De Beers activities coverage by mass media (first six months of 2007)

Overall picture

In February De Beers summed up the results of its activity during 2006. It was noted that the company’s net income during the 2006 financial year had increased 32 % (amounting to USD 730 million as compared to USD 554 million a year before). One also stressed the currently active demand for diamond jewelry especially in the emerging markets of India and China where a two-digit demand growth index had been registered. De Beers Group Managing Director Garret Penny declared De Beers LV sales volume had increased by USD100 million in the course of the previous year.

Taken on the whole, however, the diamond giant’s sales had somewhat fallen off during 2006, in spite of the result attained ranking  as the best but one in the whole of  De Beers history. The corporation authorities claim the recession has been caused by decrease of the ALROSA supply and reduction of demand for diamond raw materials.[1]

 The Economist magazine (USA) in its February issue published a lengthy article on De Beers operation. The publication, purposefully timed to both De Beers reviewing its annual progress indices and the traditional Oscar prizes  being awarded, covers the major lines of the company’s activity within the recent several years after  the major shifts in its managing staff in late 1990s and De Beers departure from the public market in 2001.[2]

The Israel Diamonds magazine in the issue of April mentions the fact of De Beers having announced the intention to focus on implementation of its newly adopted development strategy of “deriving maximum benefit from one’s dominant position in the market”. This implies, among other things, analyzing the assets available from the point of view of  their matching  “De Beers” portfolio criteria: concentrating on  survey of the regions deemed most promising as far as their prospective target development is concerned, economic efficiency maximization and investment in brand-marketing .[3]

ЕС
On January 31 the European Commission stated the Supplier of Choice program investigation initiated in 2002 having been dropped. The committee decision is said to have been motivated by the De Beers diamond distribution activity growing increasingly transparent. The range of functions of the Supplier of Choice program ombudsman has been extended, having come to include the right to perform the information filtering and make the process of the applicant’s selection more transparent.

In this connection the European Report specially emphasizes that the point at issue of the ALROSA raw material supply that has given rise to so much dispute in the relations between the company and the European Commission, has not actually been positively solved yet.[4]

South Africa
According to the data submitted by trade union leaders in the course of the previous year  “De Beers”  discharged 1200 out of more that 10 000 of its South African employees. They link the dismissals with the fact that currently most of the raw diamonds extracted in South Africa are exported to Israel wherefrom they are subsequently re-imported, brillianteered, at a price  ten times as great as their initial value. “The diamonds might be cut and faceted on the spot in South Africa, with 40 % of the country’s population unemployed”, that is the opinion aired by Shaheed Mohamed, the coordinator of the South Africa branch of the Sanctions Against Israel Coalition. Having started with the initiative to prohibit import of agricultural products from Israel (on the grounds of them being allegedly produced by  labour of the exploited and severely underpaid children from the Palestinian territories occupied by Israel), the coalition has come to demand that any diamonds imported form Israel should be qualified as conflict ones.[5]

On February 9 the decision was announced for a special agreement to be signed by the Department of Minerals & Energy of the South African Republic and De Beers. Under this agreement, among other things, De Beers will assume obligations to pass part of the “Namaqualand Mines” assets to the Department by 2008 and in all possible ways to assist in the State Diamond Trader foundation.[6]

Representatives of the indigenous tribe living at Richtersveld, within the territory to be immediately affected by the actions under the contract in question, claim it violates some of the agreements previously concluded with a view of guaranteeing their right to inhabit the territory and threaten to take the matter into the court.[7]

In June the All Africa Global Media reported on a group of member of the South African Republic parliament suspecting De Beers of having failed to pay the duties specified when exporting 20 million carat diamonds (with the total price estimated to have amounted to some USD 822 million) in early 1990s, not long before the African National Congress came to power in South Africa. “De Beers”, however, has negated all the accusation of its actions in the case above-mentioned having been not quite legal and proper.[8]

In June “Petra Diamonds Limited” made public its intention to purchase off De Beers the South African Koffiefontein mines in the nearest future.[9]

NAMIBIA
The African Business is of the opinion that the progress of the fledging Namibian diamond faceting industry has been greatly promoted by De Beers decision to have the raw diamonds extracted within the country processed domestically. In his speech addressed to member of the Namibian parliament Minister of Mine and Energy Erkki Ngimtina noted that the local diamond faceting and brillianteering companies would definitely profit by the agreement concluded in November. It is expected that by late 2007 the annual amount of diamond extraction in Namibia will increase to be 10 million carat.[10]

The government of Namibia and De Beers have agreed to incorporate a joint venture of  Namibia Diamond Trading Company (the parties shares in stock being equal) that is to undertake assessing, sorting, marketing and promoting raw diamond materials of Namibian origin in the domestic market of the country.

In January, 2007 the diamond industry giant and the authorities of Namibia prolonged the effective period of the previously concluded agreements till 2013.[11]

In 2006 the offshore diamond deposit developer De Beers Marine Namibia extracted 1.018 million carat of raw diamonds which let it earn USD 350 million.[12]

BOTSWANA
The corporation officials many a time have stated they fully understand the intention of authorities of a number of African counties to develop domestic down-stream enterprises and sympathize with it. While being interviewed for the "Modern Jeweler”,  Stephen Lussier recollected the agreement on foundation of the “Diamond Trading Company Botswana” joint venture (with shares distributed in equal proportion between the founders: “De Beers” and Government of Botswana) which would be entrusted with sorting and assessing raw diamonds extracted by another joint venture of the kind - Debswana. Later on the decision was taken in accordance with which by 2008 the whole of the corporation’s diamond sorting activity would be relocated from London to the capital of Botswana - Gaborone.[13]

De Beers has already spent USD 83 million on the construction of the relevant facilities

“Our activity serves to emphasize Botswana’s role of a leading world diamond producer, - S.Lussier remarked – Domestic industry development will help create new jobs, modernize the existing infrastructure and catalyze attraction of further foreign investment.[14]

TANZANIA
The Williamson diamond mine owned jointly by De Beers (75 %) and Government of Tanzania (25 %) has been developed for more than sixty years. According to the data cited by the Canadian press its annual output amounts to some 300000 carat. Since 1994 De Beers has been maintaining the mine’s level of efficiency by investment in the equipment and performing regular technical and technological survey and examination.[15]

ISRAEL
In February the mass media of Israel widely discussed the news that came to be known during the 32d World Diamond Congress, of Diamdel, Israeli branch establishment of DTC in charge of the secondary market supplies, expected to open its Central Production Office at the Israeli Exchange during 2007. Judging by the comments of the Diamdel officials, when taking the decision the company was after ensuring better satisfaction of needs of more than 500 companies that are not DTC site-holders. The Israeli Diamond Exchange President Avi Paz is inclined to believe the event is likely to result in increasing the amount of diamond raw materials imported in Israel .[16]

However, in late April one learnt there were plans for restructuring the secondary market supplies through Diamdel.[17]

INDIA
Alyson Warhurst remarks that though India does not belong to diamond producing countries De Beers, Rio Tinto and BHP Billiton are actively engaged in survey of new deposits within its territory. By the moment “De Beers” has already succeeded in discovering 32 kimberlites.[18]

CANADA
De Beers activity coverage in the Canadian mass media during the first half of 2007 is restricted to business press materials (articles and press-releases) devoted to the projects being implemented by the company within the territory of Canada. Thus, for example, there have been multiple comments on the “Gahcho Kue” project progress (51 % owned by De Beers ).[19]

The Victor project development is also extensively discussed. De Beers is reported to have spent USD 130 million on its survey since 1987 and to be about to allocate USD 982 million more for the execution of the construction works related to the project initiated in February,  2006 г.[20]

In May discussion of the newly adopted North Ontario diamond extraction tax begins.[21]

BRAZIL
Not long ago “Brazilian Diamonds” purchased off De Beers the Chapada Diamantina project implemented in the state of Bahia, but, according to the information published by Canadian periodicals, De Beers has reserved the right to buy back up to 40 % of the right of ownership for any kimberlite located within the project development territory in case it contains more than 200 carat of diamonds.[22]