds by value, with the revenues making up the bulk of the southern African country’s budget receipts. The decline is likely to make meeting its fiscal targets for this year difficult. The central bank already warned last week that the government would probably miss its economic growth forecast of 4.2% because of weaker mining output.
The global diamond industry almost came to a standstill in the second half of last year as De Beers and Russia’s Alrosa PJSC — the two biggest miners — all but stopped supplies in a desperate attempt to stem a slump in prices. That hit earnings at De Beers, which mines more than three-quarters of its diamonds in Botswana.
Earlier this year De Beers said it expects any recovery in the beleaguered diamond market to be slow and gradual as the industry continues to suffer from weak economic growth in key markets such as China and the US.
The Botswana government may raise its shareholding in global diamond miner De Beers, President Mokgweetsi Masisi told JCK News, after parent company Anglo American said it plans to spin off or sell the business.
The government owns a 15% stake in De Beers and Botswana accounts for 70% of the company’s annual rough diamond supply.
Anglo outlined a radical review of its business including a sale or divestment of the diamond business to focus on copper, iron ore and a fertilizer project in the UK to fend off a takeover from bigger rival BHP Group.
Masisi told JCK in Las Vegas that Anglo’s sale of De Beers would be “the best thing” if it happens.
The government could raise its shareholding in De Beers “if it’s attractive to,” Masisi told the online diamond news channel. The president in May told CNBC Africa that government would defend its interests in the diamond miner.
Among the plans Anglo could consider is an initial public offering for the diamond business, Reuters reported on May 14, citing sources.
Like other luxury goods, diamond prices have been hammered by a slump in global demand. De Beers has been limiting supply and offering flexibility to contracted customers. In February, Anglo announced a $1.6 billion impairment charge on De Beers. Anglo acquired De Beers in 2011, buying the Oppenheimer family’s 40% stake for $5.1 billion.
Masisi told JCK News Botswana’s ideal partner in De Beers would be a long-term investor. The government will try to keep the “bad guys out” and wants investors whose vision is aligned with the government’s.
“One of the characteristics of a bad owner is someone who has impatient capital,” Masisi said. “This industry requires somebody who is in it for the long-haul, because it has its ups and downs.”
Diamond exploration company Botswana Diamonds has been granted four prospecting licences – covering just under 2 332 km2 – in the Kalahari of Botswana.
The prospecting licences are in the same general area as Gem Diamonds’ Ghaghoo mine, as well as Botswana Diamonds’ own KX36 project.
“I am pleased that we have been awarded these prospecting licences in the Kalahari of Botswana, which we believe will be the next major diamond-producing area in the country.
“Exploration is a long game, particularly diamond exploration, and we believe the industry is going through a structural change which will see the natural product, particularly from Botswana, find its premium niche in world markets,” chairperson John Teeling comments.
The Group of Seven (G7) import restrictions targeting Russian diamonds will have a detrimental impact on Botswana’s diamond trade and may reverse the gains the country has made in recent years, government officials told Rapaport News.
The proposal to create a single-node location through which all diamonds should pass to verify G7 compliance would be a logistical nightmare for producer countries, Lefoko Moagi, Botswana’s minister of mineral resources, green technology, and energy security, said in an interview.
“It creates added time in terms of processing our diamonds and it affects our beneficiation trajectory,” Moagi explained. “This may bring about added costs and unintended consequences that will affect the producer countries.”
In December, the G7 — which comprises Canada, France, Germany, Italy, Japan, the UK, and the US, as well as the European Union — announced new restrictions to prevent the flow of Russian diamonds to their markets. The measures include a ban on direct imports of diamonds from Russia, taking effect at the beginning of the year. From March 1, the sanctions were extended to Russian-origin diamonds polished in a third country, which prompted each G7 nation to issue interim guidelines requiring self-certification by members of the trade declaring their goods did not originate in Russia.
A blockchain-enabled traceability system will be implemented in the final stage on September 1, which the European Commission stipulated will require verification of the diamonds in Antwerp.
Systems in place Botswana is concerned such a system will result in delays and additional costs, and consequently slow down the development of its own trade.
The government is petitioning the G7 to allow such verification to take place in the producer countries, particularly in Botswana, since it can easily adjust its processes to meet the G7 requirements, noted Emma Peloetletse, permanent secretary to the president, in a separate interview.
“Why not build on what already exists, because we have it?” she contended.
The government hosted the G7 working committee in January to demonstrate its systems and to convince the group that a local registration point can be trusted without fear of contamination by Russian goods.
“The G7 working group was shocked to see our robust systems,” Peloetletse said. “These took years of work and investment to develop.”
She expressed frustration at the lack of engagement by the G7 following the visit and that the working group didn’t have the answers to Botswana’s questions.
Risk to the economy As a nonaligned nation, Botswana is not opposed to the sanctions, Peloetletse stressed. The country is primarily concerned about the effect their implementation will have on its diamond industry, and subsequently on the economy, she added.
Diamond mining accounts for an estimated 20% of gross domestic product (GDP), while diamond cutting, polishing, and trading makes up about 5%, according to local economist Keith Jefferis, managing director at econsult Botswana.
The domestic economy was estimated to grow 3.2% in 2023, Finance Minister Peggy Serame said in her budget speech on February 5. That represents a slowdown from 5.5% growth in 2022, reflecting “the relatively weak performance of diamond trading and mining activities throughout 2023,” she explained.
Serame projected the economy would grow 4.2% in 2024, but noted several risks that could reverse such gains. Among them are those from within the diamond industry, particularly in the beneficiation subsector, “which would be worsened by the G7 plan to verify the origin of non-Russian goods through diamond certification in Antwerp,” the minister said.
After the De Beers high The government continues to rely on diamonds to elevate the standard of living in the country and expects its new sales agreement with De Beers, announced last June, will be a catalyst for continued economic growth.
“Diamonds are something we guard with our lives, given what it has done for Botswana and what it can still do for the country,” Moagi said. “That resonated throughout our negotiations with De Beers. There was a meeting of minds with them to reach an agreement that can really boost the economy.”
The agreement will see state-owned Okavango Diamond Company (ODC) increase its share of local production from 25% to 50% over the next decade. That will enable ODC to introduce contract sales and subsequently designate rough for beneficiation — something it has been unable to do with its current auction-only sales channels.
The government wants more diamonds to be manufactured in Botswana and views that program as a path to encourage local entrepreneurship in the diamond trade, Moagi explained. ODC is planning to include an allocation for citizens to incubate local diamond manufacturers looking to develop in the beneficiation sector, he continued.
The deal also marked the establishment of the Diamonds for Development Fund (DDF) as a way to enable entrepreneurship both within and outside the diamond industry, the minister explained.
While the De Beers agreement left the government on a high, the G7 plans burst its bubble, Peloetletse added. “Now, when we are supposed to reap what we have sowed, we get this,” she said. “It has left us very anxious about our prospects.”
African lobby The concern is shared by other producer countries. Botswana President Mokgweetsi Masisi met with his counterparts in Angola and Namibia in late February and sent a joint letter to the G7 leaders outlining their concerns. Their sentiment was echoed by the African Diamond Producers Association (ADPA), which emphasized the negative economic consequences the G7 measures would have on the entire diamond supply chain.
“In the absence of proper consultation with African producers, it is concluded that the G7 restrictions on diamonds will disrupt the current supply chains and the fundamental business model of the diamond sector by introducing segregation requirements,” the ADPA said in its February 29 statement.
Minister Moagi is hoping for stronger engagement with the G7 decision-makers, rather than just the working committee. There is a sense that not all G7 members agree with the proposed approach to implementation, and that the African producers can leverage their position to negotiate a more practical approach, he said.
Brace for the worst Ultimately, the African producers, and Botswana in particular, want a stronger say in how their production is handled and leveraged.
While giving license to others to tell the Botswana story, there has been a realization that those outsiders have their own agenda, Peloetletse said. “There is nobody who can tell our story better than us,” she stressed, while referencing the country’s path toward independence as a former British protectorate.
In a similar tone, Moagi stressed that from Botswana’s perspective this is more than an economic issue: “It is an assault on our democracy and the sovereignty of countries,” he cautioned. Peloetletse added that the G7 sanctions constitute just one example in which Botswana is still trying to exert its independence.
Other battles include the reclamation of land from foreign entities, after the government in November set aside BWP 1.4 billion ($102.6 million) for the acquisition of 45,000 hectares in the country’s Northeast District from British-registered Tati Company. While Tati’s status as the largest private landowner in Botswana stems from a 1911 allocation, the recent deal sparked a debate about why the country should pay such a hefty price for its own land.
The government is also engaged in a battle over its wildlife policy as European legislators attempt to ban the import of animal-trophy hunting products from the country. With the largest herd of elephants in the world, and an oversupply of game, the country must manage its ecosystem and incentivize communities to coexist with the animal population, Peloetletse explained. The government has granted the rural communities quotas for trophy hunting, arguing that banning the practice would greatly affect the livelihoods of their residents.
The convergence of these issues, and most notably the potential impact of the G7 sanctions on its diamonds, has left the government feeling uneasy and uncertain how to move forward, said Peloetletse, whose role is to advise President Masisi.
“We have to brace for the worst-case scenario because it’s not clear the G7 is willing to listen or know what it means to our economy,” she said. “Once you close the diamond tap, and the tourism tap, then we’re done, and that’s not what Botswana wants. We aspire to be a high-income country. We want to liberate ourselves.”
Botswana has designated BWP 890 million ($65 million) from its new fiscal 2024-2025 budget for the purchase of a 24% stake in Belgian manufacturer HB Antwerp.
The deal, which it first announced in March, calls for the African country to supply rough from state-owned Okavango Diamond Company (ODC) to HB Botswana for five years. The partnership would operate in a similar fashion to HB’s previous supply deal with Lucara Diamond Corp, enabling Botswana to retain a share of the polished profits.
Lucara terminated its rough-supply agreement with HB in September, citing a “material breach of financial commitments” by the Belgian manufacturer as the reason for the split. That decision came on the heels of HB’s departure from cofounder and managing partner Oded Mansori, whom it has since reinstated to his original role.
There was media speculation late last year that the Botswana government was pressuring Lucara to reconnect with HB, and that the split could affect Botswana’s interest in the manufacturer. Lucara owns the Karowe mine in Botswana. The miner has since announced that it planned to form new supply deals with other vendors.
