Botswana’s Role in Lucara’s Diamond Marketing Agreement Renewal. Lucara Diamond Corporation has renewed its marketing partnership with HB Antwerp, a decision influenced by the Botswana government’s interests. Despite previous financial disagreements with HB Antwerp, Lucara proceeded with the renewal.
The Botswana government holds a 24% stake in HB Antwerp and had plans to increase this holding under former President Mokgweetsi Masisi. Following recent elections, Duma Boko of the Umbrella for Democratic Change coalition has assumed leadership. While Masisi had been assertive in his dealings, Boko has adopted a more conciliatory approach towards foreign-owned diamond mining companies. He recently finalized a new marketing agreement with De Beers, expected to closely mirror the preliminary deal established in 2022.
Despite the change in leadership, Lucara’s CEO, William Lamb, anticipates that President Boko will encounter similar economic challenges, especially given the prolonged downturn in the global diamond market. Diamonds are crucial to Botswana’s economy, accounting for 80% of exports, one-third of fiscal revenue, and a quarter of the country’s GDP, as reported by the International Monetary Fund in July.
In December, Gem Diamonds CEO Clifford Elphick expressed concerns about “inappropriate sales” originating from Botswana, suggesting that goods, possibly from HB Antwerp, were saturating the market at prices that competitors couldn’t match. Lamb acknowledged the challenges of operating through a single channel, noting that while HB Antwerp’s manufacturing facilities are advanced, the firm lacks a broad distribution network. He remarked that relying on a limited customer base can lead to market saturation and decreased stone values.
The global diamond market’s current stagnation exacerbates these challenges. China, the world’s second-largest diamond market, remains a significant drag on global demand. Lamb observed that an influx of polished goods returning from China is adding to the available stockpile, further impacting prices. In response, De Beers has reduced its production guidance by up to 40% and is preparing for a significant impairment in its 2024 financial results, partly due to these market conditions.
