Industry journalists usually make sure they are prepared ahead of a De Beers financial report, writes Edahn Golan on www.idexonline.com. In the past, De Beers held a press conference, with a Q&A session, when it announced the results. After the 2008 meltdown, they released their figures almost in secret. This week [August 1-7] it made a half step back, letting journalists know, in advance, when the results were to be announced. Shortly after the announcement, journalists were contacted and offered a chance for a brief interview with the top brass.
All this may sound trivial, but it's not. De Beers is now a private company, and, in theory at least, obligated only to report its financial standing to shareholders. Reporting to the public is an act of responsibility and transparency towards the industry.
The new CEO, a person with nothing to do with the current half-year results, was also on hand. While Philippe Mellier had little to say about the current results, he did speak a little about the future.
"We need to address some issues, like production." Mellier told IDEX Online. About the negotiations with Botswana, a contract that details the country's profits from diamond sales, as well as marketing issues – among many other issues - Mellier admits that the discussions took longer than planned. “Obviously, the talks are taking a long time, partially because of personnel issues, but we expect to conclude the agreement in a month or two."
If De Beers wants to retain its leadership role, this is exactly the kind of candid talk needed – and more.
It's important for the industry to understand what the production issues De Beers faces, and specifically how this will affect supply to the market.
Alrosa is currently the leading supplier by volume, and as it nears an IPO, it too is providing more information about its sales and production. In an industry that is used to doing things quietly, this is a good break from tradition.
The importance of making this information available is all about doing business well. Not them – you. Business is often the art of acting wisely with little information; the more information available, the more informed are our decisions.
In the first half of 2011, global diamond production has declined by about 3.5% while prices leaped ahead some 34%. There are some external issues impacting the industry too. In the U.S., the debt ceiling needs to be resolved, Greece and Portugal need to be pulled out of the mud they sunk so deep into.
How will this affect the cost of polishing diamonds and manufacturing jewelry (negatively, if the dollar weakens), will the price of gold continue to rise (yes, if the financial markets don't have faith in the West's economy), how excited will consumers be this holiday (more than last year), will Indian banks crack down on defaulting borrowers from the diamond industry (maybe, hopefully).
We can keep asking these very relevant questions and more (What will be the cost of money, gold and diamonds? What holiday ad campaigns will be launched? Will Zimbabwe's follies enter consumers' minds and keep them away from diamond jewelry?). To answer them, we need more transparency, more candid information about problems in the pipeline and lose the fear of openly discussing the issues.
