Consumers attracted to diamond jewelry more than ever

Ali Pastorini is the co-owner of Del Lima Jewelry and President of Mujeres Brillantes, an association which brings together more than 1,000 women working in the gold and diamond trading sector, mainly from Latin America, as well as from Turkey, Spain...

21 september 2020

WDC actively supports initiatives from mine to retail; and also strives for support for the artisanal and small-scale miners - Edward Asscher, President, World Diamond Council

A member of one of the diamond industry and Amsterdam’s most well-known families, Edward Asscher was elected President of the World Diamond Council in June 2020 for a two-year term. Asscher is serving a second time as WDC President, having led the organization...

14 september 2020

Diamonds are one of the few things that have held human fascination in every nook and cranny of the world across time

Dr Usha R. Balakrishnan, a preeminent historian of Indian jewellery based in Mumbai, is Chief Curator of the World Diamond Museum. Being the author and co-author of several volumes of Diamonds Across Time, a new book and an important venture launched...

11 september 2020

Botswana Diamonds to bulk sample KX36 kimberlite, sees commercial potential

Botswana Diamonds recently acquired Petra Diamonds’ exploration assets in Botswana for $300000. The assets that were owned by Petra through its wholly-owned Sekaka Diamonds Exploration, include the KX36 project, a 3.5 hectare kimberlite that was a new...

07 september 2020

Indian diamond industry looks for recovery options

Webinars being the order of the day due to COVID-19 crisis, the Gem & Jewellery Export Promotion Council (GJEPC) of India organized a virtual meeting under its UNCUT 2020 Webinar series on 17 August 2020, inviting all stakeholders to discuss...

31 august 2020

Player No. 3

10 august 2020

igor_kulichik.pngThe current man-made global crisis has all the chances to dramatically change the landscape of the global diamond industry. I am not saying that the habits of the world’s richest people in the way they consume luxury goods will change greatly (there will be changes, but evolutionary, not revolutionary - this class will never refuse to buy diamonds, LVMH products or airplanes and yachts), I just want to draw your attention to businesses engaged in diamond mining.

Due to the fact that the current crisis, caused by the pandemic, forces entire countries and regions to get physically isolated grinding the trade turnover in the global diamond pipe to a halt with no one able to predict any prospects for its recovery, it is premature to talk about the timing for this recovery until India, as the main participant in the natural circulation of stones, will not come out of lockdown. Add to this Antwerp’s diamond trading platforms, which practically did not work for three months and now are just beginning to restore trading activity.

All this led to a massive loss of liquidity in the global diamond pipeline and put individual enterprises on the brink of survival. If the flagships of the industry, De Beers and ALROSA, can afford to practically stop trading and spend the resulting free time to optimize production and increase work efficiency (which both declare in their press releases), the companies, which do not belong to the top league, but stay in the first league are facing problems, which require major changes to survive.

It is very interesting to observe the fate of three diamond mining companies, which are very different in history, geography, but similar in terms of their diamond output and sales. These are Petra Diamonds, Dominion Diamond Mines and AGD Diamonds - the three leaders of the “first league” which can significantly change during the recovery from the current crisis. I will not describe their business profiles, as you can easily find them in open sources, but I will draw your attention to something else: Petra and Dominion actually put their businesses up for sale due to discontinued cash flows, while AGD (although this company feels good from the point of view of production and finance) – due to the recent claims from the country’s Federal Antimonopoly Service to a deal closed three years ago - is now hanging between its three potential shareholders, Otkritie, VTB and Lukoil, being a non-core asset for each of them.

Thus, at the end of 2020, the market may see a move to sell diamond mining assets, which have a total diamond production capacity of ~ 15 million carats per year and a diamond sales potential of ~ $ 1.3 billion with operations in diversified geography (Africa, Canada and Russia’s Arkhangelsk Province). Moreover, given the general state of the world diamond market, the offer price may be at a historic low.

All the three companies under consideration have their own sales systems based not on sightholders, but on regular market auctions with simple and transparent regulation, ensuring high mobility and efficiency of sales in today's complex market. All the three companies use state-of-the-art, safe-diamond-recovery mining technologies to ensure the lowest possible damage to large-size, high-value rough, whose share in revenue generation will be growing rapidly. And, finally, all the three companies are practically free of historical obligations, which can be nominally described as "social load" and which have a profoundly serious impact on the balance sheets of De Beers and especially ALROSA. The above circumstances may contribute to the emergence of a bold investor who will be ready to spend quite affordable funds to consolidate these assets with the aim of creating Player No. 3 in the diamond market in 2021.

Where may such an aggressive and bold investor come from? If one will finally emerge, it will most likely come from Dubai, as local diamantaires are ready to give their eye teeth to seize a part of the world's diamond pipeline from India, and the creation of such a player is in their best interests. After a sharp drop in oil prices, the idea of ​​diversifying the economy is very popular in the Middle East, so candidates for creditors to fund such a deal may be found at the level of corporations and at the level of sovereign wealth funds.

The main obstacle to the creation of a new diamond mining holding may be the significant difference between business environments in Canada, Africa and Russia. Nevertheless, this obstacle is not fundamentally insurmountable, and the emergence of a new sufficiently powerful and competitive player would bring a significant share of positive feelings to the market. This would permit, firstly, to balance the positions of India, whose influence on the market, especially after the introduction of a moratorium on the import of rough diamonds into the country, may be negative, and secondly, would impart diamond pricing with the flexibility that is so necessary today.

Igor Kulichik, CFO of ALROSA in 2002-2017, member of the Board of Directors at AGD Diamonds since 2018