De Beers has developed and operated more diamond mines than any company in history.
De Beers is the world’s leading diamond mining company. With more than 100 years of experience in building and operating diamond mines in southern Africa, and more than 40 years in Botswana specifically, De Beers has developed and operated more diamond mines than any company in history. De Beers is opening three new mines in 2008 and is aggressively pursuing the new production required to meet forecasted demand for diamonds in the decade ahead.
Diamond mines are capital intensive, long-term projects, and it is essential that all decisions regarding investments in the operations are made in-line with the long-term interests of all stakeholders and the countries in which the mine is built.
In response to the recent statement from African Diamonds, we wish to make the following points of clarification:
- As the majority shareholder and operating partner in Boteti, De Beers is enthusiastic about the potential of AK6 and remains fully committed to seeing it come into production
- The Boteti board, on which the three shareholders – De Beers, African Diamonds and Debwat all have representation, passed a resolution at the July 14th board meeting to apply for a retention license for the AK6 project, as, in the short-term, the project economics and sustainability are impacted by the ongoing southern African energy issue
- While De Beers would like to see AK6 come into production as soon as possible, the substantial 30% reduction in supply of power by Eskom to Botswana over the next three to four years, has resulted in the reduction in power available to Botswana’s consumers, which includes mining projects like AK6. The critical phases of the development of the AK6 mine are in 2009 and 2010, when power is expected to be most restricted. Current projections show that the shortfall in power supply is not expected to be resolved before the middle of 2012, at the earliest
- Developing a mine while knowing that there is not enough power available would contravene our responsibility to build a sustainable mine, ultimately impacting shareholders, employees and other stakeholder
- It is inaccurate and misleading to say that Wati (1% stakeholder in Boteti) is supportive of African Diamonds’ position, as is indicated in African Diamonds statement. They are not African Diamond’s assertion that, “…one of the terms of the Mining License requires the diamonds from AK6 to auctioned…” is inaccurate. The terms of the mining license continue to be discussed by Boteti and the GRB and it is likely that the diamonds will be marketed through the De Beers / GRB joint venture, the DTC Botswana. This will support employment in Botswana and the Government’s aspirations of building a value-adding cutting and polishing industry in the country. In any event, De Beers believes that the outstanding issues between Boteti and the GRB in obtaining the licence for AK6 will be resolved
- While not related to the need to file for a retention licence, it is important to note that the claim that significantly higher prices could be achieved by auctioning diamonds in Botswana is fundamentally false and demonstrates a worrying lack of experience with diamond distribution and valuation
- African Diamonds recently approached De Beers with an offer to purchase its 71% stake in Boteti, for $40 million plus a profit participation, which African Diamonds characterised as a generous offer. At the time the market capitalisation for African Diamonds was $120 million. On this basis De Beers may consider an offer for African Diamonds’ share (representing 28%) on a similar valuation methodology. De Beers assumes that the African Diamonds’ Directors would recommend this offer to their shareholders
- We note that African Diamonds apparently believes that Boteti should breach its contracts with De Beers by breaking its marketing agreement entered into at the formation of the joint venture. De Beers has met its obligations with regard to the agreement by fully funding the exploration and evaluation expenditure of AK6. As an important shareholder in African Diamonds, De Beers considers the attitude exhibited by the management of African Diamonds to be a matter of some concern
- African Diamonds has commenced legal proceedings against Boteti and its fellow shareholders in Boteti (Debot, Debwat). De Beers will defend its position
Building diamond mines requires a thorough and long-term view about the impact of the capital investment and the operation on shareholders, employees, and the country as a whole.
AK6 will provide many benefits to all its stakeholders, but only if the project is managed with a prudent and realistic approach to important issues such as power. Southern Africa is in the midst of serious energy issues. De Beers has experienced firsthand the impact of these energy shortages at its operations throughout southern Africa, and it is therefore working to ensure that the AK6 project is not impacted in the same way. Delaying the project so that production commences in 2012 / 2013 - or sooner if the power situation improves - is the right way to maximise the benefits of AK6 for the Boteti shareholders, other stakeholders and the citizens of Botswana.
Contact:
De Beers Botswana
Charmaine Muir-Revaka
Tel: +267 361 5231
Mob: +267 71321785
charmaine.revaka@debeersgroup.com
De Beers UK
Lynette Gould
Tel: +44 207 430 3509
Mob: +44 (0)7740 393260
lynette.gould@debeersgroup.com
About De Beers
De Beers, established in 1888, is the world’s leading diamond company with unrivalled expertise in the exploration, mining and marketing of diamonds. De Beers, and its joint venture partners, operate in 25 countries across five continents employing around 20,000 people. From its mining operations across Botswana, Namibia, South Africa, Tanzania and Canada, De Beers produces and markets approximately 40 percent of the world’s supply of rough diamonds. As part of the company’s operating philosophy, the people of De Beers are committed to Living up to Diamonds by making a lasting contribution to the communities in which they live and work. De Beers encourages sustainable working to ensure long-term positive development for Africa, and returns approximately US$4.7 billion to the continent every year. For further information about De Beers visit www.debeersgroup.com.