Okavango Seeks $300M Credit to Expand Diamond Purchases

Okavango Diamond Company (ODC) is aiming to secure $300 million in bank loans to fund larger purchases of rough, according to Botswana’s finance minister. 

The move comes in light of the new sales contract between the Botswana government and De Beers, which allocates a greater proportion of goods to ODC, the country’s state-owned rough trader. 

ODC currently receives 25% of run-of-mine production from Debswana, the government’s 50:50 joint venture with De Beers. This is poised to reach 30% in the short term under the new deal, and eventually 50%. 

However, the Gaborone-based trading company can currently only afford purchases of up to $70 million, using its own cash reserves, Finance Minister Peggy Serame told the country’s National Assembly on Thursday. 

The company has appointed Standard Chartered Bank to structure and coordinate a new $300 million credit facility to support purchases of larger volumes from DTC Botswana, the unit that sells Debswana diamonds to De Beers and ODC, she added. The facility will be for one year, with the lenders retaining an option to extend it annually. 

Previously, ODC had a 10-year revolving working capital facility with Standard Chartered Bank Botswana that had a capital limit of $140 million, secured by a $100 million guarantee by the government. 

ODC never needed to use this guarantee, but its existence helped the company secure favorable pricing terms, said Serame. She has asked the government to increase this to $175 million and extend it for 10 years. 

“Notwithstanding that ODC has efficiently managed its operations and built up a strong balance sheet over time in order to independently secure funding in the open market, the prevailing credit market conditions are rather adverse,” the minister said. 

The extension of the guarantee would “crucially support ODC’s increased entitlement of 30% of Debswana’s rough supply, as well as assist the company in negotiating favorable rates in the local market on a new working capital facility,” he added.

Image: Rough diamonds. (Okavango Diamond Company)