Cut 9 deal triggered early talks with De Beers � Kebonang

Brian Benza | Friday June 30, 2017 17:21

The Mineral Resources, Green Technology and Energy Security minister, Sadique Kebonang told the media on Tuesday that due to the commitment that De Beers has pledged to invest in the Cut 9 Project, the two parties have agreed to begin negotiations for the extension of their 10-year marketing and sales agreement, which is due to lapse in 2020.

“Cut 9 will be a big investment by De Beers requiring a huge capital outlay. Because of this commitment, we have agreed to start negotiations for the next marketing and sales agreement early. Instead of waiting for 2018, we decided to start renegotiations now.

We should be able to start Cut 9 in the next two to three years,” Kebonang said without elaborating how much Cut 9 would cost or how long it will extend the Jwaneng Mine lifespan by.

The previous expansion of the Jwaneng Mine (Cut 8), which Debswana started in 2010 at a cost of $3 billion, targets to uncover 100 million carats of diamonds between 2017 and 2024.

“The early start of negotiations is a way of providing security to De Beers for the funds they are going to commit in the Jwaneng expansion project.  We also expect these negotiations to go over a long period of time, that’s why we have decided to start early,” Kebonang said.

The current sales and marketing agreement, which ends in 2020, secured a new 10-year contract for the sorting, valuing and sales of diamonds from Debswana’s mines by DTC Botswana, and transferred the sorting, aggregation and sale of more than $6 billion of annual rough diamond sales to the office in Gaborone. 

The deal also allowed Botswana to sell 15% of its production directly to the local market. Appearing before the Public Accounts Committee (PAC) recently, acting permanent secretary in the Ministry of Mineral Resources, Green Technology and Energy Security, Obolokile Obakeng said they were at preparatory stage with a steering committee having been set up by the ministry to conduct the negotiations.

“It will take us about eight months to prepare ourselves for the renegotiations.  We have set up a steering committee and we also have to come up with a technical committee. 

We first have to understand the markets and compare with the current arrangement which expires in three years’ time,” Obakeng said. Apart from the sales and mining agreement, De Beers also holds mining licences in Botswana with the Jwaneng one expiring in 2027.

Debswana is expected to produce about 20.5 million carats this year. Thanks to new exploration and recovery technologies, the lifespan of Debswana mines is now expected to stretch up to 2050 from an initial forecast of 2030.