The Botswana government has been instrumental in ensuring that the lucrative diamond mining industry was able to sell to the market, despite the impact of the Covid-19-related disruptions.

The Botswana economy relies heavily on the diamond industry, as it is a major source of income for the country.

As such, government intervened to facilitate processes for the industry to ensure that companies could still sell diamonds to the market and export them before the major lockdowns.

Diamond mining company Lucara Botswana usually holds its diamond tenders locally in Botswana, where customers can view diamonds in person, to determine bids; however, pandemic-related restrictions made holding tenders in Botswana unfeasible.

“We were then allowed to take our diamonds out of the country, which demonstrates government’s commitment to facilitate business, specifically in the mining industry, because of the impact it has on the economy,” explains Lucara Botswana MD Naseem Lahri.

Lucara had to facilitate its own flights to transport the diamonds, owing to restricted flights during the initial stages of lockdown, but exporting the diamonds became easier three to four months into the lockdown as the airspace started opening up.

Consequently, diamonds could also be sent to diamond manufacturer HB Antwerp, in Belgium, with which Lucara has a supply agreement to cut and polish their high-quality “special” diamonds – those greater than 10.8 ct in size. Under this agreement, Lucara receives the polished revenue for those stones, less a fee and the cost of manufacturing.

Meanwhile, the company mitigated challenges with assistance from government, especially with regard to procurement.

To assist the diamond industry, the borders remained open for the movement of goods, and government facilitated procurement requirements prioritising the requirements of the diamond industry.

“If we had any shipments or requirements for our production line, for example, on the procurement side, such as anything getting stopped at the borders, we were able to communicate with the respective Ministries to release those items,” Lahri explains.

Into the Future

In 2022, Lucara will focus on progressing the underground development of the Karowe mine, a key project at an operational level, which will increase the life-of-mine to at least 2040. The development is on track to meet the milestones stipulated by the project timeline.

The miner is also focused on growing its online sales platform, Clara Diamond Solutions.

Currently, Lucara sells its product on three platforms: through tender, Clara and a supply agreement with HB Antwerp.

Before the pandemic, Lucara sold its product through quarterly tenders and continues to do so, but only those diamonds that do not qualify for sale through HB Antwerp or Clara are sold through the tenders.

Further, the supply agreement with HB Antwerp allows for diamonds larger than 10.8 ct in size, appropriate for manufacturing (cutting and polishing), to be sold as polished, with government receiving 10% of the revenue made in royalties.

“The arrangement is the first of its kind in Botswana, where a foreign company is actually adding value to our raw product – both the local miner and its host country benefit from those sales,” explains Lahri.

Diamonds between 1 ct and 10 ct from Karowe, in the better colours and qualities, qualify to be sold on Clara, a digital sales platform linked to blockchain that enables customers to establish provenance.

Lahri describes this process as unique because diamonds are sold through a “blind bid”, where interested parties put in a bid without being influenced by the bids of other parties. Orders are placed based on the polished parameters the customer requires. The rough diamonds are sold individually, enabling customers to buy the diamond/s of their choice.

Lucara is open to using new technology to improve its business practices. This is evident through the Clara platform, which prevents groups of customers from coming together and purposely making low bids to reduce the price of the diamonds, she adds.

“We were seeing a contraction in terms of our pricing for the large stones because there was a specific group of people [buying] those stones, [which enabled] them to collude to reduce pricing,” explains Lahri.

Lucara’s three different sales channels enable the company to get the maximum possible price for its product, which, in turn, also benefits government. The miner hopes to open Clara to other producers in the industry and secondary market participants, so that more supply can be added to the platform.

The tracking of provenance through the platform is an important component, as it has become key to consumers, particularly Millennials and Generation Z, who tend to value provenance.

Through HB Antwerp and Clara, customers can trace from where the diamonds were sourced, from the point of extraction to the manufacture of the end-product, Lahri concludes.