(Ecofin Agency) - Since its discovery in 1905, the Cullinan diamond has held the title of the largest diamond in mining history. However, in recent years, the biggest diamonds have been found in Botswana, specifically at a mine owned by Canada's Lucara Diamond.

This week, Lucara announced the discovery of a 2,492-carat diamond from its Karowe mine in Botswana, making it the second-largest diamond ever found. The news, shared on August 21, was not unexpected for those familiar with the diamond industry, as the Karowe mine already has a strong reputation.

This afternoon, Lucara Diamond Corporation had the distinct honor of presenting the largest diamond ever recovered in Botswana to His Excellency, Dr. Mokgweetsi E. K. Masisi, President of the Republic of Botswana. pic.twitter.com/96rXfmFb96

— Brand Botswana (@OfficialBrandBW) August 22, 2024

Botswana's President Mokgweetsi Masisi officially presented the diamond, the latest of five diamonds over 1,000 carats discovered at Karowe since 2015. That year, Lucara found the 1,109-carat Lesedi la Rona, the fifth-largest diamond in the world and a type IIa diamond, known for its exceptional clarity and rarity.

In 2019, Karowe made headlines again with the discovery of a 1,758-carat diamond named Sewelô, meaning "rare find" in the local language. This diamond was the second-largest ever found until the recent discovery of the 2,492-carat stone.

TheDiamondLoupe: LucaraDiamond LouisVuitton & Antwerp diamond manufacturer join forces to polish 1,758ct rough diamond called "Sewelô", the largest rough diamond recovered in the last century, in Botswana. Read more: https://t.co/MVhoe9AxPA BWGovernment pic.twitter.com/AgFiggNEOJ…

— STPL, Surat (@STPL_Global) January 16, 2020

The last two diamonds over 1,000 carats from the Karowe mine were found in 2021 and 2023, weighing 1,174 and 1,080 carats, respectively. Other significant finds at Karowe include a 998-carat diamond in 2020 and an 813-carat diamond, known as Constellation, discovered in 2015.

Why this success?

In addition to the Karowe's potential, Lucara credits its success to an X-ray detection technology called Mega Diamond Recovery, installed at the mine in 2017. The firm uses the technology to find and secure large diamonds, reducing the risk of breakage during the mining process.

This has helped Lucara become a key player in Botswana's diamond sector, though it contributes less than 1% to the country's total diamond production. In 2023, Karowe produced 395,134 carats, a small fraction of Botswana's overall diamond output. Although Lucara owns 100% of the Karowe mine, it pays a 10% royalty to the Botswana government and is subject to a variable income tax rate ranging from 22% to 55%

Botswana, a land of big diamonds

Botswana is the world's leading diamond producer by value and the second largest by volume. It mostly owes this status to its partnership with De Beers, which helped the country produce 24.7 million carats in 2023, accounting for 98% of its total output.

LARGEST DIAMOND EVER RECOVERED BY DEBSWANA

The 1,098.30 carat diamond was recovered on 01/06/2021 from the south kimberlite pipe at Jwaneng mine.

It is the largest gem quality diamond in the company’s history since diamonds were discovered in Botswana in 1967.

DEBSWANA this pic.twitter.com/CiFA6tIX7P

— DumaFM (@DumaFMRadio) June 16, 2021

De Beers has also helped establish Botswana's reputation as a source of large diamonds. In 2021, the Jwaneng mine, part of the Debswana joint venture between De Beers and the government, produced a 1,098-carat diamond. In total, seven of the ten largest diamonds in history have come from Botswana.

However, South Africa remains the leader with the Cullinan diamond, discovered in 1905 and weighing 3,106 carats. This remarkable stone was later cut into several smaller diamonds, some of which are now part of the British crown jewels.

How much does Botswana gain from its diamonds?

Botswana earned $3.5 billion from diamond exports in 2023. Diamonds represent 80% of the country's exports and about 30% of its GDP.  Diamonds also account for a third of the Botswana government's tax revenues.

De Beers, Botswana's leading diamond producer, is the main revenue source in the diamond sector. In 2023, the Anglo-American subsidiary renewed its partnership with the government for another 10 years, with better terms for Botswana. Under the new agreement, Botswana's national diamond trader, Okavango Diamond Company (ODC), will receive 30% of Debswana's production, against 25% before. This share will increase over the decade, reaching 50% by the end of the agreement.

Diversification, a must

Diamonds play a significant role in Botswana's economy, but their fluctuating market can create challenges for the authorities. Since the COVID-19 pandemic and the subsequent crisis in the diamond market, Botswana has been working to diversify its economy, particularly in the mining sector.

Diamonds are not forever. It’s time for #Botswana to find a new #development model. Read the article https://t.co/JatflQbV7O pic.twitter.com/wjlQM8r8XQ

— IMF (@IMFNews) September 9, 2018

De Beers promised to set up an economic development fund with an initial investment of 1 billion pulas (around $75 million). The amount could grow to 10 billion pulas over the next 10 years. Additionally, a copper industry is emerging, highlighted by China's MMG acquiring a copper mine for $1.9 billion last year.

Despite these efforts, the local economy still heavily relies on diamond mining. The African Development Bank (AfDB) expects economic growth to rise from 2.7% in 2023 to 4.0% in 2024, driven by a recovery in diamond sales. Last year, the sector faced a significant drop in demand and prices due to a slowing global economy.

The pan-African institution emphasized in its country report published in July 2024 that “for Botswana to succeed in diversifying away from diamonds, it must reduce government involvement in economic activities to allow the private sector to grow.”

Emiliano Tossou