Namibia in Talks to Sell Diamonds Separately From De Beers

Jul 04, 2014 12:03 pm ET

(Updates with increase in output in sixth paragraph.)

July 4 (Bloomberg) -- Namibia, which produces the world’s highest quality diamonds from the floor of the Atlantic Ocean, is negotiating to sell some of the gems separately from an agreement it has with Anglo American Plc’s De Beers unit.

The government is setting up a company to sell part of the diamonds mined by Namdeb Diamond Corp., the joint-venture it owns equally with De Beers, Mines and Energy Minister Isak Katali said in a telephone interview from the capital, Windhoek, yesterday. The project, emulating an initiative by neighboring Botswana, depends on a deal with De Beers, he said.

“For the company to operate, there has to be an agreement with De Beers,” said Katali, adding that Namibia won’t initially want to market 50 percent of Namdeb’s production. “We are being guided by the Botswana example.”

Botswana’s Okavanago Diamond Co. started selling 13 percent of the country’s gems in December, after De Beers agreed to a new 10-year marketing pact. Namibia expects negotiations on setting up the new diamond company to be completed by December, said Katali. The Orange River formed the world’s richest marine- diamond deposit by laying down an estimated 80 million carats of gems off the coast of Namibia.

Namibia is also renegotiating its diamond-marketing agreement with De Beers, which expired in December.

Price Target

Namdeb is seeking technology to mine deposits trapped in gulleys at depths of as much as 50 meters to extend operations beyond 2050, De Beers said in April. The company’s output increased 6 percent to 1.76 million carats last year, with two- thirds of that coming from marine-mining operations.

De Beers is overhauling how it sells diamonds by picking customers based on their financial strength and track records as buyers at earlier offerings. The company has sought to increase prices to meet parent Anglo American’s target for returns. A London-based spokesman for De Beers declined to comment.

Namibia’s marine diamonds sell for $450 to $700 per carat, at least triple the price of gems from neighboring Botswana and as much as 14 times those from Zimbabwe, the country’s Diamonds Commissioner Kennedy Hamutenya said in March. Botswana is the world’s biggest diamond producer.

--With assistance from Thomas Biesheuvel in London.