The production value of diamonds has remained static over the past five years, while margins for the midstream of the diamond production pipeline are shrinking, noted Chaim Even-Zohar, on the first day of the the Mines to Market international diamond conference hosted by the Gem & Jewellery Export Promotion Council (GJEPC) in Mumbai on Sunday.
Even-Zohar, who is the event’s host, noted that the midstream made a profit of some $900 million in 2016 — a very small proportion of the $20.35 billion value of the polished diamonds generated by the pipeline. According to him, the forecast for the midstream’s profits in 2017 are drastically lower at $200 million. The wholesale price of polished diamonds has also declined from $22.6 billion in 2011 to about $18.7 billion today.
By far the greatest profits in the diamond process pipeline are made by the mining companies, while the midstream is still struggling with thin margins. The only way to resolve this, Even-Zohar noted, was for the midstream — particularly the Indian diamond industry which accounts for practically all of it — to negotiate a better deal for itself.
Even-Zohar noted that the diamond industry’s major issues included that of working out how to grow and prosper as rough production declines; coping with an oversupply of overpriced rough and the criminalisation of the production pipeline.
Zimbabwe’s Mines and Mining Development Minister Walter Chidakwa, made a passionate speech asking for a greater share of the pipeline’s value for African nations. “Most African countries have very little to show in terms of development after 100 years of mining,” he said, adding that the segregation of ‘mining countries’ and ‘processing countries’ needed to be done away with. African diamond producing countries need to move up the value chain and provide employment and economic benefits for their citizens by also being able to process some of their own mineral wealth.
The Indian diamond industry was told that it needed to take action to “renew the government’s trust in it” by Indian Minister of State with Independent Charge for Power, Coal, New & Renewable Energy and Mines Piyush Goyal, who was the chief guest. Goyal called for more interest from the industry in the exploration for new diamond mines in India. He also called for a more concerted effort toward inclusive development, acknowledging the the Zimbabwe Mining Minister’s perspective.
The global diamond industry should refocus its fight against synthetic diamonds and concentrate more on fighting the slide in the value of natural diamonds, observed Andrey Polyakov, Vice President of Russian diamond miner ALROSA and President of the World Diamond Council (WDC).
During a panel discussion on mining that included Polyakov, De Beers Executive Vice-President, Global Sightholder Sales Paul Rowley, Dominion Diamond Corporation Executive Vice President James Pounds, Rio Tinto Head of India Office Vikram Merchant and Dimexon Director Rajiv Mehta, co-moderated by Even-Zohar and industry analyst and Managing Director for Research of the Royal Bank of Canada London Desmond Kilalea, the mining companies all said they didn’t want to consider extending credit to the midstream as they added value to the product in a variety of other ways. Exploring for diamonds, mining and even the process of closing a diamond mine were all expensive and long processes, they said.
Even-Zohar quoted an ALROSA presentation that listed midstream profits as being ‘low’ and in the region of one percent. He reiterated again that the only way this could be resolved was if the midstream determinedly got itself a better deal.