Stephen Lussier has served as De Beers' Executive Director, External and Corporate Affairs, since 2005, and sits on the corporation’s Group Executive Committee. He is CEO Forevermark and is also chairman of De Beers Botswana.
In this interview with Antwerp Facets, Lussier comments on a wide-range of issues of importance to the global diamond industry.
ANTWERP FACETS: The way that De Beers' CEO Gareth Penny's departure was announced in July raised quite a few eyebrows in the industry, particularly since De Beers now appears to have rounded the corner financially. Do you believe the departure was announced in the right way?
STEPHEN LUSSIER: We felt that we had to release the news at the same time as the financial results. We wanted to make it public as soon as possible to prevent rumours in the industry. Gareth thinks in terms of five-year blocks. He had been mulling the idea of leaving after dealing with the impact of the financial crisis and downturn. Leaving during the downturn would not have been right. This was the point in time when he felt it was right to leave. He had to decide whether to stay and take De Beers to the next stage, or leave the field to the next person to do it. In hindsight, we understand his decision.
ANTWERP FACETS: Is a management team featuring two senior executives, chief financial officer Stuart Brown, and chief commercial officer Bruce Cleaver, serving as joint acting CEOs the right way of managing a large multi-national company constantly facing a range of difficult challenges?
STEPHEN LUSSIER: I must say that it does not trouble us that we have two leaders. We believe we have an exceptional management team. Stuart and Bruce have been part of the team that took De Beers through the financial downturn. We see them as providing continuity in managing the company. We see it as an advantage that we have two senior managers running the company so that business can run as usual. As for the decision regarding Gareth's replacement, I believe that it will be announced later this year.
De Beers' Chairman Nicky Oppenheimer wants someone with broad mining and marketing experience. He is looking both inside and outside the company. He has a great deal of experience and he knows the requirements of the job. He is accountable for the appointment, although he will also consult with the shareholders.
ANTWERP FACETS: De Beers announced sales in the first half of 2010 of $2.62 billion. Is $4 billion still the target for all of 2010? Is the recovery in demand ahead of where you thought it would be at the start of this year?
STEPHEN LUSSIER: I believe the second half of the year will be broadly similar to the first half. Although the recovery in demand is positive, with China and India showing rises, it is still a fragile world. There are mixed signals with talk of a double-dip recession, so the situation is still uncertain.
ANTWERP FACETS: Media reports have spoken 40 million carats as a likely production figure for this year? Do you believe that will be the case?
STEPHEN LUSSIER: I do not think we will see 40 million carats this year, it’s more likely to be a little north of 30 million carats in 2010. Provided the recovery continues and economies continue to pick up we hope to break 40 million carats in 2011. Over time we will build the amount up. The so-called 'new normal' means that businesses are now being more flexible in their approach. We were all caught by surprise, so we will be cautious in building up our output.
ANTWERP FACETS: Where are you seeing the main growth in demand for diamond jewellery? Which markets are strong?
STEPHEN LUSSIER: In the United States, demand has not been bad, and that has helped. Retailers have been maintaining and building their inventory levels. If you look at the financial results posted for the large jewellery chains, they have posted gains albeit compared with poor results for the same period of 2009. That is largely because of spending by more affluent consumers.
There is a sense of there being two types of consumers in the United States now. There are people who are unemployed or who feel they are vulnerable to being made unemployed, and they are not willing to spend money on jewellery that they may need for other expenses. Then there is the second group who are people who have survived the downturn, who have seen the stock market recover and their savings regain value and so they feel more comfortable about buying jewellery.
Regarding China and India, we are seeing strong demand as urbanization and other factors continue to create good demand for diamond jewellery and luxury products. We see little reason for that not to continue. In the future, China and India will provide half of global diamond jewellery growth so they are key markets.
ANTWERP FACETS: How do you see the issue of debts in the cutting centres? They have obviously fallen as a result of the financial downturn in the last two years, but are they still a concern?
STEPHEN LUSSIER: We monitor this issue as closely as possible. The banks give us the impression that that they are not uncomfortable with debt levels, and there appears to be a long-term trend of reducing them.
If you take the view that the near future is going to remain fragile, then clearly it is not a good idea to build up debt because it does not allow you to expand your business. De Beers itself has also been cutting its debts because it gives us flexibility. During the downturn, the companies that did not have debt were able to manoeuvre better.
ANTWERP FACETS: Reports in recent months say that the Marange deposit is huge. Did De Beers take its eye off the ball in a way by not being involved in exploring at Marange?
STEPHEN LUSSIER: We did not explore in Zimbabwe because of two issues that made it difficult for us to do so. Firstly, we are a long-term miner rather than an artisanal miner which is the type of mining activity at Marange. So one has to be very cautious about predicting how large such a deposit might be.
Secondly, as a long-term investor, would we be comfortable doing business in Zimbabwe? It would not be an environment in which we would be comfortable doing business since a joint venture with the Zimbabwe government would be highly challenging.
However, the Zimbabwe government has to be given credit in working hard to bring Marange in line with Kimberley Process compliance standards. It is very promising that Zimbabwe and the Kimberley Process have been able to resolve some of the issues. The transparency now has to be maintained and the world must see that the benefits from the sale of diamonds flow through to the people as has happened with good effect, for example, in Botswana.
ANTWERP FACETS: What is the status of Forevermark? Is it as successful as you had hoped?
STEPHEN LUSSIER: It is still early days. It must be remembered that Forevermark suffered from being launched just as the global financial crisis began. However, we are very pleased with progress in China, and we are confident that we will achieve our targets in terms of shops opened and diamonds inscribed. We are pleased with the response from consumers to the brand; we see that consumers believe that the Forevermark diamonds have a lot of expertise invested in them.
We learned a lot from the launch of the brand in Hong Kong about logistical issues, and that enabled us to launch in China with great confidence. We have also learned a great deal about the differences between consumers in the countries in which we have launched. In China, for example, there is a lot of demand for solitaire stones in bridal rings because they are usually buying their first diamond ring. Chinese consumers are less concerned with design. However, in Japan, buyers are more design oriented because they usually already own a ring.
Again, in China, there is quite an emphasis on getting a premium quality product, whereas in the West, the ethical issue resonates more strongly.
We announced on September 15 that, having reached over $150million in retail sales in the first 18 months, and now in 294 doors across Asia, the diamond brand, with its unique promise of quality and integrity, will now be available in Singapore, selected islands in the Caribbean, Mexico and India before the end of 2010.
ANTWERP FACETS: As the company that single-handedly financed the global promotion of diamonds for many decades, are you concerned about the lack of progress in getting the International Diamond Board (IDB) up and running?
STEPHEN LUSSIER: We take a long-term view on this issue that there is no need to rush into things simply in order to bring them to fruition. There is a significant role that the IDB can play, but we have to be unified. In the long run, the diamond industry will need bodies of this sort, but if the IDB comes about in smaller steps, that is fine with De Beers.
