Examining diamonds at the Botswana Diamond Trading Company. (Photo courtesy of Botswana DTC)
CHANGING LANDSCAPE FOR THE DIAMOND INDUSTRY
But the diamond industry going into the new round of negotiations is greatly different to the one that existed a decade before, and the implication is that Botswana is consequently unlikely to enjoy the same type of upgrade in its international status that it did in 2011.
Global rough diamond production is expected to peak over the coming two years, and then decline in volume by about 1 and 2 percent each year through 2030. And, even if a new major deposit is uncovered in the next 18 months, this would be unlikely to change the picture, because typically it takes more than eight years for a mine to come on-stream, from point of discovery to full-scale production.
In the meantime, Botswana’s still considerable diamond resources are being depleted, although there are sufficient deposits underground to maintain some leverage over De Beers for the next 10 years. But, unlike the strategic gains that Botswana managed to achieve in previous agreements with De Beers, such as increasing it stakes both in the De Beers itself, as well as in its Debswana subsidiary, not to mention the transfer of the sorting and sales operation from London to Gaborone, this time efforts are more likely to focus on investments in the mining operations themselves.
Diamond mining in Botswana. (Photo courtesy of Botswana DTC)
Jwaneng, the world’s richest mine that is owned and operated by Debswana, will require a massive investment in infrastructure to extend its life to 2034, and more expenditure is required at Debswana’s Orapa mine to extend its life beyond 2030. Open-pit operations have already ended at the Letlhakane Mine.
A coup for Botswana would be obtaining De Beers’ agreement to move mining operations underground.
NEW AGREEMENT MAY REVEAL DE BEERS’ MASTERPLAN
De Beers’ readiness to accede to Botswana’s demands will provide a good indication of its intentions moving into the 2020s and beyond, and with that the likely direction of the diamond business. In particular it may reveal the diamond producer’s masterplan for a business dealing in both natural and synthetic materials.
In late May, De Beers announced that it would be launching a company called Lightbox Jewelry, which would begin selling online a new brand of laboratory-grown diamond jewelry, at prices would be reportedly 75 percent lower than those being charged for similar goods by other man-made diamond producers. De Beers also announced that it would be investing $94 million over four years in a production facility near Portland, Oregon, in the United States, which will be operated by its synthetic diamond subsidiary, Element Six. Once fully functioning, the plant will be capable of producing upwards of 500,000 carats of laboratory-grown diamonds each year.
An article published by industry pundits Chaim Even-Zohar and Pranay Narvekarin in August suggested that, over the long term, De Beers plans on blurring the distinction between natural and synthetic goods. Given the falloff in rough diamond output, synthetics will come to assume a larger part of the pie, they suggest.
De Beers did not respond directly to the article, nor is it likely to. However, it strategy for contract negotiations with Botswana over the coming months may indicate where it is headed.
Laboratory-grown diamonds by De Beers. (Photo courtesy of Lightbox Jewelry)