Gareth Penny, addressing the Third International Rough Diamond Conference in Tel Aviv, posed four questions:
What has the diamond industry achieved over the past decade?
What are the current challenges facing the industry?
How might the industry respond?
How will De Beers respond?
Addressing the issue of industry achievements, Gareth highlighted the fact that over the past ten years, both supply of rough diamonds and demand for them had been growing. De Beers’ own production in carats had risen from approximately 30 million carats in 1999, to 50 million carats in 2007. The company’s safety record had improved considerably over this period to the extent that De Beers was now one of the best performers in the industry in terms of ‘lost time injuries’. There had also been significant technological achievements in both the upstream and downstream industry. Demand had been growing for most of the period at some 4-5%, driven by emerging new markets and developing diamond brands, but perhaps the greatest achievement of the industry had been the determination with which it had tackled reputational issues, and in particular the implementation of the Kimberley Process, in the face of the conflict diamond challenge.
Turning to the current challenges, Gareth highlighted the need to find new diamond deposits, given the flat forward looking supply curve predicted in the industry. Other upstream challenges included input cost rises, availability of power in southern Africa, and the need to successfully implement producer beneficiation strategies.
These challenges were taking place against the backdrop of deteriorating economic performance in many countries, a weaker dollar and liquidity pressures being experience by downstream players. Gareth also focused on the need to improve retail performance and the danger of ‘discount’ marketing, particularly when faced by ever more sophisticated competition from luxury goods.
Against these challenges, Gareth suggested ways in which the industry could respond, including greater focus on new markets, in particular India and China, ways to improve consumer experiences at retail, the need for collective industry diamond jewellery marketing and new concepts which could improve liquidity. There would also be a continued need to focus on enhancing the reputation of the diamond business.
De Beers in turn had a clear vision and strategy for the future. It would remain focused on exploration in order to find and develop new mines. It had a number of new projects under development, including two new mines in Canada, two in South Africa, and one project awaiting approval in Botswana. Mining operations that no longer fitted its long term strategy were being turned over to emerging mining companies. The Diamond Trading Company, the distribution arm of De Beers, was being transformed to allow for greater alignment with producer countries and in order to ensure a supply of appropriate rough diamonds for beneficiation initiatives, particularly in southern Africa. De Beers at the same time would be re-focusing its marketing activities and progressing further the FOREVERMARK initiative. Further expansion and progress was made in its independently managed retail business, De Beers Diamond Jewellers, and the company would continue to focus on ensuring it met the highest standards in terms of transparency, compliance and governance.
Gareth concluded by emphasising De Beers’ commitment and optimism in facing the challenges that lay ahead by working closely with all stakeholders.
