Diamond War in South Africa Forces DTC to Postpone Sight (Updated)

A diamond war has erupted In South Africa and as a result, rough diamond sales have come to an abrupt halt.

South African rough diamond buyers are facing a new reality, as a number of developments are currently taking place:

• De Beers postponed the South African Diamond Trading Company (DTC) Sight by one week from September 22 to September 29, which coincides with the Jewish New Year.
• The DTC’s South African Sightholders have been informed that their Sights will only contain goods of South African origin. As only 20 percent (by value) of the South African production is economically cuttable in South Africa, the total allocation to all South African Sightholders is expected to be limited to about $25-$30 million.
• The delay stems from held rough diamond shipments worth some $200 million that are destined to London. The South African government apparently insists that De Beers pays a 15 percent export duty on these goods.
• The State Diamond Trader (SDT) agreed to buy $3.8 million worth of rough diamonds from De Beers. After the goods were selected, prices were agreed, and invoices were prepared the SDT reneged on the deal.
• Alexkor held a rough diamond tender worth some $15-$20 million. The SDT cancelled the tender claiming that it should have had the right to pick goods first, before the tender was finished. Alexkor is rescheduling its tender.
• A Trans Hex rough diamond tender was scheduled, cancelled and rescheduled amidst uncertainty.
• The Diamond and Precious Metals Regulator will hold an emergency board meeting next week. The professional future of either SDT Chief Executive Abbey Chikane or Chairperson Linda Maketini is expected to be up for discussion.
• Companies which have bought goods from the SDT have problems in exporting their purchases; Thursday night there was a general feeling that no rough is leaving the country.
• The South African government seems to have concluded that it was a mistake to have the SDT purchase run-of-mine production, and it wants De Beers to sell the SDT economically cuttable goods to the tune of 10 percent of the total value of production, which the diamond miner refused.
• Government is now making demands on De Beers to sell, through the DTC Sight system, non-South African goods to the SA Sightholders – something it did in the past. Apparently, De Beers wants to sell only “South African footprint” goods.
• None of the other problems around licensing or access by foreign DTC Sightholders to see their goods seem to have been resolved. The system seems to have broken down and government appears to be at war with the country’s main producers.

In an initial reaction, a De Beers spokesperson just confirmed that the South African Sight is being delayed by a week and when it goes ahead, it will consist of “unaggregated” goods from the De Beers Consolidated Mines (DBCM) production.

(Last update Friday September 12, 2008 6:36 am)