De Beers Plans For Angola, DRC and Canada

July 30, 2004

De Beers Plans For Angola, DRC and Canada

De Beers is confident it will soon be allowed back into Angola, which would alleviate the shortage of diamonds facing the world's largest producer in a fast-expanding global market, reports the Financial Times of London.

"We are on a good roll in Angola," Gary Ralfe, group managing director, told FT. "We are more confident." De Beers left Angola, a big producer of high-quality diamonds, in 2001 after the collapse of an agreement with Endiama, the state-owned diamond company. Negotiations with the government have stalled several times since.

"We do not believe Lev Leviev's presence in Angola is a hindrance to us going back," said Ralfe, referring to one of De Beers' main competitors. "He would not have anything against us prospecting there."

De Beers also plans to resume prospecting soon in the Kasai region of the Democratic Republic of Congo. It closed its offices there in 1999 in response to increasing market and consumer concerns over so-called "conflict diamonds." The DRC is a full-fledged participant in the Kimberley Process, the U.N.-backed initiative to stem illicit diamond trading. "Negotiations with the DRC authorities are going well," said Ralfe.

Next year, De Beers will start building the first of three new mines in Canada, which will produce $500 million worth of rough diamonds a year towards the end of the decade. "We need more," said Ralfe. "We need to find large supplies of diamonds" to feed fast-growing markets such as China and India and continuing strong demand in the U.S., the U.K. and France.

Dwindling production has led De Beers to increase prices of rough diamonds by 14% in the past 12 months, but there is no risk of inflating a price bubble that could burst. "Prices are rising at a steady and sustainable rate. The fundamentals are good to very good and I can see no red flashing lights at all," said Ralfe.

The one important threat De Beers faced was that of synthetic diamonds, he said, which were manufactured for use in jewelry by two companies in the U.S.. As a defensive strategy, De Beers is planning a marketing campaign that will underline the natural aspect of diamonds and will hinge on the "forever" mark, visible only under a microscope, as an "icon of confidence" for consumers, said De Beers.

Consumers will be told they have a choice between "nature's greatest treasure, over 1 billion years old, or something manufactured two weeks ago," said Ralfe. "The real threat is synthetic coming to be regarded as a substitute for natural diamonds."

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