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De Beers

De Beers and the various companies within the De Beers Family of Companies engage in exploration for diamonds, diamond mining, diamond trading and industrial diamond manufacture. It was founded as the De Beers Mining Company in April 1880 by Cecil Rhodes during the South African diamond rush of the early 1880s.

De Beers is active in every category of industrial diamond mining: open-pit, underground, large-scale alluvial, coastal and deep sea. Mining takes place in Botswana, Namibia, South Africa and Canada.

Mining in Botswana takes place through the mining company Debswana,a 50-50 joint venture with the Government of the Republic of Botswana. In Namibia it takes place through Namdeb, a 50-50 joint venture with the Government of the Republic of Namibia. Mining in South Africa takes place through De Beers Consolidated Mines (DBCM), 74% owned by DeBeers and 26% by a broad based black economic empowerment partner, Ponahalo Investments. In Tanzania it occurs through a partnership with the government of Tanzania, 75% owned by De Beers, 25% by the government. In 2007 De Beers began production at the Snap Lake Mine in Northwest Territories, Canada; this is the first De Beers mine outside of Africa. In July 2008 De Beers opened the Victor Mine in Ontario, Canada.

Trading of rough diamonds takes place through the Diamond Trading Company through wholly-owned and joint venture operations in South Africa (DTCSA), Botswana (DTCB), Namibia (NDTC) and the United Kingdom (DTC). The various DTCs within the Family of Companies sort, value and sell approximately 40% of the world’s rough diamonds by value.

The Family of Companies employs about 20,000 people around the world on five continents, with 17,000 employees in Africa. Over 7000 people are employed in Botswana, over 7100 in South Africa, 3800 in Namibia, 700 in Canada and over 800 in Group Exploration.

Business structure

De Beers Investments is the privately held, ownership company of De Beers Societe Anonyme (DBSA), and is registered in Luxembourg. It is made up of three shareholdings: Anglo American plc has a 45% shareholding, Central Holdings (the Oppenheimer family) has a 40% shareholding, and the Government of the Republic of Botswana owns 15% directly. De Beers Societe Anonyme (DBSA) is the management company of the De Beers group.

The Family of Companies

The De Beers Family of Companies is involved in most parts of the diamond value chain. Companies are as follows:

De Beers Diamond Jewellers

In 2001, De Beers entered into a retail joint venture with French luxury goods company Louis Vuitton Moet Hennessy (LVMH) to establish an independently managed De Beers diamond jewellery company.

The joint venture, called De Beers Diamond Jewellers Ltd sells diamond jewellery. The first De Beers store opened on Old Bond Street in London and there are now De Beers retail stores in the following locations:

Marketing

Over the last century, De Beers has been highly successful in increasing consumer demand for diamonds. One of the most effective marketing strategies has been the marketing of diamonds as a symbol of love and commitment.

A young copywriter, Frances Gerety coined the famous advertising line "A Diamond is Forever" in 1947, allegedly while she was dreaming.

In the year 2000, Advertising Age magazine named "A Diamond Is Forever" the best advertising slogan of the twentieth century.

Other successful campaigns started by De Beers include the "eternity ring" (as a symbol of continuing affection and appreciation), the "trilogy" ring (representing the past, present and future of a relationship) and the "right hand ring" (bought and worn by women as a symbol of independence).

De Beers is also known for its television advertisements featuring silhouettes of people wearing diamonds, to the music of Palladio by Karl Jenkins.

Forevermark

De Beers has introduced Forevermark diamonds to markets in China, Hong Kong, India and Japan. "Forevermark diamonds are natural, untreated, responsibly sourced, and cut and polished by a specially selected diamantaire." Forevermark diamonds have an icon and identification number inscribed on the table facet of the diamond. The inscription is 1/500 of the depth of a human hair and applied using De Beers technology developed in Maidenhead, United Kingdom, and Antwerp, Belgium.

The Diamond Trading Company

The Diamond Trading Company, the rough diamond sales and distribution arm of the De Beers Group, sorts, values and sells approximately 40% of the world’s rough diamonds by value. Currently the DTC has a combination of wholly-owned and joint venture operations in South Africa (DTCSA), Botswana (DTCB), Namibia (NDTC) and the United Kingdom (DTC).

The diamonds sold by the DTC are sourced primarily from De Beers’ own mining operations in South Africa and Canada, and through its joint venuture partnerships with the governments of Botswana, Namibia and Tanzania.

Technicians in London, Kimberley, Windhoek and Gaborone sort these diamonds into approximately 12,000 different categories based on size, shape, quality and colour, for DTC Sightholders.There are 79 Sightholder companies who buy the rough diamonds from the DTC and its partner offices. Sightholders travel to London, Kimberley, Gaborone and Windhoek ten times a year for their Sight. DTC Sales in 2007 were $5.9bn.

The Diamond Trading Company develops diamond technology and operates a research and development facility based in the United Kingdom, to support the consistency of DTC rough diamond assortments for Sightholders and downstream industries in the DTC’s producer partner countries.

Sightholders are required to comply with the De Beers’s Best Practice Principles, which set out various objective standards of conduct within three main areas: business, social, and environmental responsibilities. The Best Practice Principles ensure that the De Beers Family of Companies, Sightholders and applicable third parties operate to an ethical, legal, professional, social and environmental standard, including being committed to the Kimberley Process.

Changes to De Beers' business model

The transformation of the company, from the late nineties to present, is becoming more widely known. Sometimes referred to as a monopolist, De Beers at one time sold anywhere from 60-80% of the world's diamonds.

This was done through a single channel marketing structure that was favoured by most in the diamond industry and producer countries for creating structure and stability, and maintaining consumer confidence in gem diamonds. Currently De Beers sorts, values and sells approximately 40% of the world's rough diamonds by value, but as a result of company transformation, is now more profitable than when it maintained a greater market share.

A range of factors contributed to the need for change in the De Beers model. In the 1990s it became increasingly evident that De Beers’ industry custodianship and supply-controlled model was no longer viable. De Beers was also unable to conduct business in several jurisdictions where it had interests or a corporate presence due to their dominance in the diamond industry. In addition, more producers from varied locations such as Russia, Canada, and Australia chose to distribute diamonds outside of the De Beers framework.

Also, diamond jewellery markets had fallen in comparison to other luxury goods. The behaviour of consumers had changed and the diamond industry, being in a world unto themselves, had been slow to respond to market dynamics.

To address this, on behalf of its own interests and that of the industry as a whole, De Beers conducted a strategic review with Bain & Company, consequently changing its business model from a supply-controlled industry to that which was driven by demand. De Beers also implemented their Supplier of Choice sales strategy.

The diamond industry of today is markedly different to that of a decade ago, and is a complex and constantly evolving geo-political phenomenon.

Current major players in the diamond industry are the African producer countries, i.e. the Government of the Republic of Botswana, the Government of the Republic of Namibia, De Beers, Rio Tinto, BHP Billiton, Lev Leviev, Harry Winston, and Alrosa.

Conflict Diamonds (The Kimberley Process)

De Beers policy in the 1990s, which applied to all of Africa, was only to buy those diamonds that were legitimately traded and that it believed were not used to fund rebel groups, although as a leader in the industry they came under scrutiny and were widely believed to be a prominent dealer of conflict diamonds. In 1999, in line with a zero-tolerance policy, De Beers stopped all outside buying of diamonds in order to guarantee categorically the conflict-free status of De Beers diamonds.

In December 2000, the United Nations General Assembly adopted a landmark resolution supporting the creation of an international certification scheme for rough diamonds. By November 2002, negotiations between governments, the international diamond industry and civil society organisations resulted in the creation of the Kimberley Process Certification Scheme (KPCS). The KPCS sets out the requirements for controlling rough diamond production and trade. The KPCS became effective in 2003.

De Beers states that 100% of the diamonds it now sells are conflict-free and that all De Beers diamonds are purchased in compliance with national law, the Kimberley Process Certification Scheme and its own Diamond Best Practice Principles.

De Beers is active in the Kimberley Process, and a participant in the Diamond Development Initiative (DDI). The Diamond Development Initiative aims to address the political, social and economic challenges facing the small-scale informal diamond mining sector and to optimise the beneficial development impacts of small-scale formal diamond mining to diggers and their communities.

Legal issues

Gem diamonds - From 2001 onwards several lawsuits were filed against De Beers in US State and Federal courts. These alleged that De Beers unlawfully monopolized the supply of diamonds and conspired to fix, raise and control diamond prices. Additionally there were allegations of misleading advertising. Whilst De Beers denied all allegations that it violated the law, in November 2005, De Beers announced that an agreement had been reached to settle civil class action suits filed against the company in the United States, and in March 2006, three other civil class action suits were added to the November agreement. In April 2008, De Beers confirmed that Judge Chesler of the US Federal District Court in New Jersey had entered an order approving the Settlement, resulting in a Settlement arrangement totaling $295 million USD. De Beers does not admit liability. As part of the Settlement, persons who purchased gem diamonds within the past ten years may be eligible for compensation.

Industrial diamonds - In 2004 De Beers pleaded guilty and paid a $10 million fine to the United States Department of Justice to settle a 1994 charge that De Beers had conspired with General Electric to fix the price of industrial diamonds.

European Competition Commission - In February 2006, De Beers entered into legally binding commitments with the European Commission to cease purchasing rough diamonds from Alrosa as of 2009. In January 2007, the European Commission announced it had rejected all outstanding complaints against the Diamond Trading Company's Supplier of Choice sales strategy.

Sustainability

De Beers publishes an annual "Report to Stakeholders" which is coordinated by Maplecroft Consultants in the United Kingdom. The Report covers De Beers approach, economics, ethics, employees, communities, environment, and a range of case studies, initiatives and related web sites. The first report was published in 2006. It was reviewed by Ethical Corporation magazine as "transparent but not entirely reader friendly. The latest "Report to Society" which covers information and data from 2007 can be found on the company web site.

External links

See also

Popular culture

  • The popular band, the Arctic Monkeys, played "Diamonds are Forever" at Glastonbury in 2007.
  • Crime journalist Kris Hollington has written a book, Diamond Geezers, about the spectacular attempted theft of the De Beers Millennium Collection from the Millennium Dome which took place in November 2000.
  • The 1971 James Bond film Diamonds Are Forever directly cites De Beers.
  • Comedian Ron White (of Blue Collar Comedy Tour fame) has mentioned the De Beers slogans in his stand-up routines, claiming that they should just "go ahead and say it: Diamonds...that'll shut her up."
  • In Soldier of Fortune, episode 4, season 12 of the television show Law & Order, De Beers is the basis for the fictional Gerard Diamond Company.
  • The 2003 comedy How To Lose A Guy In 10 Days depicts the fictitious diamond mogul couple, the "DeLauers". This is a play on the name De Beers.
  • In the film Blood Diamond, De Beers is represented by the fictional corporation, Van De Kaap.
  • In the film Flawless, De Beers is represented by the fictional corporation, London Diamond.
  • In the 2007 comedy Knocked Up Seth Rogen's character, Ben Stone, proposes to Katherine Heigl's character, Alison Scott, with an empty box. He says he doesn't have the ring yet but one day he will give her the ring she deserves. He has already chosen it and it's at De Beers.
  • The webcomic Questionable Content, in strip number 774, has sarcastically accused De Beers of "subverting humanity's genetic drive to reproduce so we'll buy more jewelry."
  • The 2004 video game Grand Theft Auto: San Andreas features a commercial on one of its radio stations advertising the fictional company "De Koch Fine Jewels," a play on De Beers.
  • The animated television sitcom Family Guy features a fictional commercial in the vein of the De Beers commercials with the slogan, "Diamonds: She'll pretty much have to."

References

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