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A diamond surprise - Russia comes to know it has a brand-new diamond mine, Tarskaya

28 april 2017

boris_voronov_xx.jpgThe World of Diamonds Group of Companies says on its website that it was established in 2001 and has a diversified holding in the industry. “With over a decade of expertise and involvement in five continents, the Group provides fine jewelry, rough and polished diamonds to prominent diamantaires around the world,” the company says, adding that with a full ownership in the Tarskaya diamond mine it has joint interests in several other diamond mines globally. Recently, World of Diamonds asked Rough&Polished to do a story on their operations and we settled on an interview by e-mail with Mr. Boris Voronov, the Group’s Chairman, Managing Director & CEO. It’s all below, as is. And above, there is a commentary to this interview.

Can you run us through the workings of your Group ' World of Diamonds ' right from inception to date, for the benefit of our readers? Please give details of all your Group's varied activities, affiliates and their activities and so on.

At a young age, I had access to classified diamond reports which contained data on the composition and structure of the Earth’s crust, and which stated the presence of diamonds in Russia through indicator materials, tracing back to several Archaean cratons underlying the country that were detected in aerial magnetic surveys. My interest in geology and gemology grew, and I pursued that academically. During my education and the years following that, I developed relationships with financiers and individuals who eventually assumed roles in the government. Meanwhile, I had opportunities to be involved in diamond prospecting activities, overlooked small scale diamond mining operations and eventually acquired significant shares in larger projects after the dissolution of the Soviet Union. The mining group I was with focused on large scale volume based production and with my age reaching 50, I was happy to have my own business. We needed an entity in Russia to develop and market the larger, investment quality fancy colored diamonds. OOO «Мир Бриллиантов», or World of Diamonds Group as we are known today, was established in 2001.

WOD Group initially invested in 3 major mines in the North-Eastern and North-Western parts of Russia, primarily in the Yakutsk region, the capital city of the Sakha Republic, and in the Republic of Karelia. We noticed stable growths in production, close to 60% of the diamonds mined were gem-grade and the collective annual output of the 3 mines reached over 4 million carats by 2005. We reinvested some profits for exploration in other parts of Russia as well as South America and Africa. In 2006, we discovered the Tarskaya diamond mine, which contributes to most of the Group’s revenue today. WOD Group is vertically involved from diamond mining, rough diamond processing, diamond cutting and polishing, and distribution to select trade players and jewelry houses. The Group used to have a manufacturing facility in Belgium but that has since moved to Russia in 2014, due to sanctions. We still maintain relationships with diamond cutters in Ramat Gan, Antwerp and New York, and have an arm for fine jewelry creation located in Geneva. Most of our operations within and outside Russia are done through our affiliates, so that we can be appreciated as an international brand.


Tarskaya Diamond Mine - Aerial View

As your Group is into diamond mining, can you elaborate on this aspect of your business...where are the mines situated in Russia; do you own mines in Africa as well; number of mines owned totally and production levels of each mine; open-pit or underground mines and where is the concentration plant located, etc.

Tarskaya diamond mine which accounts for over 95% of our revenue in the mining business is situated in the North-Eastern part of Russia, on the outskirts of the Arctic circle. It is in Srednekansky District, Magadan Oblast, with the nearest airport in Seymchan. In the early 2000s, we were exploring Brazil, Venezuela, Colombia, Namibia, Botswana, Sierra Leone and the Democratic Republic of Congo. Between 2005 and 2007, we had a workforce of about 300 in Africa, but were faced with challenges of the civil war so we gradually exited the region. Tarskaya diamond mine has 38 commercially viable kimberlite pipes, while we have started production in 6 of them. These 6 open-pit mines produce around 7 million carats of rough a year, and because this area has been largely untouched and undeveloped, most of the diamonds are gem-quality. Our mines have a depth of over 160 meters to about 500 meters, and we do not plan to consider underground operations due to the exponential costs and risks involved. With our mining concessions, we are best suited to explore the adjacent kimberlite pipes and to expand our areas of operation laterally. It is important to pace ourselves in production to match global demand and to maintain price stability, given that we have good reserves. Also, we streamline operations with some of our affiliate companies where the lower value diamonds we mine get manufactured and traded through them, while the higher value diamonds evolving from their mines passes through us. It allows our employees to specialize on a particular class of diamonds, and when marketing to the luxury brands, it is a matter of brand positioning.


Tarskaya Diamond Mine - Upclose

Can you give us an idea of what kind of rough diamonds you are producing currently... in terms of size and color? Does the WOD Group intend to expand its mining explorations in other countries in the future?

The average rough diamond we mine is about 8.70 carat, but this is greatly reduced after polishing. Depending on the cutting style, rounds can lose up to 60% of their weight while radiant cut diamonds can lose as little as 20%. Generally, because of the desirable clarity grades (Tarskaya mine is a dependable producer of type Ib, IIa and IIb), we do not have to always navigate around inclusions. We mine diamonds of all colors, including colorless (whites), yellows, pinks and blues. There have been some green diamonds, and a few red and orange ones recovered over the years. There is a misconception that certain mines produce more of one color over another. While it may be true that Argyle is famous for pinks and Cullinan for blues, Tarskaya has seem some very rare fancy colored diamonds. Among the spectacular roughs we have recovered is a 21.47 carat blue which resulted in a 12 carat intense blue heart shaped diamond and several smaller blues, a 53.85 carat reddish orangy pink which contributed to a 37.49 carat cushion diamond, and a near 6 carat red diamond which gave birth to a 4.05 vivid pinkish red, marquise cut diamond. Since the lifespan of our Tarskaya diamond mine is expected to last for over 45 years or more, it is unlikely that we have to diversify mining operations into other areas immediately. However, we have a substantial annual budget for exploration activities to factor in global growth, and Africa is in our consideration.

How, and to whom, and in what way does your Group sell rough diamonds? Do you have selected buyers to whom you supply on regular basis? On what basis can a customer apply, to be your regular rough buyer? Who are your major buyers now globally?

World of Diamonds Group specializes in supplying polished diamonds as we have the capacity and expertise to cut, polish and distribute finished stones. As a mining company, we have the upper hand in understanding certain trait characteristics of our diamonds and can better align their structural planes with our cutting and processing equipment. Polishing diamonds are a value added service to our clients, and so we do not have plans to offer rough diamonds. We supply to a select number of diamond wholesalers, and to most luxury watch and jewelry brands that have their manufacturing facilities in Europe and America. Most of our business is conducted through long-term contracts, where our clients commit a minimum dollar value of diamonds per year. We guard the profiles of our clients since the retail scene is highly competitive. Should end consumers know that diamonds under several brands are mined and supplied by the same source, the whole industry becomes more price competitive.

Where are your diamond processing facilities situated? What is the size of the unit/units; and what is the volume of diamonds processed per month? Do you process large high-end stones or smalls, or both?

We set foot in Belgium in 2001, and had a 36,000 sqaure feet diamond cutting and sorting facility in Antwerp shortly after. However, we ceased operations there in 2014 due to sanctions against Russian corporations, and took the opportunity to relocate to our new facility in the WOD Building, adjacent to the Tarskaya diamond mine. Initially, it might have seemed like a hasty decision, but we were not pleased that our clients were being vetted and scrutinized. Over the years, we had been grooming our Russian employees who had adopted rotational jobs in Antwerp, and this paid off when we were moving our operations to Russia. Today, we still have partners in Antwerp, New York, Amsterdam and Israel, but are more discreet about it.

The WOD Building in Tarskaya has high quality manufacturing units which operate at the highest level of efficiency. We have multi-tiered recovery systems comprising of screening and advanced micro-crushing machinery, dense media separation plants, scrubbers, x-ray fluorescence separators, grease belts, diamond processing equipment, laser marking and sawing instruments, refractometers, sorting and polishing departments, a diamond grading and assessment center, a marketing and administrative office and a research center for diamond technology. This facility spans about 62 hectares and includes housing, education and medical facilities for our 9,000 employees. Since relocating to the WOD Building in October 2014, we have processed about 5 million tonnes of ore, yielding around 9.3 million carat of diamonds. We polish mainly larger diamonds, but smaller ones if they are fancy colored. The smaller diamonds are generally cut through our affiliates, which work closely with India and China.


WOD Facility in Tarskaya

Was World of Diamonds Group created to supply diamonds directly to trade buyers, since Alrosa had contracts with De Beers in its earlier years? Do you have your own diamond processing units in other parts of the world like Africa, China, India, etc.? Or, what's the equation between your Group and the overseas partners or associates, if any? Do you process only your own roughs or use other mining companies’ goods as well in the overseas facilities?

WOD Group is a separate entity from Alrosa, and was established for its own purpose. Alrosa works more with Asia, including India and China. We have various subsidiaries and partners that have diamond manufacturing units around the world. Within the Group, we coordinate our operations.

As jewellery manufacturers and distributors, can we get a total picture of all your associates situated globally? With which companies/leading houses is your Group in JV with in Europe, Americas and other countries in terms of polished diamonds as well as high-end jewellery supply?

WOD Group supplies mainly to brands in Europe and the Americas, but not because we discriminate against Asian brands. Our clients are mostly luxury names and they typically have their jewelry houses in Geneva, Paris, England, and in America. The ultra-luxury retail brands you see through boutiques in Asia, Australia and Africa do not engage in fine jewelry manufacturing within those regions itself, but in the West.


Analyzing Diamond Mining & Lattice Formation

World of Diamonds Group only sought visibility through internationalization in early 2013, about the time Alrosa went public. Both mining consortiums have interests in Africa and WOD Group’s registered entity, OOO «Мир Бриллиантов» takes after the famous “Мир” (Mir) mine owned by Alrosa. WOD Group seems to have resource sharing arrangements with a leading Russian diamond mining company and Russian media noted that some of WOD’s key employees have been spotted at Alrosa’s offices. How is World of Diamonds Group related to Alrosa?

World of Diamonds Group and Alrosa are separate entities and would like to be known as that.

Wrapping up, what's your opinion of the current global diamond/diamond jewellery industry? As it is facing numerous issues like slow demand due to economic slowdowns in consuming centres; and challenges like mixing of synthetics, conflict diamonds, competition with lifestyle/luxury products etc, do you see a 'light at the end of the tunnel' for the industry?

There will always be a demand for diamonds. With a growing population, there will be an increase in marriages, weddings and celebratory occasions – a diamond is the best representation of love, and it is usually set in jewelry. WOD Group is more focused on larger and fancy colored diamonds, and diamonds are undoubtedly the world’s most portable wealth. Economic slowdowns may be assumed from the surface, but the world is generating wealth through more sophisticated means. Everything is about technology and we learn to embrace it, including exploring diamond growing technology. Element Six, an arm of De Beers, has been in the diamond growing business since 1946. Diamond Foundry, which has investors including 12 billionaires along with Leonardo DiCaprio, has developed a reputation in recent years. As a mining company, we best understand the structure of a diamond, and have invested in technology that can create diamonds under certain conditions. Ultimately, disclosure is important. Synthetic diamonds will be a threat only to a small extent, but the benefits outweigh the drawbacks. Consumers who were never attracted to diamonds due to the suspicion of their conflict provenance and lack of environmental friendliness, now have an option. Competition in the luxury space will always exist, but branding is key. Over the years, we have focused more on internationalizing ourselves and being able to connect with selected clients, while some of our creations have gained more prominence. For example, we were behind the world’s most expensive perfume collection in partnership with a Spanish perfume house, world’s most expensive dining experience that comes with a blue diamond ring named after British-American actress Jane Seymour, and the world’s most expensive trip with the most luxurious amenity being a collection of gold and diamond encrusted swizzle sticks.

Aruna Gaitonde, Editor-in-Chief of Asian Bureau, Rough & Polished


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