ODC follows De Beers into supply contracts
Brian Benza | Wednesday December 4, 2013 15:34
Currently, the fledgling state-owned diamond company only sells through auctions. “We recognise the value to the market of committed supply arrangements and it has always been our intention to introduce fixed term contracts alongside
our regular auction sales. We intend to analyse various fixed term options and we will endeavour to introduce our fixed term contracts in 2014,” Deputy Managing Director Marcus ter Haar told Mmegi. In 2013, the company is entitled to 12% of rough supply from Debswana, the joint venture between De Beers and the Botswana government, which is expected to increase to 15% by 2016.
According to a 2011 agreement, ODC sells government’s share of Debswana’s production, 10% of which was available retroactively from the beginning of 2011. The share will increase by 1 percent each year until it reaches 15% in 2016. Debswana targets to produce 20 million carats this year and ODC will, as a result, be entitled to 2.4 million carats. ODC was established as a key part of Botswana’s plans to establish diamond trading and other diversified diamond-related activities in the country. The decision by ODC to venture into contract sales will see the state owned company competing directly with De Beers, which sells 90% of its $6 billion a year supply to handpicked, contracted buyers (sightholders).
De Beers recently moved its sales operations from London to Gaborone as part of the 2011 sales agreement with government.
ODC currently sells via 10 online spot auctions per year, having launched commercial sales in October. The goods are available for viewing in Gaborone for two weeks before the auction closes, and bidding is conducted online via the company’s website. Okavango sells about 250,000 carats of rough per auction with projected annual sales of about $400 million (P3.4 billion). He said that contract sales will run alongside the company’s auction sales, but didn’t confirm how much would be sold by either method.
“As we are at the inception stage of this process, further developments will be communicated in due course,” added ter Haar.
Okavango’s management recently visited various trading centres across the globe to invite customers to participate in its sales. Okavango’s next sale is scheduled for the end of January 2014.