[miningmx.com] — De BEERS’ decision to shift its entire diamond marketing operation from London to Gaborone by the end of 2013 will have serious negative consequences for South Africa’s diamond cutting and polishing sector.
That’s the opinion of Rockwell Diamonds CEO James Campbell and AllanHochreiter partner James Allan, who is consulting to Rockwell and is a former top-rated diamond analyst.
Campbell worked for De Beers for 20 years before leaving to become MD of Botswana diamond explorer African Diamonds in 2006.
Under Campbell’s guidance African Diamonds successfully developed the AK6 kimberlite project in northern Botswana to the stage where the company was taken over by TSX-listed Lucara Diamond Corporation in December 2009.
Campbell stayed on as vice-president at Lucara to complete the development of the AK6 mine before joining Rockwell in June this year.
Interviewed after a presentation to fund managers in Johannesburg on Wednesday, Campbell said Botswana would dominate because of the sheer volume of diamonds that would be made available to local cutters as well as the ease of doing business in that country.
In terms of the deal struck between De Beers and the Botswana government in September, the ten annual “sights’ held in London at which De Beers has traditionally marketed its diamonds will now be held in Gaborone.
In addition, the Botswana government has negotiated the right to sell through its own marketing channels 10% of the run-of-mine production from the country’s mines rising to 15% over a five year period.
The Botswana mines dominate De Beers’ production and accounted for nearly 70% of the 33m carats that De Beers mined in 2010.
On that basis the Botswana government will initially have some 2.3m carats to sell annually on its own account. The Botswana government’s strategic aim is to promote the local cutting and polishing of diamonds as well as the local manufacture of retail diamond jewellery.
A major diamond cutting and jewellery manufacturing hub has already been set up in Gaborone immediately adjacent the airport and the huge new DTC (Diamond Trading Company) building that De Beers has already built there.
“In the long-term these developments in Botswana are going to kill the South African cutting and polishing industry,” said Allan.
Campbell commented: “The best place in the world to go for rough diamonds in the future is going to be that diamond hub in Gaborone where you will get access to Botswana’s diamonds as well as production from other countries.
“The terms for doing business in Botswana are also very clearly set out and implemented. You do not have to deal with issues such as the interpretation of some of the legislation.
“You also have ease of access to government officials. If you need to talk to the minister or the director-general you can phone them and they will talk to you. If required, you can also readily arrange direct meetings which they will attend and on time.”
The South African cutting and polishing industry is already in decline despite the creation of the State Diamond Trader (SDT) in 2007, which was supposed to increase the supply of rough diamonds to local cutters and polishers.
The SDT was set up with help from the Industrial Development Corporation and De Beers which seconded key technical staff to the organisation at start-up.
But in March last year David Noko, the retiring MD of De Beers Consolidated Mines, said the SDT was “a mess”.
“It needs to be fixed and I believe government is committed to fixing it,” laying the problem with the bureaucracy within the SDT.
“The emphasis must be placed on efficient access to diamonds, whereas at the moment the emphasis in the SDT sits on legal compliance issues and issues around the operation of the government diamond valuator.
“They need to get rough diamonds to the buyers. It will be fixed.’
According to diamond industry sources, the SDT is still not fulfilling the role it is supposed to in making rough diamonds available to local cutters.
