BUILDING ON DIAMONDS is the world’s richest diamond mine by value. Damtshaa and Letlhakane mines are operated as part of the Orapa Mine complex. SORTING AND VALUING Diamond Trading

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  • BUILDINGON DIAMONDS

    1.

    Botswanas President, His Excellency Ian Khama, after being appointed as the Southern African Development Community (SADC) chairperson during the 35th SADC ordinary summit of heads of state and government in Gaborone on 17 August 2015.

    T U R N I N G F I N I T E R ES O U R C ES I N TO E N D U R I N G O P P O RT U N I T Y

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    1 . B U I L D I N G O N D I A M O N D S

    The modern history of Botswana is closely linked to the story of diamonds. This, in turn, is linked to the story of the Partnership, formed in 1969 between the Government of Botswana and De Beers.

    These intertwined stories are captured in Figure 1, which shows the close relationship between Botswanas GDP growth from the 1970s onwards (above the horizontal axis) and the growing supply of diamonds produced by Debswanas mines (below the axis). Over nearly five decades, the Partnership has recovered 708 million carats of diamonds. The more the Partnership has mined, the more it has supported Botswanas socio-economic development.

    The yellow line shows that, over this time, Botswana has improved its score in the United Nations Human Development Index, a composite statistic of life expectancy, education and income indices, and a broad measure of human development.

    De Beers was established as a diamond mining company in South Africa in 1888, following the Kimberley diamond rush. Today, De Beers is the largest diamond producer in the world by value (approximately 34 per cent),3 and it is active in the exploration, mining, sorting, valuing, sales, marketing and retailing of diamonds employing nearly 23,000 people worldwide.4 De Beers has mining operations in Botswana, Canada, Namibia and South Africa.

    T H E M O R E T H E PA RT N E RS H I P H AS M I N E D , T H E M O R E I T H AS S U P P O RT E D B OTSWA N AS S O C I O - EC O N O M I C D E V E LO P M E N T.

    500XIncrease in nominal GDP growth since 1960

    40,000,000

    30,000,000

    20,000,000

    10,000,000

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    8

    16

    12

    0

    0

    Orapa Regime (Orapa, Letlhakane and Damtshaa mines)

    Jwaneng Mine

    GDP US$

    (billions)

    Carats

    HumanDevelopmentIndex

    1.00

    0.6

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    HDI

    GDP

    1967: DE BEERS GEOLOGISTS DISCOVER DIAMONDS AT ORAPA

    1969: DE BEERS BOTSWANA MINING COMPANY (BMC) FORMED AS A PARTNERSHIP BETWEEN THE GOVERNMENT OF BOTSWANA (GRB) AND DE BEERS

    1987: BMC TAKES A 5% SHAREHOLDING IN DE BEERS

    1992: BMC RENAMED DEBSWANA DIAMOND COMPANY

    2001: DE BEERS DELISTEDAND PRIVATISED. GRB TAKES A 15% INTEREST

    2006: GRB AND DE BEERS ESTABLISH DIAMOND TRADING COMPANY BOTSWANA (DTCB), A 50/50 JOINT VENTURE BETWEEN GRB AND DE BEERS

    2008: OPENING OF DTCB WITH MORE THAN 3,000 NEW LOCAL MANUFACTURING JOBS CREATED IN BOTSWANA

    1971: FIRST OF THE JWANENG KIMBERLITES DISCOVERED

    2013: DE BEERS MIGRATES INTERNATIONAL SALES FUNCTION TO BOTSWANA

    1 9 6 0 s 1 9 7 0 s 1 9 8 0 s 1 9 9 0 s 2 0 0 0 s 2 0 1 0 s

    F I G U R E 1 : G D P, H U M A N D E V E LO P M E N T A N D CA R ATS E X T R ACT E D

    10 11Source: World Bank (2015) and United Nations Development Porgramme (2014)

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    2006GRB and De Beers form a 50/50 partnership to sort and value Debswanas production

    2008DTCB opens

    1 . B U I L D I N G O N D I A M O N D SCONT INUED

    The footprint of the Partnership in Botswana has expanded over time.

    Together, De Beers and the Government established Debswana, then the De Beers Botswana Mining Company, as a joint venture in 1969. The Government held 15 per cent of the company at its founding, increasing its shareholding to 50 per cent in 1975. The name of the company became the Debswana Diamond Company (Pty) Ltd (or Debswana) in 1992.

    From mining, the Partnership extended operations down the value chain. In 1971, the Botswana Diamond Valuing Company was formed as a 50/50 joint venture for the sorting and valuing of Debswanas diamonds. This was replaced in

    2006 with the formation of Diamond Trading Company Botswana (DTCB) (a 50/50 joint venture) in order to provide a regular supply of diamonds for local manufacture by Sightholders and further domestic diamond beneficiation. In 2008, DTCB opened the largest and most sophisticated rough diamond sorting and valuing facility in the world.5

    The most recent development in this story of increased participation in the diamond value chain was the relocation of De Beers international sales function De Beers Global Sightholder Sales (DBGSS) to Gaborone from London at the end of 2013.

    The activities of the Partnership companies, and the flow of diamonds through their operations, are depicted in Figure 2.

    ROUGH DIAMOND SALES

    F I G U R E 2 : T H E O R GA N I SAT I O N A L ST R U CT U R E A N D ACT I V I T I ES O F T H E PA RT N E RS H I P I N B OTSWA N A

    ANGLO AMERICAN PLC 85%

    THE DE BEERS GROUP OF COMPANIES

    GOVERNMENT OF THE REPUBLIC OF BOTSWANA 15%

    D E B E E RS H O L D I N G S B OTSWA N A(100% De Beers)

    EXPLORATION

    DTC B OTSWA N A(50% GRB 50% De Beers)

    G LO BA L S I G H T H O L D E R SA L ES(100% De Beers)

    D E B SWA N A D I A M O N D C O M PA N Y(50% GRB 50% De Beers)

    PRODUCTION

    T H E G OV E R N M E N T H E L D 1 5 P E R C E N T O F D E B SWA N A AT I TS FO U N D I N G , I N C R E AS I N G I TS S H A R E H O L D I N G TO 5 0 P E R C E N T I N 1 9 7 5 .

    Botswana parliament building.

    1955De Beers begins exploration activities in Botswana

    1969GRB and De Beers form a 50/50 partnership (later to become Debswana) to mine Botswanas diamonds

    2013De Beers relocates its global aggregation and sales function to Botswana, holding its first global Sight in Gaborone

    2003First Sightholder factory opens

    2014Forevermark concession opens in Maun

    CONSUMERS

    PA RT I C I PAT I O N T H R O U G H O U T T H E D I A M O N D VA LU E C H A I N

    EXPLORATION MINING SORTING AND VALUING AGGREGATIONMANUFACTURING & BRANDS

    1950s 1960s 1970s 1980s 1990s 2000s 2010s

    Note: The Governments 15 per cent ownership was not included within this study.

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    F I G U R E 3 : T H E P I P E L I N E I N B OTSWA N A F R O M E X P LO R AT I O N TO M A N U FACT U R I N G

    1 . B U I L D I N G O N D I A M O N D SCONT INUED

    E X P LO R AT I O NCurrently, De Beers exploration activities in Botswana are focused on early stage exploration work programmes in Tsabong, Orapa, Palapye and Kang.

    M I N I N GDebswana operates four open-pit mines in Botswana: Orapa, Damtshaa, Letlhakane and Jwaneng. Jwaneng is the worlds richest diamond mine by value. Damtshaa and Letlhakane mines are operated as part of the Orapa Mine complex.

    S O RT I N G A N D VA LU I N GDiamond Trading Company Botswana (DTCB) sorts Debswanas diamond production by size, colour, clarity and shape in line with around 12,000 price points on rough diamonds.

    AG G R EGAT I O N A N D SA L ESThirteen per cent of Debswanas total production is made available to the Okavango Diamond Company, a wholly Government-owned rough diamond distribution company, established in 2012.

    The majority of Debswanas production is transferred to De Beers Global Sightholder Sales. Here, Botswanas diamonds are combined with rough diamonds from De Beers Group mines in Canada, South Africa and Namibia. This aggregated production is then prepared in bespoke assortments for the worlds leading diamantaires known as Sightholders either to be cut and polished internationally or locally in Botswana to support beneficiation.

    M A N U FACT U R I N G A N D B R A N D SThe first Sightholder factory opened in Botswana in 2003, with 20 currently operating. Here, rough stones are cut and polished, then sold on to jewellery manufacturers and others.

    Forevermark, the diamond brand from The De Beers Group of Companies, is available in more than 1,600 retail stores across 34 markets. In August 2014, the first Forevermark concession in Botswana was opened at Maun International Airport.

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    Angola All others

    Russia DRC Botswana Australia Canada

    South Africa

    VALUE (US$ BILLIONS)

    F I G U R E 4 : R O U G H D I A M O N D P R O D U C T I O N B Y M A I N P R O D U C I N G C O U N T R I E S , 2 0 1 3 A N D 2 0 1 4

    8

    16

    12

    4

    0

    20

    Source: De Beers Diamond Insight Report (2015)

    20142013

    +6%VOLUME (MILLION CARATS)

    50

    100

    150

    020142013

    -3%

    1 . B U I L D I N G O N D I A M O N D SCONT INUED

    These assortments are at the heart of De Beers sales model, in which the majority of its rough diamond customers called Sightholders qualify for three-year supply contracts for the supply of a specific profile of diamonds.

    Since the end of 2013, De Beers Sights international rough diamond sales events held 10 times per year have taken place at a newly-built facility in Gaborone. In addition to its global supply contracts, De Beers also sells rough diamonds to customers with factories in Botswana for cutting and polishing in-country, thereby supporting the development of a domestic cutting and polishing sector.