[2008-09-24]  Govt rejects De Beers' retention licence application
The Botswana Government has rejected De Beers's application for a retention licence in the proposed AK 6 diamond project developed by Boteti Exploration, a joint-venture company between BSE-listed African Diamonds and De Beers, Business Today has been reliably informed.

But in an unexpected move, the government has agreed that diamonds from AK 6 will be marketed through the Diamond Trading Company Botswana (DTC Botswana) along with other Debswana production. The government had initially preferred auctioning on the open market.

African Diamonds confirmed yesterday that the Director of Mines had informed the parties that the retention licence applied for by De Beers had not succeeded.

The company's Chairman, John Teeling, said in a statement e-mailed to Business Today that the Director of Mines had informed them that the decision to reject the application was that it was not formally lodged as a mining licence application was still pending.

Teeling said African Diamonds had given this advice to De Beers prior to the latter's submission of the application in question. The rejection of this advice, among other things, prompted proceedings currently before court against De Beers and Boteti.

Teeling also said African Diamonds had been notified by De Beers that De Beers and Government had reached an agreement on the marketing of AK6 diamonds; the diamonds will be marketed through the Diamond Trading Company Botswana.

"Significant progress has been made toward agreement on the terms of a mining licence for the AK6 diamond discovery in Orapa. Earlier attempts by De Beers to defer the project were rejected by the Botswana government,"

"Difficulties with the marketing of the diamonds have been ironed out. African Diamonds is satisfied with the new agreement," Teeling said. "Final details are now being worked out to enable agreement on the terms of a mining licence to be completed by 30 September."

In the light of progress being made toward a mining licence, the directors of African Diamonds said they had agreed to seek deferment of the court case, which was scheduled for the Lobatse High Court yesterday (September 22).

"Of greater significance is the strong encouragement given by the Botswana government to the three parties involved in the AK6 mining licence negotiations by 30 September 2008, so that a Mining licence can be awarded," Teeling continued.

"Detailed discussions between the parties and state officials make African Diamonds' directors optimistic that this deadline can be reached."

De Beers said last Thursday that African Diamonds had withdrawn the case it had lodged at the High Court on July 25 against them. African Diamonds had brought an urgent application against De Beers and the Boteti joint-venture to prevent the submission by the joint venture of an application for a retention licence in respect of the AK6 project. But the case against Boteti is still pending.

De Beers said it was still fully committed to seeing AK6 come into production but that power remained a challenge. The diamond giant said discussions between the shareholders of Boteti and the authorities to contain the risk were on-going and no conclusion had been reached yet.

"We cannot overstate the challenge that the regional energy shortage presents to this project, not just from a supply perspective, but also in terms of cost, particularly in the current economic climate," said De Beers Botswana CEO Sheila Khama.

In mid-August, the Ministry of Minerals, Energy and Water Resources extended the negotiations between the partners, De Beers and African Diamonds, after the initial deadline had passed without a solution.

The Botswana government is on a campaign to transform the country from a diamond producing nation into a diamond marketing and beneficiation centre over the next ten years, ahead of a forecast sharp drop in diamond revenues. The government has a 15-percent stake in De Beers and a 50/50 partnership with the same company in DTC Botswana.

As part of this strategy, the government wants to establish a separate marketing channel for diamonds produced by new operators to be sold outside the established De Beers-DTC system.

This is understood to be a serious bone of contention. De Beers maintains that the shortfall on power poses a major challenge, hence its application for a retention licence.

If De Beers had been granted the licence, it would have maintained ownership of AK6 for another three to five years without developing the mine. De Beers used its majority stake in Boteti, the joint venture company developing AK6, to pass a resolution to apply for a retention licence.

African Diamonds unsuccessfully sought an urgent interdict in the Botswana High Court to prevent the application.


Source: © MMEGI 2002 - 2008