Jun 17, 2015

Mellier and Zharkov Address Presidents’ Meet; Stress Need for Stimulating Diamond Demand

Day Two of the Presidents Meeting being held in Tel Aviv in Israel saw the heads of De Beers and Alrosa addressing the attendees, each bringing up  pertinent points regarding the diamond industry and the challenges before it.

Philippe Mellier, Chief Executive of the De Beers Group, stressed the fact that it is a changed world we are living in today. “In recent years we have seen fundamental and permanent shifts in the way we interact with technology, the expectations we have of the products we buy and the way we consume media,” he said. But that is not all. There were changes at many levels. “For example, the world of international finance has seen major changes after the Great Recession in 2008-2009 and it will not be changing back,” Mellier added.

Mellier expressed the opinion that sustainable returns across the diamond pipeline are the key to investment to underpin further growth of the diamond industry. “Diamantaires need to make sustainable returns so they can invest in things such as new technology, marketing activities and business efficiency,” he explained. “Meanwhile, at De Beers we need to make sustainable returns so we can invest in things such as production capacity, with our current projects requiring expenditure of more than $3 billion.”

Saying that there was no easy answer  - “silver bullet” --  that would  ensure  “sustainable returns for all” he averred that there are “activities and investments that can enhance midstream prospects”.

“First, there is a need to generate consumer demand growth downstream – this supports the value of diamantaires’ polished diamond sales,” he said. “Second, there is a need to facilitate efficiency and maintain third party confidence in the midstream – this will reduce diamantaires’ operating costs. And third, there is a need to maintain availability upstream – this will limit the escalation in diamantaires’ input costs.”

Mellier said that De Beers’ multibillion dollar investment in three of the world’s most important diamond projects, was not “undertaken lightly” as they knew “it will be many years before we stand to make a single dollar of return on the billions we commit”.

However, De Beers did not shy from going ahead as, he said, “... our optimism in the industry’s long-term future is shared almost universally by industry analysts and commentators, as hundreds of millions of new consumers around the globe are set to purchase diamonds in the coming years.”

He concluded by saying:  “.... if we keep pace with this rapidly changing world then, despite our bright history, our greatest successes will lie ahead of us.”

President of Alrosa Andrey Zharkov’s address, amongst other aspects, examined the current state of the diamond industry and the challenges confronting it and also provided an insight into his company and its plans on the exploration and production front in Russia and elsewhere.

Zharkov also stressed upon the need for joint effort to stimulate consumer demand for diamonds, including through promoting diamond as an emotional symbol. The need for this arose as, he said, "Diamonds have been losing their symbolic value and have become just another product in the luxury arena. Today we are seeing the first steps of diamonds regaining their glory."

Zharkov went on to say: “The diamond trading centres play an important role in the development of our market. Alrosa will continue to foster close relations with diamond centres and industry organisations to contribute to the sector development, information exchange and consumer confidence.”