Lucara Diamond, owner of the Karowe mine in Botswana, has ended its deal to sell its largest stones to HB Antwerp, following what Lucara called “a material breach of financial commitments by HB.”
“Lucara will continue to use its established mechanisms to sell Karowe’s rough diamond production,” the company said in a statement, “namely through its Clara diamond sales platform, traditional tenders, and other value-added mechanisms for stones.”
It declined further comment. HB did not respond to a request for comment by press time.
The agreement with HB was put in place in 2020 during the tenure of former Lucara CEO Eira Thomas. In November, it was extended for 10 years. But some speculated that its future might be tenuous after Thomas resigned in August.
William Lamb, who took over as CEO after Thomas resigned, said in the Lucara statement that “the company will continue to look at innovative sales mechanisms to maximize the value of our rough diamonds.”
The Lucara–HB deal had an unusual structure: HB committed to buy all Karowe rough over 10.8 carats, and gave Lucara a percentage of the diamond’s final polished price.
But some questioned the arrangement—particularly HB’s assertion that its model delivered a 40% increase in royalties to the government of Botswana. “The diamond industry is filled with some of the brightest and sharpest traders in the world: Most are razor-sharp,” former De Beers executive Richard Chetwode wrote in a May commentary on bne IntelliNews. “No diamantaire is going to pay one company 40–45% more for a polished diamond than he can get from someone else. Get real!”
Analyst Paul Zimnisky tells JCK: “During the pandemic when the market was frozen, the deal made sense—it gave Lucara consistent cash flow. But in my opinion, it didn’t make sense to renew it for 10 years.”
The end of the Lucara partnership seems like a blow to HB, which had gained significant attention since its 2020 founding by forging relationships with not only Lucara but also Louis Vuitton, Microsoft, and the government of Botswana.
Earlier this month, HB announced that cofounder Oded Mansori was being removed from its board due to unspecified “difference in strategic vision and approaches to business.” Mansori said he was taking legal action.
It is not clear what all this means for the Botswana government’s plan, announced in March, to take a 24% stake in HB, after the company opened a massive factory in Gaborone, the country’s capital.
At a press conference on Thursday, Botswana president Mogsweetsi Masisi said his country and HB had only forged an “agreement in principle.” He said the HB deal was supposed to be signed at the end of this month—just a few days away.
“It is for us now to determine a course of action we take,” Masisi said. “There is no contract with HB.” He noted that Botswana’s new deal with De Beers is also just an “agreement in principle.”
Masisi said that the Botswana government wanted to invest in HB to better understand the downstream industry, and that HB had originally wanted the government to buy less than 24%.
“We talked them into more,” he said. “We wanted a significant stakeholding.
“Diamonds, when you invest in them, it’s not just the diamonds. It’s all the intellectual capital that goes with the value addition: the marketing algorithms, the technology, the associates that they have in marketing. We were buying the total lot…. It just made logical economic sense.
“In the world of business, things happen,” Masisi added. “There suddenly appeared to be a difference in the ownership of HB diamonds. Do you think we were surprised? No, of course not. We are adults, we know what’s going on.… And then there was a change of leadership in Lucara.”
He said that regardless of what happens with HB, “we will never not participate in the value-added space. Nothing will stop us.”
Masisi concluded: “Leave us to play our games. We will play them well for you.”
Top: the Karowe mine in Botswana (photo courtesy of Lucara Diamond)Follow JCK on Instagram: @jckmagazine
Follow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine