adminTo the southeast of the teeming herds of wildlife in the Okavango Delta in Botswana, an offshoot of the Lundin mining dynasty is extending its search for the world’s biggest diamonds.
Lucara Diamond Corp is sinking an 800-metre shaft to ensure the kimberlite orebodies at its Karowe mine keep producing the 1 000-carat-plus gems that set it apart. However, the US$550 million investment is potentially less significant than the second prong of the miner’s strategy.
That involves changing the way diamonds are sold, indirectly posing a challenge to industry giant De Beers. The unit of Anglo American, which accounts for most output in top producer Botswana, is locked in a battle with the government over how the spoils of the diamond trade are shared. While Lucara’s operations are dwarfed by De Beers, Botswana is using its sales model as a bargaining chip in negotiations with the No 1 diamond company.
Lucara sells about a quarter of its stones using a method pioneered by De Beers: cutters view packages of diamonds before bidding on them. But most of its stones — including those over 10,8 carats in size and known in the industry as specials — are sold under an agreement with HB Antwerp. For those, the company receives polished rather than rough prices and the government earns more revenue.
“The model is disruptive,” said Rafael Papsimedov, a co-founder of HB Antwerp. “It’s delivering value, transparency and data. It empowers the miner and the nation to move to the next level.”
That model is complicating the relationship between De Beers and Botswana, as negotiations over an extension of their more than 50-year partnership drag on. Botswana President Mokgweetsi Masisi in September praised Lucara’s arrangement with HB Antwerp, saying it had “enormous scalable potential.” Earlier this month, he threatened to walk away from a deal with De Beers. – Bloomberg
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