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52 posts from May 2005

Rio Tinto Diamonds prospecting in India

Rio Tinto Diamonds, the second biggest miner of rough diamonds in the world, plans to address a shortage of rough diamonds in India by looking for new mines in the country, reports CNBC-TV18. India is the largest market for polishing of rough diamonds.

Rio Tinto has been prospecting for mines in India for the last four years and has already spent US $ 20 million in the effort. The spend this year is pegged at around US $ 4 million. In case of the discovery of a mine from where diamonds can be extracted profitably, the capital costs may climb even as high as a US $ 1 billion.

The company is looking for mines with the hope that those will help them overtake De Beers as the biggest manufacturers of diamonds in the world in the end. “The aim is to find a mine faster and begin extraction,” Douglas Ritchie, MD, Rio Tinto Diamonds told CNBC-TV18.

India exported diamonds worth US $ 11 billion last year. Polishers of rough diamonds in the country earn their profit by reselling diamonds in the international market.


De Beer's tactics dubbed 'anti-competitive'

BRUSSELS - Antwerp diamond dealers are planning to challenge De Beers' powerful grip on the global supply of the precious stones by lodging a complaint with EU regulators against the South African giant for anti-competitive practices, says a trade association.

The Belgian Polished Diamond Dealers Association (BVGD), which represents 150 wholesalers of cut diamonds, is preparing to file the complaint within the next two weeks, its president Andre Gumuchdjian said.

The complaint will be the fourth such appeal to the European Union's executive commission, which has reopened its inquiry into a De Beers business strategy selling diamonds to a select group of trusted traders.

The aim is to "fight for the continued legal competition in the diamond market, which must remain open to everyone," he said in an open letter to diamond dealers.

Gumuchdjian accuses De Beers in particular of seeking "to eliminate independent diamond firms that are a source of competition on the market by actively encouraging jeweller-clients to get supplies solely from their sightholders".

Under a strategy known as 'supplier of choice,' De Beers encourages jewellers to buy directly from hand-picked sightholders, exclusive dealers who are able to buy rough diamonds directly from the company.

BVGD claims this practice is anti-competitive because it excludes independent dealers, who are not given the same access and must rely on sightholders for their supplies.

De Beers controls around two-thirds of the world market in rough or unpolished diamonds, which are sold to around 80 sightholders via its Diamond Trading Company (DTC) sales subsidiary in London.

Antwerp's many diamond trading houses are rife with rumours that the number could be pared down to 60 in weeks. As competition from other suppliers of rough diamonds has increased, De Beers has started to control its dealers more tightly and has begun to market its 'DTC' brand of diamonds.

In January 2003, the European Commission, which polices competition issues in the EU, investigated De Beers' supplier of choice strategy and concluded that the practice did not contravene EU competition rules.

But the commission did promise to keep an eye on the situation, and pledged to reopen the case if evidence of abuse of De Beers' dominant position came to light.

A spokesman for the competition services of the EU's executive commission said the investigation had been reopened "in the course of 2004" following three other complaints from individual diamond traders.

"We have already received several complaints against De Beers since January 2003," he said.

Despite several requests for comment to De Beers, the company was unavailable to respond.


Richmond Diamonds

Diamond Source of Virginia will be sponsoring the June "Shot in the Dark" event that is presented by Richmond.com, an online portal for activities and business in the Richmond, Virginia area.

Here is a link to the latest article for May's blind date https://www.richmond.com/locallife/output.aspx?ID=3684925&Vertical_ID=127&tier=1&position=1

I will be posting additional information about this event prior to the event kick off June 1st. My thanks to Kathy Hall of Marathon Marketing https://www.marathonmarketingva.com/ who suggested this event and is such an effective Marketing and Public Relations adviser.


Antwerp diamond dealers to bring De Beers before EU antitrust body

BRUSSELS — Antwerp diamond dealers will complain to Europe’s antitrust authority that De Beers’ sales and marketing system is crushing competition and has led to a rapid hike in prices, the dealers’ trading group said.

The president of the Belgian Polished Diamond Dealers Association said yesterday it would complain about De Beers’ “supplier of choice” scheme, through which it supplies rough diamonds to selected customers known as sightholders.

“We see less and less merchandise on the market, we notice that prices have increased 40% in the past two years, and we think that the supplier of choice strategy and all the obligations imposed by De Beers are really restricting trade,” association president Andre Gumuchdjian said.

De Beers-approved sightholders cut and polish diamonds, and sell them on to wholesalers or jewellers.

The association represents polished diamond dealers in the Belgian port of Antwerp, one of the world’s main diamond hubs.

They buy polished diamonds from manufacturers — sightholders and others — and sell them wholesale to jewellers and jewellery makers.

The European Commission, which polices competition in the 25-state European Union, cleared the supplier of choice scheme in 2003 but said it would “remain watchful” to ensure the market stayed competitive.

Gumuchdjian said the group was likely to lodge a complaint in the next two weeks.

De Beers, the world’s biggest diamond producer, is 45% owned by mining conglomerate Anglo American.

It sold $5,7bn worth of rough diamonds last year through its Diamond Trading Company.

Meanwhile, De Beers said yesterday it was reviewing the underground operations at its old Kimberley mine, which are expected to incur losses of R150m this year.

“The three Kimberley underground mines are over 100 years old and this year they are projected to incur a loss of R150m,” said Vukani Magubane, head of corporate affairs for De Beers’ South African unit.

Magubane declined to say if the unit, De Beers Consolidated Mines, might close the underground operations, but said they were nearing the end of their life as reserves became depleted.

“Let’s engage with our key stakeholders and find out how to mitigate that because it’s not a sustainable business model,” said Magubane.

The underground mines now only account for about 10% of total output at the Kimberley operation, which also comprises two treatment plants.

The review at Kimberley comes after De Beers Consolidated said in February it might have to cut 13,5% of its 9442 jobs in SA since five of seven mines were operating at a loss, mainly due to the strong rand that cuts export income.

That broader strategic review is due to conclude at the end of this month, said Magubane.

The rand strengthened more than 130% between late 2001 and the end of last year, hitting miners and other exporters since their foreign exchange earnings in dollars shrink when translated into rands.

In recent weeks, however, the rand has weakened.

Last year De Beers’ South African output increased 15% to 13,7-million carats.

Total De Beers production last year rose 7% to 47-million carats, with Botswana by far the biggest contributor with an output of 31,1-million carats.


INDIA TO BECOME INTERNATIONAL TRADING CENTRE FOR DIAMONDS

Shri Kamal Nath, Union Minister of Commerce & Industry, has said that his Ministry is working closely with the industry to develop India as an International Trading Centre for Diamonds. “Considering that we are the largest purchaser of diamond roughs in the world, there is no reason why India should not have a Diamond Trading Centre at par with the centres currently in Belgium, Israel and Dubai. We hope to have this established in the near future”, he said, while speaking at the inauguration of the International Diamond Conference – Mines to Market 2005 in Mumbai today. Shri Kamal Nath further said that the government would encourage foreign direct investment (FDI) and joint ventures between Indian entrepreneurs and businesses abroad in sectors all along the diamond chain – exploration, mining and sourcing, cutting & polishing, jewellery designing and manufacturing, exports, and sales and marketing. He underlined that enormous opportunities existed not only for FDI by foreigners in India but also for FDI by Indian industrialists in other countries.

“We are quite open to the idea of entering into economic cooperation agreements with countries, especially the countries of Africa, that ensure the supply of rough diamonds to India, while also bringing value and investment in other areas (such as transport, communications and infrastructure) to supplier countries. We should place emphasis on the promotion of forward and backward linkages, including the consolidation of our position in the small diamond sector segments, in syndicating buying of rough diamonds, and creating controlling stakes in mine-heads through joint ventures and tie-ups. We believe that only such trade is sustainable as brings value and benefit to all concerned; and we want to work on this basis”, he said.

Shri Kamal Nath also called upon investors to set up enterprises in Special Economic Zones (SEZs) dedicated to a single industry adding that “the gems and jewellery industry is best placed to take advantage of this”, now that the SEZ Act has been passed by Parliament.

Mr. Festus Mogae, President of Botswana; Ms. Phymzile Mlambo-Ngcuka, Minister of Mines & Energy, South Africa; Mr. Ingele Ifoto, Minister of Mines, Democratic Republic of Congo; and Shri Vilas Rao Deshmukh, Chief Minister of Maharashtra were among the dignitaries present on the occasion.

Referring to his recent visit to Australia in connection with meeting of the Joint Ministerial Council and Joint Business Council in Sydney and Melbourne, Shri Kamal Nath stressed that his first stop was Perth in Western Australia – the heart of Australia’s diamond mining area and said he had extensive and very promising discussions with mining companies as well as the Western Australian Prime Minister regarding continued supply of rough diamonds to India.

The cut and polished diamond segment accounts for about 75% of India’s total gems & jewellery exports. Out of every 12 diamonds in any piece of jewellery in the world, 11 are cut and polished in India. “I would not like you to treat this amazing fact as a mere statistic, but rather see it as an indication of the enormous relevance and importance of the diamond industry to the people of India”, Shri Kamal Nath said.


Diamonds: “You’re in the right market.”

James Picton, a leading diamond market analyst, presented his forecast for a shortage in the supply of diamonds at the first Diamond Mining Conference organised by stockbrokers Hargreave Hale in association with LM Associates in London this week.

Focussing on the market for rough diamonds than on the miners themselves, Picton believed that it was widely recognised that there is an immediate, and growing, shortage of natural rough diamonds (which cannot generally be substituted by either synthetic or cultured diamonds).

In 2004, Picton calculated, the value of rough natural diamond production was $11.0 billion, close to the $11.2 billion estimated by De Beers. Rough demand in 2004 was also approximately $11 billion, leaving the market broadly in balance.

He then reviewed a base case analysis from De Beers, that demand should rise by 50% between 2002 and 2012 to something approaching $14 billion in 2012. This works out at less than an average annual growth of less than five per cent and, Picton asserts, this is extremely conservative, given that during the period 1993 – 2002 growth was 6% annually. The significance of this is that it was during this earlier period that Japanese demand imploded (falling from 33% world share of demand to a mere eight per cent), Asia suffered its financial crisis of 1998 and the stock markets performed badly (2000 – 2002). If a seven per cent annualised growth rate were applied, this would take demand in 2012 to approximately $18 billion.

If supply fails to increase in step over this period (and his prognosis is that it cannot do so given that it takes five to ten years to bring on a major new kimberlite) then we are looking at a market shortfall, all other things being equal, of up to $7 billion in 2012 – equivalent to roughly two De Beers! Note that the Russian and De Beers stockpiles, which at times in the 1990s were supplying up to $1 billion of diamonds in a year, are depleted.

Last year, De Beers increased the price of rough diamonds by about 14% and free-market prices increased by around 20%. Picton postulated that to bring the market into balance over the next seven years, prices will have to rise by 30% in real terms over the period.

Read the rest of the story at https://www.mineweb.net/sections/gems/443158.htm


'Diamonds not our best friend'

Gaborone - Botswana, the world's biggest diamond producer, was over-dependent on the crystal and therefore vulnerable, President Festus Mogae told an international diamond conference in Mumbai on Tuesday.

Diamonds accounted for four fifths of Botswana's export revenues.

"Trying to construct an advanced and sustainable economy on such a narrow platform is no easy task," he said as he explained government policy on the future of the industry in Botswana.

"We hope to strike an appropriate balance between competing policy objectives," he said, but Botswana would not, at this stage, impose any fiscal or other penalties on the export of rough diamonds, or compel domestic beneficiation.

Mogae is on a five day official visit to India. He returns to Botswana on Saturday.

"I wish to correct the popular misconception that diamonds have transformed Botswana into a land of Mammon (the worldly rich)," Mogae said.

"If we are fortunate, this year our diamond revenues will be at the level of $1.75bn, which is less than the turnover of some of the major corporate players in the industry. Dividing this by our one and three quarter million citizens, gives a per capita income of just over two dollars a day - the international benchmark for those living in poverty!"

It should come as no surprise that many Batswana criticised his government for permitting the export of rough diamonds.


HIGH SECURITY FOR DIAMONDS

The priceless De Beers Millennium Star diamond will go on display at the National History Museum next month.

The 203 carat gem was unveiled in 1999 at the Millennium Dome, where it was the target of a foiled robbery the following year.

It has not been on public display in the UK since.

Tight security will be in force for the world's biggest ever diamond exhibition, being held at the London museum from July 8 to February 26.


2 AMENDMENTS PROPOSED FOR CANADA'S ROUGH DIAMONDS ACT

The Honourable R. John Efford, Minister of Natural Resources Canada, has introduced a bill in the Senate to ensure that Canada meets its obligations under the Kimberley Process Certification Scheme by proposing two amendments to the Export and Import of Rough Diamonds Act. The Export and Import of Rough Diamonds Act is under the authority of the Minister of Natural Resources and serves as the legal foundation to implement the Kimberley Process in Canada. Several modifications brought forward to improve the effectiveness of the process at the Kimberley Process plenary meeting held in Gatineau, Quebec, in October 2004. mean that amendments are required to the Act to ensure that Canada remains compliant with the international agreement.

The first amendment will allow Canada to publish Kimberley Process Certificate-based trade statistics, aligning Canada's methods with those of other international participants. The second amendment will clarify the size of diamonds subject to the Kimberley Process.

“The Government of Canada is committed to the Kimberley Process, which is helping build greater transparency and accountability in the international diamond trade. This bill will help Canada meet its international obligations under this agreement, ensuring the smooth trade of legitimate diamonds and supporting Canada's burgeoning diamond industry in the North,” says Minister Efford.


Demand for diamonds soaring ahead of supply

A large increase in global demand for diamonds will force prices up by a third in the next few years, it is predicted. Either that or the market will face a $3 billion supply shortage by 2012.

James Picton, an analyst at WH Ireland, will warn an international diamond conference at the London stockbroker Hargrave Hale that demand will rise by at least 50% by 2012, to $14 billion.

This is equal to the combined annual production of Russia and Botswana, the world’s biggest diamond producers. Meanwhile, reserves in Australia and Canada are declining.

As a result, prices for rough diamonds, from which gems are cut, will go up by at least 30%. Although much of this will be absorbed by companies that act as middlemen in the diamond trade, the price of gemstones will inevitably rise.

“You have supply going up by 1% a year on average, and demand going up by at least 5% a year,” he said. But that was a conservative estimate and the real increase in demand could be much higher.

“There are going to be other mines coming on stream, but nothing like another $3 billion worth. That’s almost another De Beers. It’s just not going to happen,” he said.

Demand was being driven by both the industrial and commercial markets, while there had been a massive new increase in demand for gemstones in China and India, Picton said.