Can you talk about the relationship between the Namibian mine and De Beers? Many of our customers don’t want to have anything to do with De Beers because of its bloody history. How are customers assured that the Kalahari diamonds are not just a positive PR campaign for De Beers?
De Beers suffers from a bad public relations problem There is a reason why De Beers earned a nasty reputation and is associated with bad corporate behavior. However, the De Beers of today is not the same as the one 50 to 100 years ago. Firstly, they are no longer a monopoly. They were forced to change their practices because of all the terrible press and market pressures. If you are a consumer looking for a diamond with a verified origin, there are very few mines in which you can buy the stone and have it be certified. Currently, De Beers is the only major diamond supplier that you can buy a diamond that has a verified origin.
The largest mine that De Beers operates is in Botswana. The Botswana mine is a joint venture between the Boatswain government and De Beers in which the Botswana government owns 15% of the mine. One of the reasons why Botswana has the social progressive programs that it does is because of the capital generated from the mine.
De Beers has a very similar relationship with Namibia in which Namibia owns a portion of the mine, however, it is not as extensive as the Botswana arrangement. Because of its image, its partnership with the governments, and to some extent its dependency on these countries’ resources, De Beers has a big stake in operating fairly. There is a collision of interests between these African governments and De Beers as a corporation.
One of the unique aspects of the Kalahari project is that the cutting is done in Namibia opposed to being exported overseas often times to facilities that endanger their workers’ health because of insufficient environmental oversight. Will you talk a about the cutting and polishing facility in Namibia?
In both Botswana and Namibia, the governments wanted to see the diamond mines offer a greater benefit to the people, and encouraged De Beers to create the polishing and manufacturing facilities. So now there are local polishing and manufacturing factories in both countries operated by De Beers. De Beers is very transparent in how they run both the mines and the cutting/polishing factories. The cutting facility is a state of the art modern factory. The average wage of Namibian diamond cutter at the facility is 30-50% higher than the average wage of the typical Namibian worker. The total employment from Namibia is around 3,000 to 2,500 people.The workers are given the right to unionize, benefits, and pension plans. So the overall benefits are very good.
However, in both Botswana & Namibia, they don’t cut all the stones there because it wouldn’t be cost effective. The percentage of stones cut there is 10-15% but it is growing. De Beers also supplements the cutting, by adding to the supply at the cutting facility with rough from their other mines. The large stones from the mine tend be cut in New York, Belgium, or Israel.
Can you tell me how the Kalahari stones are certified?
Our stones are GIA certified & then we have a third party EGL certification of origin. However, not everybody cares about where they come from so we only provide the certification of origin when the customer requests it. The diamond industry is a slow moving industry. It is not a cheetah, but more like a sloth.
How long do you think the mine will produce?
All mines have a life-span, however, it will be a long time before the Namibian mine stops producing. It is not in the foreseeable future.
Why are these projects just in Namibia and Bostwana and not other diamond producing countries? Do you think that this model will be a trend? What are the factors for expansion?
De Beers has an incentive to support the programs in both Botswana & Namibia. The governments in both of these countries are strategic for De Beers, and both governments were pushing for these types of programs. In terms, of other places where De Beers has mines like Canada or South Africa, the partnerships are less important. De Beers doesn’t have the partnership that it used to in South Africa, and South Africa is also a more diversified economy. Botswana & Namibia need the diamond economy.
Can you talk a bit more about the Finesse’s 88 cut diamond and how it differentiates Finesse diamonds from the rest of the market?
The 88 is a specialty cut desgned to offer a more brillant alternative to a round cut diamond. The 88 offers buyers a unique, patented shape with a design that emphasizes light performance.
Can you speak about the presence of diamonds in today’s market that are still conflict diamonds?
Most diamonds sourced today are conflict-free. There is only a small percentage of diamonds today that are not conflict-free. Currently conflict stones are coming from the Ivory Coast, the Eastern Coast of Congo (but a larger issue there is the mining of rare earth metals that are used to make cell phone batteries), and Zimbabwe. Zimbabwe, however, is still part of the Kimberly Certification, which is controversial. I think in a way that it is better that Zimbabwe has remained part of the Kimberly Certification because if they been kicked out it would have just created a black market.
What is your opinion of the Kimberly Certification?
The Kimberly Certification on its own doesn’t hold very much weight. Diamonds can originate anywhere and still be smuggled into a country that is part of the Kimberly Certification.
What about smaller diamonds that only come with the Kimberly Certification. Is there any foreseeable solution to providing certification for the smaller diamonds?
Smaller diamonds are just not economical to certify. Smaller diamonds receive the Kimberly Certification when they are still rough, then they are polished and sold. The question is who is going to pay for the certification of the smaller stones? If the customer had to pay for the certification, it would make the stones too costly. It’s not worth it to the consumer or to the seller. It’s a problem of economics.
In terms of the smaller diamonds that aren’t certified, is there any documentation or traceability of where the diamonds are cut & polished?
The only accountability is in knowing your supplier. Major retailers like Tiffany have very stringent KYC programs. That’s really the only way at this stage.
We have a lot of customers who want to do the most responsible thing when trying to choose between a recycled, Canadian, and Namibian diamond. Do you have an opinion about which stone is the most responsible?
Obviously, I am biased towards the Namibian diamonds. Any answer that you get is a subjective answer. In Africa over 2 million peoples’ livelihood is derived from the mining industry. By choosing the recycled diamonds, you are in a way not participating in the industry, but you are also not supporting a needed economy.
It is interesting to me that many of our customers are the most interested in the Canadian diamonds which in my opinion seems like a less progressive option when compared to the Namibian diamonds. Why do you think Canadian diamonds are such a trend?
The Canadian diamonds are very popular right now. Rio Tinto did a very effective marketing campaign.