Botswana issues three new diamond licenses

Botswana government has issued three new diamond licenses. The decision to hand out the licences undermines a list of potentials recently presented by De Beers. Botswana is De Beers� largest supplier of rough diamonds and is the largest producer in the world by value.

Following an exhaustive process six candidates with no sight or allocation in southern Africa - a requirement imposed by De Beers on its sightholders last year which bars them from having more than one sight in a producer country. The restriction to allow sightholders to have only once sight in a producer country has angered Botswana officials as it excludes De Beers� largest players with sights in SA from investing in Botswana in return for rough supplies. By granting two of the three licenses to sightholders with sights in SA, the Botswana government has ignored the condition set by De Beers on its clients, highlighting the power shift that is taking place.

�This is a strong signal from the Botswana government that they are independently going to decide about the future of their own industry,� said one industry source. �It is a very courageous move.� Last year�s negotiations with the Botswana government for the renewal of the Jwaneng and Orapa�s 25-year leases, two of the most profitable diamonds in the De Beers portfolio, resulted in Botswana slashing its contribution to De Beers� profits from these mines.

Previously, Botswana was believed to provide over 70% of the profit within De Beers group diamond account. De Beers also agreed to relinquish its London-based distribution system and move sorting and sales to Gaborone once the infrastructure is ready. Anglo American, 45% owner of De Beers, is understood to want to increase its stake in the company when the management contract with the Oppenheimer family expires in 2007.