This week De Beers announced that diamonds which will be purchased from the current Sight of 2019 which is the third and runs from April 1 to 5, and onwards, where customers can refer to stones purchased from the giant mining company as “diamonds from DTC” across the value chain down to the end-consumer level.
According to De Beers, Sightholders and Accredited Buyers will be able to use the “diamonds from DTC” provenance claim across the value chain down to the consumer level, and will be able to provide assurance on its validity through certifying the claim under the Responsible Jewellery Council standards, or through an independent third-party audit. The “diamonds from DTC” provenance claim will add glitter to the ever sparkling Botswana’s diamond-led development story. Diamonds from Botswana contribute to 27 percent or US$ 4.4 billion of the GDP.
In Botswana De Beers has four companies in diamond business; De Beers Holdings, Debswana, Diamond Trading Company Botswana and De Beers Global Sightholder Sales. De Beers Holdings is the exploration arm and is currently focused on early stage exploration programmes in Tsabong, Orapa, Palapye and Kang. Debswana, a 50/50 joint venture between De Beers and the Government, is the primary producer of diamonds in Botswana.
The Diamond Trading Company Botswana, also a 50/50 joint venture between De Beers and the Government, sorts and values the rough diamonds mined by Debswana. De Beers Global Sightholder Sales is responsible for selling the bulk of De Beers’ global production to its rough diamond customers, known as Sightholders. In 2013, De Beers moved this international sales operation from London to Gaborone, resulting in growth in the volume of diamonds traded in Botswana to about US$6 billion, leading to a boost to employment, as well as downstream and other support services.
“We are proud of where our diamonds are discovered, how we recover them responsibly and the role our activities play in building thriving communities. By enabling our customers to share the source of origin of our diamonds, we hope to drive further transparency throughout the diamond value chain,” said De Beers Group CEO Bruce Cleaver this week.
According to De Beers, the “diamonds from DTC” provenance claim will offer greater significance than many other industry provenance claims, as it not only states corporate provenance, but is also supported by the provision of sustainability performance and transparency information on each of the mines of origin
Diamonds from DTC Botswana journey
Exploration of diamonds is done entirely by De Beers. Mining or production is done at Debswana, a 50/50 joint venture between De Beers and the Government, which owns mines: Jwaneng, Letlhakane, Orapa and Damtshaa. Thirteen percent of Debswana production is made available by Okavango Diamond Company, a rough diamond distribution entity which is 100 percent owned by Botswana government. Most of the Botswana diamonds are transferred to De Beers Global Sightholders Sales.
De Beers Global Sightholders Sales sells around 90 per cent of De Beers’ rough diamonds by value, via term contracts to customers known as Sightholders, at events called Sights. Rough diamonds from these mines will then be sorted and valued by the Diamond Trading Company Botswana (DTC Botswana) another 50/50 Joint Venture partnership between the Government of the Republic of Botswana and De Beers.After being valued and sorted by DTC Botswana, rough diamonds will then be sold to Sightholders or Accredited Buyers-these are a select group of clients which are certified by De Beers to be demonstrating high financial integrity and sufficient demand for rough diamonds.
In Botswana there are 20 Sightholders who have established cutting and polishing diamonds in Gaborone. De Beers sell rough diamonds through ‘Sights’ to these Sightholders or Accredited Buyers. Rough diamonds can also be sold via online auction sales. Sights which comes after every five weeks and last up for a week, the coming one slated for April 1 to 5(third one of this year), are held 10 times a year in Botswana (and Namibia and South Africa), where customers will inspect their rough diamond allocations before deciding whether to purchase them. Diamonds will then be cut and polished by diamentaires before being sold to jewelers and other retailers around the world.
Skepticism dresses the 3rd Sight
Towards the current Sight which ran this week, diamond experts around the world expected rough diamond prices to drop to drop 1 percent to 2 percent in the first half of 2019. These analysts also expected the prices to recover then end 2019 flat. London based analyst Kieron Hodgson told diamond publisher Rapaport that prices rose to 2 percent last year due to a strong first half, but the market slowed in the second half. According to Hodgson, production rose over the last two years and this led to supply outweighing demand especially in smaller categories.
According to Rapaport Weekly Market Comment, sentiment weakens after soft first quarter and dealers are avoiding large inventory purchases, and manufacturers on the other hand are reducing supply. The publication says miners are bracing for tough year as first-quarter sales decline an estimated 30 percent “Rough market under pressure, with some analysts optimistically predicting flat rough prices in 2019. Sightholders hoping profit margins will improve after next week’s sight,” says the comment.
Jewelers International Showcase
As a biggest diamond producing country backed by De Beers which is a big player in the industry, Botswana diamonds end products are expected to be among ones to be exhibited at the Jewelers International Showcase(JIS)-the second largest jewelry show in the Wstern Hemisphere. The JIS is slated for April 16-18 at the Miami Beach Convention Centre in the state of Florida, USA.
The Surat trade mission
Many diamantaries are expected to converge at the Indian city of Surat where they will be provided with an unprecedented opportunity for members of the diamond and jewelry trade to meet and interact with the diamond cutters, dealers and market makers in the world’s largest diamond cutting center. Surat is home to an estimated 500,000 diamond cutters, who manufacture over 90 percent of the world’s polished diamonds. The trip to Surat will be on April 8 to 11.
Botswana Stock Exchange (BSE) moved swiftly this week to suspend BBS Limited from trading its securities following a brawl between Board of Directors and Managing Director, Pius Molefe, which led to corporate governance crisis at the organisation.
In an interesting series of events that unfolded this week, incumbent board Chairperson, Pelani Siwawa-Ndai moved to expel Molefe together with board Secretary, Sipho Showa, who also doubles up as Head of Marketing and Communications. It is reported that Siwawa-Ndai in her capacity as the board Chairperson wrote letters of dismissals to Molefe and Showa.
Following receipt of letters, the duo sought and was furnished with legal opinion from Armstrong Attorneys advising them that their dismissals were unlawful hence they were told to continue to report to work and carry out their duties.
Documents seen by BusinessPost articulate that in the meeting which was held on the 1st of April, the five outgoing board members, unlawfully took resolutions to extend their contracts by a further 90 days after April 30 2021 as they face tough competition from five other candidates who had expressed interest to run for the elections.
Moreover, at the said meeting, management explained that neither management nor the board have the authority to decline nominations submitted by shareholders or the interested parties which is in line with Companies Act and also BBS Limited constitution.
Molefe also revealed that as management they cautioned the board that it was conflicted and it would be improper for it to influence the election process as it seems they intended to do so. “Nonetheless, in a totally unprecedented move in the history of BBSL, the board then collectively passed the unlawful resolutions below. Leading to the illegitimate decisions, the board had brazenly directed that its discussions on the Board elections should not be recorded totally violating sound corporate governance,” reads the statement released by management this week.
When giving their legal advice, Armstrong Attorneys noted that notice for the AGM should state individuals proposed to be elected to the board and directors have no legal authority to prevent the process.
Armstrong Attorneys also noted that, “due process” cited by board members are simply to ensure that the five retiring Directors avoid competition from interested candidates to be appointed to the BBS Limited board. The law firm further opined that the resolution of the 90 day extension of term of the five directors pending re-election or election was unlawful.
Molefe expressed with regret that BBS has been suspended from trading by BSE until the current matter has been resolved. “I am concerned by this development and other potentially harmful actions on the business. As management, we are engaging with stakeholders to mitigate any negative impact on BBS Limited,” expressed a distressed Molefe.
He assured shareholders and the rest of Management that they are working very hard to ensure that the issues are being dealt with in a mature manner. BBS which hopes to become the first indigenous commercial bank has seen its shares halted barely four months after BSE lifted the trading suspension of shares for BBS following submission of their published 2019 audited financial statements.
According to Chief Executive Officer (CEO) of the local bourse, Thapelo Tsheole said the halting of shares of BBSL is to maintain fair, efficient and orderly securities trading environment. “The securities have been suspended to allow BBS to provide clarity to the market concerning the recent allegations which have been brought to the attention of the BSE relating to the company’s Board of Directors and senior management,” said Tsheole.
Meanwhile in their audited financial statements for the year ended 31 December 2020, BBS recorded a loss of P14.6 million as at 31 December 2020 compared to the loss of P35.7 million for the comparative year ended 31 December 2019. According to Molefe the year under review was the most challenging for the bank, its shareholders and customers endured the difficult economic environment and the negative impact of the coronavirus.
He revealed that as the bank, they were forced to put in place several measures to ensure that the business withstands the impact of coronavirus and also to cushion mortgage customers from the effects of the pandemic. “Since April 2020 up to the end of December 2020, BBS assisted 555 mortgage customers with a payment holiday,’’ he said.
This is the bank whose total balance sheet declined by 12 percent from P4, 626 billion for the year ended. 31 December 2019 to P4, 088 billion as at 31 December 2020. As if things were not bad enough, total savings and deposits at the bank declined by 14 percent from a balance of P2, 885 billion as at 31 December 2019 to P2, 494 billion as at 31 December 2020.
On a much brighter side, BBSL mortgage loans and advances improved from P3, 401 billion to P3.408 billion with impairment allowance significantly improving to P78, 648 million from P102, 532 million for the year under review, representing a positive variance of 23 percent. BBS maintained a strong capital base with capital adequacy ratios of 26.32% for the year ended 31 December 2020.
Molefe was optimistic and anticipated a positive outcome during the implementation of the new BBS corporate strategy, whose main drive is commercialization of operations, which is in full force. “It will be spurred on by the positive results we have achieved for the year ended 31 December 2020, and our planned submission of our banking license application to Bank of Botswana which we anticipate to operate as a commercial bank in the third quarter of 2021,” he alluded.
Chief Executive Officer (CEO) of Premium Nickel Resources Botswana (PNRB), Montwedi Mphathi, has said his company will resuscitate the formerly owned BCL assets and deliver a new, sustainable and cutting edge mining operation.
The new mine which will leverage on modern and next generation technology, will be environmentally sensitive and cognisant of the needs of its people and that of the communities around the area of influence.
In a statement last week, Premium Nickel Resources Botswana and its parent company, the Canadian headquartered Premium Nickel Resources announced that they have now completed the Exclusivity Memorandum of Understanding (MOU) with the Liquidator.
The MOU will govern a six-month exclusivity period to complete its due diligence and related purchase agreements on the Botswana nickel-copper-cobalt (Ni-Cu-Co) assets formerly operated by BCL Limited (BCL), that are currently in liquidation.
On February 10, 2021, Lefoko Moagi, the Minister of Mineral Resources, Green Technology and Energy Security of Botswana, affirmed in Parliament a press release by the Liquidator for the BCL Group of Companies, stating that PNR was selected as the preferred bidder to acquire assets formerly owned by BCL.
“This is encouraging for the company and for Botswana. Our ambition in this new project dubbed “Tsholofelo” is to redevelop the former BCL assets into a modern, environmentally sensitive, efficient NI-Cu-Co-water producer where sustainability and the people are at the forefront of the decisions we make,” said Mphathi in a statement last Thursday.
“We also understand that no matter how successful we are at building the “New BCL” , our success will only be measured at our ability to create local wealth , skills and support the continued transition of local economy to a longer term sustainable base.”
The next step during the exclusivity period will be the completion of the definitive agreement. Simultaneous to this the PNRB will be conducting additional investigative work on site to further its understanding of the potential of these assets.
Specifically the company will complete an environmental assessment, a metallurgical study, a review of legal and social responsibilities, a review of the mine closure and rehabilitation plans and an on-site inspection of the legacy mining infrastructure and equipment that has been under care and maintenance.
Mphathi said they continue to monitor the global Covid-19 developments noting that they are committed to working with health and safety authorities as a priority and in full respect of all government and local Covid-19 protocol requirements. PNRB has developed Covid-19 travel, living and working protocols in anticipation of moving forward to on site due diligence.
“We will integrate these protocols with the currently applicable protocols of Ministry of Health & Wellness as well as District Health Management Team ( DHMT) and surrounding communities,” reads a statement released by the Gaborone based Premium Nickel Resources team.
PNRB is looking to become a catalyst in participating and building a strong economy for Botswana, with a purpose where respect and trust are core to every single step that will be taken. “Our success will mean following international best-in-class practices for the protection of Botswana’s environment and the focus on its people, building partnerships and earning respect, through cooperation and collaboration,” explains PNRB on its website.
“We are committed to Governance through transparent accountability and open communication within our team and with all our stakeholders.” Mphathi, a former BCL Executive, is widely celebrated for achieving unprecedented profitability at the mine during his tenure as General Manager.
The Serowe-born mining guru obtained a Diploma in Mining Technology from Haileybury School of Mines in Canada. He later obtained a B.Eng. Mining degree from the Technical University of Nova Scotia. Mphathi went on to City University in London, UK and obtained a M.Sc. in Industrial and Administrative Sciences.
Before ascending to the top country managerial role of Premium Nickel Resources. Mphathi was General Manager of Botswana Ash (Botash), Southern Africa’s leading salt and soda ash producer. He was at some point linked to Debswana top post, which is still to date not substantively filled following the death of Managing Director, Albert Milton, in August 2019.
With Mphathi out of the race and now leading the rebuilding of his former employer, the top post at De Beers- Botswana joint venture is likely to be filled by current acting Managing Director Lynette Armstrong, a seasoned finance executive with unparalleled experience in the extractive industry.
“We are happy to hear that former General Manager of BCL, Mr Montwedi Mphathi, has a relationship with the new Company that intends to resuscitate the mine, he is an experienced Mining Executive who knows BCL better, we want the mine to be brought back to life so that our people can be employed ” said Dithapelo Keorapetse Member of Parliament for Selibe Phikwe West recently in Parliament.
BCL was liquidated in October 2016 following a series of losses and government bailout occasioned by low Copper prices and allegedly poor Investment decisions and maladministration. Recently PNR CEO, Keith Morrison said his team of seasoned experts both from Canada and Botswana are committed to resuscitate the BCL assets and deliver a high performance mining operation.
“The World, Botswana and the mining industry have changed dramatically since mining first started at the former BCL assets in the early 1970s. The nickel-copper-cobalt resources remaining at these mines are now critical metals, required for the continued development of a decarbonized and electrified global economy,” he said.
Morrison added: “As we move forward, it is our goal to demonstrate the potential economics of re-developing a combination of the former BCL assets to produce Ni-Cu-Co and water in a manner that is inclusive of modern environmental, social and corporate governance responsibilities.”
He explained that to attain this, extensive upgrades to infrastructure will be required with an emphasis on safety, sustainability and the application of new technologies to minimize the environmental impact and total carbon footprint for the new operations.
“Our team remains committed to working with the local communities and all of the stakeholders throughout this period and we encourage anyone with questions or feedback to reach out to us directly,” he noted.
Lucara Diamond Corporation, the Canadian 100% owners of iconic Karowe mine, this week announced the extension of its supply deal with Belgian diamond midstream giant HB Antwerp.
The definitive supply agreement is in respect of all diamonds produced in excess. of 10.8 carats in size from its rare gem producing Karowe diamond mine located in the Boteti district of Botswana. Large, high value diamonds in excess of 10.8 carats in size account for approximately 70% of Lucara’s annual revenue.
Though the Karowe mine has remained fully operational throughout the COVID-19 pandemic, Lucara made a deliberate decision not to tender any of its +10.8 carat inventory after early March 2020 amidst the uncertainty caused by the global crisis.
Under the terms of this novel supply agreement with HB, extended to December 2022, the purchase price paid for each +10.8 carat rough diamond is based on the estimated polished outcome, determined through state of the art scanning and planning technology, with a true up paid on actual achieved polished sales thereafter, less a fee and the cost of manufacturing.
“Lucara is beginning to see the benefits of this strategy in accessing a broader marketplace and delivering regular cash flow based on final polished sales,” said Lucara CEO, Eira Thomas on Wednesday.
“We believe these early results warrant an extension of the arrangement for at least 24 months to determine if superior pricing and market stability for our large, high-value diamonds can be sustained longer term.”
The Canadian junior miner initiated a supply agreement with HB for large stones from its Botswana Karowe mine in July 2020, after pausing its tenders shortly after the Covid-19 pandemic began. The deal enables Lucara to sell the rough diamonds to HB at a price based on an estimate of the polished outcome, which the companies determine using diamond scanning and planning technology. Once HB sells the goods, it adjusts the price that Lucara receives based on the actual selling price of the polished, minus a fee and manufacturing costs.
The extended supply deal will follow the same payment terms as the initial agreement, and will be in effect through to December 2022. Lucara said in a statement this week that the agreement also provides increased tax revenue and beneficiation opportunities for the government of Botswana, and creates a streamlined supply chain for Karowe’s rough.
“More than a supply agreement, this collaboration structurally embeds a new transparent and sustainable way of working in the diamond-value chain,” said HB CEO, Oded Mansori. “For the first time, different partners of the value chain are fully aligned, sharing data and information throughout the process from mine to consumer.”
Mansori added: “We are truly proud with this innovative and straightforward collaboration that has proven itself through the volatile and uncertain reality of 2020. We are confident to achieve even better results during the term of this new contract and demonstrate the power of a true partnership.”
Lucara, which early this year secured extension of Karowe mining license to 2040, announced over P2.4 billion funding for Karowe underground mining expansion project a fortnight ago. The Vancouver headquartered top large diamond producer says this supply agreement deal extension with HB will bring about regular cash flow for Lucara using polished pricing mechanism. Furthermore, the company says the deal has potential revenue upside, particularly suited for Lucara’s large, exceptional diamonds.
In the main, Botswana will benefit increased tax revenue and additional beneficiation opportunities for the Government and communities around Karowe mine. A streamlined supply chain that achieves alignment between Lucara and HB to maximize the value of each +10.8 carat diamond produced at Karowe.