Nigel Kieser, De Beers Moscow Office Director exclusive interview to Rough&Polished.
De Beers Office in Moscow (background by R&P):
Opened in September 1992 to represent De Beers interests in Russia and the CIS, is managed by the central holding company De Beers JS (Luxembourg). Currently the Moscow Office has a staff of 19 employees. Nigel Kiezer is the Office Director since December 2006.
The Office current responsibilities include:
- support of diamonds acquisition under the Trade Agreement with ALROSA.
- geological survey issues: on September 6, De Beers and ALROSA signed the Memorandum for Cooperation that covers various aspects of joint activities, including diamond prospecting in Russia, review of geological survey options in Russia and Ukraine;
- assistance in exchanges of technical and operations experience between ALROSA and De Beers (for instance, De Beers experience in underground kimberlitic mining);
- research programs with world renowned higher educational institutions;
- public relations: De Beers relationships with partners in Russia and the CIS, including federal and regional Government agencies, technical institutes, etc.;
- social responsibilities: financial aid in higher educational institutes equipment, internships for students specializing in technical sciences;
- sponsorship of arts, charity aid.
- What are, in your view, diamond industry, both in Russia and worldwide, major trends? There is an opinion that soon there will be a downturn in world diamond production that will also affect the cutting and jewelry industry.
- This is a very good question. Diamond industry representatives have been pondering it during the last 5 years, understanding that a drop in diamond mining volumes will without doubt affect the global situation.
I believe that question may be answered in the following way: there are 5 major diamond mining facilities in the worldв, including Udachny, Zhvaneng, Orapa, Vinicia and Argail. Those are major providers of rough diamonds during the last several dozens of years. I believe that those largest diamond producing facilities will switch to underground mining during the next 10-20 years. And any mining engineer will tell you that a switch to underground mining entails certain difficulties due to which it would be difficult to maintain current production rate. We have new projects in Canada – such as Snap Lake and Victor, which, we hope, will become operational as early as next year. Those are, of course, wonderful projects, but they will be unable to compensate the volume of production at Udachny, Zhvanenga, Orapa and Venicia. That’s why major diamond producing companies are concentrating their efforts on geological surveys in order to discover new fields that in time may be developed into large diamond production facilities like Udachny, Zhvaneng or Orapa. Those discoveries may occur in Yakutia or Angola, or in any other country.
- Another intriguing issue is the issue of stocks. Many will like to know whether De Beers has diamond stocks for “the rainy day”?
- De Beers corporate structure has changed during the last 10 years. This process began back in 1998-1999, when De Beers started to review its «Buyer of the last resort» strategy that provided for the acquisition of all raw material unsold on the market. Now with the strategy change the Company implements the «Supplier of choice» Project, that is why stocks are maintained at an operational level necessary to hold about 10 sights per year.
There are other issues of concern to all diamond industry members. First, the is the issue of maintaining the attractive image of diamonds, the solution of “conflict diamonds” issue in the framework of the Kimberly Process, encouragement of consumer demand, and with regard to that the issue of synthetic diamonds is extremely important. When buying a diamond the consumer has the right to know whether he is buying a natural stone or a synthetic one.
Аnd, of course, there always will be the issue of competition with other luxury items producers. The restructuring of our marketing strategy is tied to the need to encourage consumer demand for diamond jewelry.
- Is it true that De Beers is opening a jewelry store in Moscow?
- Well, first of all I would like to say that it is not De Beers but rather De Beers Diamond Jewelry – a joint venture of De Beers and Louis Vuitton, this is an independently managed company. I may confirm that De Beers Diamond Jewelry indeed intends to open a store in Moscow.
The store opening is expected before the end of this year.
- Tell us, please, what are your responsibilities.
- I will tell you first about myself and then about the Company major goals and objectives. First of all, I would like to mentioned that I am a geologist and worked before for Rio Tinto. My previous job responsibilities included development of Rio Tinto geological prospecting activities in Russia. I am facing a similar task at De Beers. I already have some experience in this field but a lot has yet to be learned. As for the Company goals in Russia, one should note that before De Beers was engaged here primarily in the acquisition of rough diamonds. It is known, that those acquisitions started back in 1959. Nevertheless, during the last 50 years the Company made several attempts to get involved in geological surveying and production. One may remember the Lomonosovsky Project in 1998-1999 as well as the Luzhsky Project in Leningrad oblast in 2003-2004. At the same time, while there was some geological survey activities, our major efforts were still concentrated on trade activities. In 2005 the situation has changed due to the European Commission decision that requires De Beers to stop buying rough diamonds from ALROSA by 2009. The European Commission may appeal that lower court decision and I’ve heard that it actually did so. Until all legal issues are cleared we would buy rough diamonds in line with the European Commission decision. Regardless of the final ruling with regard to the acquisition issue my major responsibility now is the implementation of geological survey projects.
- You’ve probably been to Moscow before your appointment last winter. Is it easy to work in Russia?
- Of course I’ve been to Moscow since I was working for Rio Tinto, which started its operations here since 2002. I’ve been to Russia several times, took part in gold mining projects, in diamond production projects in Karelia. This is really a good question, whether it is easy for a Western company to work in Russia where so many things are unpredictable and unregulated – probably, it is not easy.
- And when it comes to trade cooperation?
- It should be noted that the trade agreement is still very important for us and before the end of 2008 we are to buy almost half a billion dollars worth of diamonds – that is why this is also a priority issue for our operations. I’m very interested in everything that has to do with rough diamonds sorting and sales. I hope our sorting experts from ЕСО will one day let me participate in the sorting process and get to know their work. I will be very much interested.
- Is there anything symbolic behind the fact that a geologist has now been appointed to De Beers in Russia rather that an appraiser as your predecessor has been?
- In fact I have not been practicing practical geology for a long time and it will be wrong to say De Beers has sent me here as a geologist. I’ve been appointed to this position due to my experience in setting up a foreign company geological survey activities in Russia.
- Where have you studied?
- I’ve studied in Britain, at the Imperial College Royal School of Mines.
- You’ve recently been to Yakutia. Did you like it?
- Very much! I have not been there before and I was very much impressed by what I saw, although we’ve been just to Udachny. Our visit coincided with the June 12 Independence Day and we were lucky – we’ve seen the concert, we liked very much the small kids performance. I thought I would have liked very much my own kids singing like that. The visit was a success from the business viewpoint as well, we were very well received by the mining and processing complex Director Yuri Petrov, we discussed a number of various issues with his colleagues at a high professional level, the meeting was very friendly and open. We hope that visit was useful to our colleagues in ALROSA to the extent it was useful to us. I would be glad to see other mining facilities in Yakutia.
- We would like to know the current condition of that long story with Griba field in Archangelsk? Is there any progress?
- First of all, I would like to say that the issue is dealt with by the Archangel Diamond Corporation (ADC), in which De Beers owns some 60%. Hence, questions with regard to Griba field should be addressed to the ADC external relations department. The Company 2006 Annual Report says the Company tries to settle this conflict in the interests all parties involved and the shareholders. As you know, court proceedings are under way in Stockholm. meanwhile, ADC is ready to settle this issue by way of negotiations. I am, of course, holding to the opinion that the issue should be settled as soon as possible. The history of any field does not end with its discovery – it is necessary that the field is developed, then it may be rated as a success.
- What are De Beers Moscow Office plans?
- First of all, we intended to hold some events in connection with the new office opening. Although, of course, there is no way it may be compared with the opening of a jewelry store opening in terms of scope or significance. Furthermore, De Beers continues to be involved in sponsorship activities. We’ve been supporting for a few years now the UNESCO Foundation in the framework of the Books for Little Blind Kids Project. And, certainly, we would continue to implement charity projects in Moscow and other regions, where we have any activities.
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