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INDUSTRY TRENDS | Safeguarding the dream

Timely approaches to a timeless gemstone

Diamond, the hardest naturallyoccurring substance, is themost popular gemstone and

a symbol of enduring love.DO

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1882 2013

Global production volume (1882−2013)Millions of carats (gem only, 1882-2008; all carats included, 2008-2013)

SOURCE: DE BEERS

Note: Prior to 2008, Russian industrial carats were excluded from the total. From 2008, they are included.

It remains one of the greatest lines in market-ing. A late-night line scribbled by the copy-writer Frances Gerety, plagued by a morningdeadline and a bout of writer’s block. Shewasn’t quite sure about the line, but her cli-ent, De Beers, was. Gerety’s phrase, ‘‘A dia-mond is forever,’’ has appeared in all the

company’s advertisements for engagement ringssince 1948. Its alluring simplicity and timeless-ness stand in counterpoint to a complex industryfacing rapid change.

A new report on the industry suggests the timeis right for a fresh wave of innovation to reinforcethe enduring appeal of this extraordinary material.The just-released Diamond Insight Report 2014 isthe first in an annual series from De Beers analyz-ing major trends in the industry. Innovation and dif-ferentiation, it states, are essential to safeguard-ing the ‘‘diamond dream’’ in an industry that‘‘derives practically all its value from consumers’demand for diamond jewelry.’’

Consumer demand for diamonds is healthy. Thereport estimates global diamond-jewelry sales in2013 at $79 billion, representing 3 percentgrowth over 2012. China leads the way, showing acompound annual growth rate of 21 percent overthe past decade; the global average is 3 percent.The United States, historic powerhouse of the dia-mond-jewelry market, had a good 2013, with salesof polished diamonds rising by 7 percent (Chinasaw double that). Looking ahead, Goldman Sachsexpects the demand for diamonds to rise by11 percent between 2013 and 2017. China shouldforge ahead, with RBC reporting that the 2014Chinese New Year saw retail revenue up by32 percent at leading retailers.

Despite these robust figures, some 2,000 jew-elry retail doors have closed in the United Statesover the past five years. The growth of fine-jewelrysales over the past decade lags behind that of oth-er luxury products such as electronics, fine winesand beauty and personal care. Des Kilalea, a dia-mond analyst at RBC Capital Markets, is mindful ofthe risks. ‘‘Who,’’ he asks, ‘‘will be the buyers ofdiamond jewelry in 10 or 15 years’ time? If thereisn’t concerted marketing, diamonds could losetheir share of the luxury wallet.’’

Such concerns occupy the thoughts of EstherOberbeck, head of group strategy at De Beers. ‘‘Forme,’’ she says, ‘‘the challenge is how to communic-ate to consumers, how to get above the noise thatexists for so many other things people want.’’

The Diamond Insight Report calls for invest-ment in branding, marketing and raised retail

standards to ‘‘ensure that consumers, particularlyamong new generations and new markets, do notdrift away from the diamond-jewelry category.’’There are signs the retail sector is becoming, inOberbeck’s words, ‘‘a little more contemporary.’’Some 13 percent of women’s diamond-jewelry sales in the United States in 2013, for ex-ample, were made online, up from 5 percent in2006. Meanwhile, 40 percent of U.S. consumersand a quarter of Chinese women use the Internetfor research before purchasing diamond jewelry.Brands are increasingly popular; a third of U.S. con-sumers claim their diamond engagement ring isbranded, while in 2002 just 7 percent did.

The retail environment may be evolving fast,but the report is clear that ‘‘positive demandgrowth will almost certainly outstrip growth in pro-duction volume.’’ Production grew modestly in2013, but remains below precrisis levels.

The industry’s response has been twofold: first,to make the extraction process more efficient, ob-taining as much value as possible from existingmines; and second, to spark new efforts in explo-ration. Investment in the first of these options isunderway. Jwaneng, a cavernous, conical pit in theNaledi river valley of the Kalahari desert, is theworld’s richest diamond mine by value and is ben-efiting from huge investment. In Cut 8, a new,$3 billion project there, 700 metric tons of wasteearth is being removed to obtain 100 million car-ats of diamond. The mine’s owner, Debswana, a50/50 joint venture between De Beers and thegovernment of Botswana, estimates this extrac-tion will yield approximately £15 billion ($24.87billion) over the life of the mine.

Confidence in such projects is well founded.‘‘The diamond sector,’’ says Kilalea, ‘‘has beenbetter than any other mining sector in deliveringprojects and costs close to where they were prom-ised. They’ve been innovative in trying to protectdiamonds in the plant, in the X-ray technology usedto identify rocks that contain large diamonds andin milling techniques.’’

The rewards are clear, but so is the size of theinvestment required. Fixed costs, from electricityprices to labor, make mining ever more expensive.Between 1990 and 2013, capital costs for all dia-mond projects equaled $12 per carat. For projectscurrently in development, that figure rises to $25.

Getting the most value from existing mines iscrucial, as exploration has become increasinglychallenging. Since 2000, the Diamond Insight Re-port calculates, nearly $7 billion has been spent onexploration, but only the Bunder area in India has

proved significant. Budgets for exploration arewell below precrisis levels, low-hanging fruit hasbeen picked and exploration is heading for moreelusive, hence expensive, fields.

Lower carat supply will be felt in the fragmen-ted midstream, where the sale of rough diamonds,cutting and polishing take place. In a tight lendingenvironment, banks will back companies that canadd significant value and deliver innovation, suchas the laser technology that is improving precisionand yield. Consolidation in the midstream is inevi-table. ‘‘Because of the amount of capacity that ex-ists,’’ says Mike Elliott, global mining and metalsleader at Ernst & Young, ‘‘they’re working on razor-thin margins of just 1 percent to 2 percent. Capa-city has been building in developing countries asgovernments have sought resource nationalism,mandating ways of trying to capture more of thevalue chain. All that has done is add to supply andpush down the margins.’’

Whether it’s explorers carving through Siberianpermafrost, miners burrowing beneath the Kala-hari desert or a Gujarat brillianteer giving a dia-mond its final gleam, the journey a diamond takesbelies the simple beauty of the final outcome. TheDiamond Insight Report, Oberbeck hopes, ‘‘willgive retailers the weapons to tell this story, toreassure consumers that diamond is worth itbecause it is something unique, precious and hardto get.’’

In the 1980s, De Beers adopted a new tag:‘‘Isn’t two months’ salary a small price to pay forsomething that lasts forever?’’ Today’s diamondenvironment, in today’s world, asks both produ-cers and consumers more complex questions. Dia-monds are a finite resource, but demand for themis anything but. Those looking for diamonds,mining them, shaping them and selling them aredeveloping innovative solutions to this glitteringconundrum. J.B.

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OBJECTS OF DESIRE | Mingling beauty with history

A unique gift of nature, captivating imaginations through the centuries

Eight of the most illustrious diamonds in the world

DIAMONDS FOR DEVELOPMENT | The fruits of beneficiation

Reaping midstream benefits at the source of the stone

A Botswana success story: Rich natural resources plus sound governance equal huge gains in gross domestic product

Cut into oval, cushion, round, square or pear shapes, diamonds offer fire and purity unmatched in other gemstones. Right: The Millennium Star, target of a daring attempted raid at London’s Millennium Dome in 2000.

The Jwaneng diamond mine contributes between 60 percent and 70 percent of Botswana’s GDP.

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Sorters at Diamond Trading Company Botswana, the largest diamond-sorting facility in the world.

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Diamonds’ share of GDP in keyproducing countries, 2013Percent

SOURCE: THE WORLD BANK, KIMBERLEY PROCESS STATISTICS,

DE BEERS ANALYSIS

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Diamondproduction aspercent of GDP

Diamond exportsas percent oftotal exports

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W hen it comes to rarefied diamonds,jewelers have a propensity tospeak about mystique, eternity, ro-

mance and glamour. And not without reason.The archives of top-flight jewelry maisonslike Cartier, Tiffany and Graff brim with sto-ries testifying to the perennial appeal ofdiamonds.

At a frenzied bidding session in 1969, a69.42-carat diamond made auction history,becoming the first diamond to sell for morethan a million dollars. The buyer was Cartier.But two days later, the actor Richard Burton,a man passionate about diamonds, was de-termined to give this stone to his wife, Eliza-beth Taylor. Cartier agreed to sell it to Burtonon the condition the diamond be displayed inthe windows of Cartier’s Fifth Avenueboutique. Over several days, the Cartier-Burton-Taylor diamond attracted thousandswho came to admire a diamond destined fora star.

From the 317-carat Cullinan II diamonddiscovered at the De Beers Premier Mine inSouth Africa in 1905 and now resplendent inthe Queen of England’s Imperial State Crownin the Tower of London to the Taj Mahalheart-shaped diamond Richard Burtonbought from Cartier for Elizabeth Taylor’s40th birthday — said to have been the prop-erty of Emperor Shah Jahan, who built the TajMahal in memory of his wife — to the Tiffanyjewels worn by Carey Mulligan in the movie‘‘The Great Gatsby,’’ depicting the luxurious

world of 1920s New York penthouses andLong Island estates, diamonds have longbeen the ultimate symbols of power andwealth.

The allure of high-quality, iconic diamondsis a matter of beauty and rarity. ‘‘What mostpeople don’t know is that if you took all thediamonds that have been polishedthroughout history, they wouldn’t quite fill aLondon double-decker bus,’’ says Eli

I t was Nelson Mandela, characteristically,who ushered in the future. ‘‘I would like toappeal,’’ he told the 1993 Sub-Saharan

Oil and Minerals Conference, ‘‘for investmentin the mining, mineral beneficiation and oil in-dustries, not only of South Africa, but of thewhole subcontinent.’’ While since then thediamond industry has faced challenges inAfrica, it is demonstrating its capacity to dogood.

Twenty years after Mandela’s call, benefi-ciation — the creation of activities beyond

mining in producer countries — saw one ofits most significant moments when De Beersmoved its entire ‘‘sights’’ activity (where cus-tomers can inspect and buy diamonds) fromLondon to Gaborone, Botswana. The movehas had a transformative effect. Botswana isno longer merely a diamond-producing coun-try, but has made advances in midstream ac-tivities. According to the Gemological Instituteof America, there has been a risein the number of people workingin diamond polishing there, from500 in 2006 to more than 3,000today; polished diamond exportsare forecast to top $1 billion by2015, up from $100 million in2008; and the Diamond Technol-ogy Park is fully rented and a gov-ernment-commissioned expan-sion is due to be completed bythe end of the year.

‘‘We’ve seen significantchange here,’’ says Kevin Good-rem, vice president of benefici-ation at De Beers. ‘‘Chauffeurcars, restaurants, hotels and airlines have allgrown since the move. The sightholders findthe environment exceptional, with most com-menting that the facilities are better than inLondon. We’ve taken on 84 staff who werenot employed before and who are of excep-tional caliber. The quality of the people inBotswana is remarkable.’’

It was Mandela again who, in 2006, en-couraged the hip-hop and fashion magnateRussell Simmons and the African-Americancivil rights leader Ben Chavis to tell the storyon their return from Africa of the positive im-pact diamonds were having on socio-economic development. They witnessedprojects such as the Debswana HIV strategyin Botswana. Debswana, a joint venture be-tween the Botswana government andDe Beers, has provided antiretroviral drugsto employees and their families living with

HIV /AIDS since 2001 (around 23 percent ofadults in Botswana carry the virus).

On returning to the United States, Sim-mons and Chavis established the DiamondEmpowerment Fund, a nonprofit organiza-tion backed by members of the jewelry anddiamond industries, and its annual Dia-monds Do Good supporter program.

The DEF, says Chavis, has contributedover $2.3 million to causes suchas the Botswana Top AchieversProgram, which supports aca-demically excellent students asthey move toward key strategicroles; the African LeadershipAcademy, which identifies, devel-ops and connects the continent’snext generation of leaders; andthe CIDA City Campus College inJohannesburg, which offers fullscholarships for its business-de-gree program. ‘‘The DEF’s finan-cial contribution to these pro-grams,’’ says Chavis, ‘‘is indicativeof the broader global support the

industry gives to transformation and quality-of-life projects in Africa, India, China, Russia,Canada, Australia and the United States.’’

As Chavis indicates, Botswana’s gainshave been matched elsewhere in the world,nowhere more so than in India, where thecountry’s Gem & Jewelry Export PromotionCouncil calculated the industry was worthmore than $39 billion in 2012-13. A 2013task-group report for the Indian governmentestimated that just under a million peopleare employed in the industry. The reportlooked at the beneficiation program in Africaand elsewhere, recommending strongpolicies to support Indian sorters and buy-ers. As in Botswana, the trajectory is clearlylaid out. India, the report recommends, mustposition itself and the industry in terms of ad-vanced skills and a highly trained workforce.

Botswana was one of the mostimpoverished countries in the worldwhen it was granted independence bythe British in 1966. Gross domesticproduct per capita was $70. It waspredominantly agricultural, but 10 yearsof exploration were about to give thisfledgling nation an enormous boost. In1967, surveys confirmed diamonds atOrapa, and a mine opened just four yearslater. Three other major mines weresubsequently established, helping toturn Botswana into one of contemporaryAfrica’s success stories. In 2013, theWorld Bank reported Botswana’s percapita GDP as $15,675.

It would be easy to attributeBotswana’s economic growth purely toits diamond resources. Stable, shrewd

governance, however, has been just asimportant. Botswana was grantedindependence rather than having hadto fight for it. Consequently, it avoidedthe civil wars that afflicted so manydecolonized African states. The resulthas been four decades of uninterrupteddemocracy, sound fiscal discipline andenlightened social policies. Although23 percent of the population carriesthe HIV virus, the C.I.A. praisesBotswana for having ‘‘one of Africa’smost progressive and comprehensiveprograms for dealing with thedisease.’’

The government quickly recognizedthat diamonds would be pivotal in thecountry’s development and enteredinto agreement with De Beers, the sole

company mining there, to shareproceeds. Initially, the government held15 percent. In 1978, the formation ofDebswana saw the shares establishedat 50/50. That year also saw anagreement to mine at Jwaneng, whichopened in 1982. It is the world’s richestdiamond mine by value and contributesbetween 60 percent and 70 percent ofBotswana’s GDP.

The move of De Beers ‘‘sights,’’ orinspecting and buying activities, toGaborone in 2013 and theestablishment of cutting, polishing andtrading enterprises will see $6 billionflowing through the country’s bankingsystem. It is money that is allowingBotswana to diversify away from beingpurely a diamond producer. J.B.

These developments boost an industrythat has contended with negative coveragein the past. Reverberations remain from the‘‘conflict diamond’’ controversy, whichpeaked in the 1990s when Unita rebels useddiamond revenues in their war with the An-golan government. It prompted Robert Fowl-er, Canadian ambassador to the U.N., towarn the industry in 2000 that it faced thesort of boycott that had decimated the furtrade two decades earlier.

The Fowler Report was followed threeyears later by the Kimberley Process, estab-lished to prevent conflict diamonds from en-tering the mainstream rough-diamondmarket. ‘‘The Kimberley Process can takecredit for being the first multistakeholder ini-tiative that brought together government,

civil society and private-sector actors,’’ saysAlan Martin of Partnership Africa Canada, aNobel Prize-nominated nongovernmental or-ganization that attempts to control the flowof conflict minerals.

Nonetheless, warns Martin, vigilance re-mains crucial. ‘‘The landscape haschanged,’’ he says, ‘‘and you have issuesnobody talked about 10 years ago — reven-ue transparency, environmental degrada-tion, labor standards. These are critical to awell-managed, responsibly mined and tradedcommodity. The civil-society coalition hasgood relationships through the KimberleyProcess with many actors in the industry be-cause we know we win when we’re on thesame page.’’

J.B.

Izhakoff, honorary president of the WorldDiamond Council.

Perhaps this is why, while the world’smost confident diamond buyers may bemadly in love with the stones they acquire,they also see them as a means of increasedwealth. In 2006, Laurence Graff bought the78.1-carat Maharajah Diamond. It had notbeen seen in 50 years because it had beenlying in a bank vault. ‘‘The translucency, the

life in that stone, is beyond anything I haveever seen,’’ Graff was quoted as saying atthe time. He might have prized the diamond,but he also sold it the next day for a presum-ably dazzling, and naturally undisclosed,profit.

Today, as the diamond industry bracesitself for supply to wane, diamonds could be-come objects of even greater desire. Whilediamonds are forever, supplies are fading.

According to the Diamond Insight Report2014 just published by De Beers, quotingGoldman Sachs research, diamond demandis expected to expand at 11 percent be-tween 2013 and 2017, while global naturalsupply is expected to increase at 5.2 percentduring the same period.

Rio Tinto Group is currently holding atender for top pink diamonds from its Aus-tralian Argyle mine, with viewings takingplace in Sydney, New York and Hong Kong,and some stones are expected to fetch wellin excess of $1 million per carat.

Earlier this year, Cora International LLCpaid $25.6 million for the Blue Moon, a 29.6-carat vivid blue rough diamond discovered byPetra Diamonds, now cut to 12 carats andadmired for its clarity, cut and kaleidoscopichues. ‘‘The Blue Moon is a piece of history onthis planet,’’ says Arye (Ehud) Laniado, prin-cipal of the diamond-pricing consultancyMercury Diamond, advisers to Cora Interna-tional LLC. ‘‘Every day, we develop and cre-ate state-of-the-art medicines, machinesand technology beyond our imagination, butthere is a place beyond all this. The BlueMoon speaks of the power and beauty ofnature and the history of the earthitself.’’ C.A.

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1. The Blue Moon: Acquired by CoraInternational LLC in 2014, this 12-caratvivid blue diamond could provide cluesabout forces within the Earth when thediamond was created, according to theSmithsonian Institute’s top gemcurator, Jeffrey Post.

2. The Cartier-Burton-Taylor diamond:Less than 48 hours after Cartieracquired this 69.42-carat diamond ata New York auction, the actor RichardBurton bought it for his wife, ElizabethTaylor, who transformed the ring intoa pendant.

3. The Cullinan II diamond in QueenElizabeth’s Imperial State Crown: This317-carat stone, cut from the originalrough 3,106-carat Cullinan diamonddiscovered at a De Beers mine in1905, adorns the crown the queenwears at the opening of Parliament.

4. The Tiffany diamond: Bought byCharles Lewis Tiffany in 1878 for$18,000, this 128.54-carat fancyyellow diamond was worn by AudreyHepburn in a Jean Schlumbergernecklace for a 1961 publicity shot forthe movie ‘‘Breakfast at Tiffany’s.’’

5. The Windsor Yellows: A pair of canary-yellow pear-shaped diamond clips,bought by Graff in 1987 and given byEdward VIII to the American divorceeWallis Simpson — a remnant of aromance that led a British king toabdicate the throne.

6. The Hope Diamond: Discovered in17th-century India, this 45.52-caratblue diamond has a long list ofillustrious owners, including Louis XIV,Marie Antoinette, Harry Winston andWashington’s Smithsonian NationalMuseum of Natural History.

7. The Pink Dream: After this 59.6-caratoval vivid pink diamond, mined byDe Beers in 1999, fetched a record-breaking $83.2 million at Sotheby’s in2013, the buyer revealed he couldn’tpay. Sotheby’s bought it back for $60million.

8. The Koh-i-Noor: Rulers fought overthis 105-carat diamond for centuriesbefore Britain seized it when it tookcontrol of the Punjab in 1849. It isnow set in a Maltese cross in a crownformerly belonging to the QueenMother. C.A.

Kevin Goodrem, DeBeers vice president

of beneficiation.

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CONSUMERS | Shifting demand

An evolving global market reshapes jewelry retail sales

28 percentof U.S. retail diamond-jewelryvalue in 2013 was diamond

engagement rings

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In China, diamond rings are increasingly popular as part of women’s wedding purchases.

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Polished value: 23%

Chinese market growth over timeUS$ millions (nominal)

SOURCE: DE BEERS

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O ver the last 10 years, demand for dia-monds has shifted dramatically. Ac-cording to research commissioned

by De Beers and released in September, thediamond industry has its eyes on the UnitedStates and China, the world’s largest andfastest-growing diamond-jewelry markets.

While the United States accounts for 40percent of the world’s diamond-jewelry sales,China, Hong Kong and Macau together ac-count for 15 percent. Over the past year, U.S.sales of diamond jewelry grew 7 percent,while Chinese sales grew 14 percent.

A propensity toward brand-consciousbuying of diamond jewelry is affecting boththese markets. ‘‘In America, diamond-jewelrybrands have been gaining space, andForevermark is part of this growing retailerand consumer interest,’’ says Forevermark’schief executive officer, Stephen Lussier.‘‘While Chinese consumers prefer to buyfrom trusted domestic retailers like Chow TaiFook and Chow Sang Sang, since 2008Chinese sales of diamond jewelry fromCartier and Tiffany to the more affluentChinese have grown by eight to nine times.’’

Despite China’s recent economic slow-down, diamond polishers, jewelry designersand retail jewelers the world over are likely tobe betting on Chinese tourists for futureprofits. Chinese shoppers are already re-sponsible for 27 percent of global luxury pur-chases, with 60 percent of their luxury shop-ping taking place while traveling. The Chineseare predicted to spend a whopping $154 bil-lion on jewelry and other luxury items in 2014during an estimated 93 million trips, morethan five times the number of trips taken bythe Chinese in 2002, according to McKinseyConsumer and Shopping Insights. Chinese

travel abroad is expected to reach 135 mil-lion trips by 2016.

When Chinese women were recentlyasked to choose from a list of items or expe-riences they most coveted, fine jewelry cameout on top, with designer handbags comingin a distant second. While one in 100Chinese brides received a diamond engage-ment ring in 1994, that figure is now one intwo. In the next six years, China’s middleclass is predicted to grow from 200 million toover 500 million. The Chinese jewelry giantChow Tai Fook, a chain with well over twicethe revenue of Tiffany & Co., has establisheddiamond polishing factories, enabling it tobuy rough diamonds direct from miners.

In the United States, sales of diamondjewelry face fierce competition from otherluxury goods and experiences. When Ameri-can women were recently asked about thegifts they’d most like to receive, fine jewelrywas not a top-five priority. Holidays, electron-ics, home furnishings, spa days, designerhandbags and clothes came first. Diamondjewelry, however, trumped all other kinds ofjewelry in the popularity stakes for all agecategories.

Diamond engagement rings and bridaljewelry are a key area for American growthbecause in 2013, even though diamond en-gagement rings accounted for just over onein 10 pieces of diamond jewelry sold, they

represented close to 28 percent of retailmarket value. Customers are spending morethan three times more on engagement ringsthan they are on other pieces of women’sjewelry. Although fewer Americansare marrying and those who doare waiting longer before firstmarriages, the average spend peroccasion is rising, according to theresearch consultancy Mintel.

Among couples spending$8,000 or more on an engage-ment ring, De Beers found 75 per-cent of couples have a definedbudget in mind, but half end upstretching it. In good news for as-piring brides, over half of womenhave a say in selecting their en-gagement ring, with 35 percent choosing thering they plan to wear daily for the rest oftheir life and 25 percent dropping carefullycrafted hints.

Meanwhile, the growing presence ofChinese and Russian buyers and collectorsis noticeable at auctions for the world’s mostexceptional diamonds, according to Arye(Ehud) Laniado, principal of the diamond pri-cing consultancy Mercury Diamond, advisersto Cora International LLC, which bid success-fully against seven other companies to ac-quire the 29.6-carat Blue Moon diamond at aPetra Diamonds tender this year.

Evidently, preferred luxury-jewelry styles

also vary across cultures. ‘‘While we createjewels that transcend geographical boundar-ies, we take into account that Middle Easternclients are captivated by suites of necklaces,

bracelets and earrings,’’ saysFrancois Graff, chief executive of-ficer of Graff Diamonds. ‘‘In Asia,colored diamonds are popular,and European clients favor classicstyles, including diamond-linebracelets, necklaces and hairadornments.’’

The London-based, Russian-born custom-jewelry designerYana Zaikin, founder of Emily H.London, recently located a fancyvivid pink diamond of over five car-ats for a client’s engagement ring

and has received additional requests forblue and vivid orange diamonds. ‘‘I’ve no-ticed a surge in interest from newly wealthyindividuals in Nigeria, Indonesia andAzerbaijan who are chasing rare colored dia-monds,’’ she says. ‘‘Five years ago, my Rus-sian and Ukrainian clients preferred invest-ing in gold rather than wearable diamondjewels. But they’re also showing significantinterest in top-quality large stones, from twoto five carats, often seeking flawless stones,sometimes basing their decision on the GIA[Gemology Institute of America] certificateand an emailed video alone.’’

C.A.

Forevermark’s CEOStephen Lussier.

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ETHICAL LUXURY | Integrity and transparency

Fine jewelers build ethical concerns into business

The dynamic world of diamondswasproduced by the TBrand Studio internationaldepartment and did not involve the InternationalNew York Times reporting or editorialdepartments. Text by CLAIRE ADLER and JOEBOYLE.

Forevermark: The creation of a brand and a promise

A Forevermark inscription is a guarantee of adiamond’s responsible sourcing.

Although both Canada and Siberia offer potential diamond sources, these sites are often remote,inhospitable and covered in glacial ice.

70 percentof oil-drilling equipment

now usessynthetic diamond

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ALL MINING EXPL. EXPENDITURE US$ billions

Global diamond exploration budgets 2001−2013, by company typeUS$ millions (nominal)

SOURCE: SNI. METALS & MINING’S CORPORATE EXPLORATION STRATEGIES 2013;

INCLUDES GRASSROOTS, LATE STAGE AND MINE SITE EXPLORATION EXPENDITURES

2 2 2 4 5 7 10 13 7 11 16 21

T here’s no mystery about to where tolook for diamonds. But finding dia-monds of gemstone quality requires

lots of good luck, hard cash and hard work.‘‘We are constantly exploring,’’ says

Bruce Cleaver, executive head of strategyand corporate affairs at De Beers. ‘‘We ex-plore, and we explore even through financialcrises. We spend roughly $50 million a yearon exploration, in difficult jurisdictions, be-cause finding new mines is becoming moredifficult and the places to find them are be-coming more complicated to work in.’’

All of which explains why mining compa-nies are investing so much money in thetechnology that might unearth the next bigmine. A key tool in early-stage exploration isflying specialist machinery over potential tar-gets in an attempt to identify geographic an-omalies in the ground and narrow down loca-

tions for on-the-ground surveys.The Superconducting QuantumInterference Device (SQUID), de-veloped in collaboration withAnglo American, is able to sit on aplane, fly at low level and not beaffected by engine vibration,which would once have interferedwith the collection of data.

It’s an example of the type oftechnological development that isbeing used in the attempt to un-earth new mines. Explorationremains, nonetheless, very much ahuman activity, not simply a technical process.While much of the work is done at desks andon computers thousands of miles away from apotential site, exploration work requires peoplebreaking sweat on the ground.

‘‘Diamonds are always found at places of

old, thick continental crust,’’ saysAndy Beard of the department ofearth and planetary science, Birk-beck College, London University.These areas are well identified andlead to a search for the first sign ofindicator materials, such as darkgarnet, in sediment deposits.‘‘They’ll walk up streambeds with aGPS and grab small samples, akilo of gravel,’’ says Dr. Beard.‘‘That’ll be flown back and a drain-age map built to show where theseindicators are found. That map is

cross-matched with the results of geophysic-al surveys to see where the drainage inter-cepts a potential target.’’

‘‘There are lots of boots on the ground,’’says Dr. Beard. ‘‘It’s dangerous work as well.But the diamond is deeply engrained in ourpsyche.’’

This is simply early-stage exploration.Identifying kimberlite, igneous rock that issometimes diamondiferous, is one thing;identifying kimberlite with gemstone-qualitydiamond is quite another. In the past 140years, almost 7,000 kimberlite pipes havebeen sampled, 1,000 found to be diamondi-ferous and only 60 identified as sufficientlyrich in diamond to be economically viable.

Southern Africa and parts of Russia havebeen traditional locations for diamondmines, but Cleaver says it is unlikely moremajor mines will be found in these places. Hepredicts the next massive mine, if it’s foundat all, will be in central Africa, Angola or theDemocratic Republic of Congo. De Beers ex-plores in Angola, a difficult environment geo-graphically. Even in Canada, the miningcratons being explored are far north, withinor just outside the Arctic Circle — inhospit-able, remote and expensive. The same goesfor Siberia, which offers potential but iscovered in glacial ice.

It’s not just geography that poses chal-lenges, says Cleaver, though transporting

huge drill bits into the heart of Angola is a logis-tical puzzle and hugely costly. The legislativeprocess in some of these countries is em-bryonic, he adds. Luanda is also, somewhatcounterintuitively, calculated to be the most ex-pensive city in the world. Labor is expensive.

The costs aren’t limited to Angola. Cleav-er points to Russia where, for example, overthe past decade the price of electricity hasrisen 12 percent, fuel has gone up 17 per-cent and labor has gone up 19 percent. Thenumbers in southern Africa are similar.These costs also need to be multiplied by theamount of time it takes to move from discov-ery to exploration. From 1950 to today, theaverage time it took to take a mine from ex-ploration to production was 15 years. Forprojects currently in development, that timescale has increased to 20 years.

‘‘It’s a very risky venture,’’ says DerekHamill of Zimtu Capital Corp., which man-ages private and seed-level investment inresource-exploration companies. ‘‘Because

of that, exploration is going to be more at-tractive to guys with a risk-taking appetite.’’

Hamill says that the challenge of unearth-ing new mines is leading to the emergence ofsmall, specialist exploration companies.‘‘What you’ve seen is real cuts to explorationbudgets from the majors,’’ he says. ‘‘Whyspend the money when they already havedeposits they need to develop? I actuallythink the discovery phase is now more at-tractive to juniors.’’

Whatever the size of the company, muchof diamond’s glamour and allure comes fromthe difficulty of extracting it, and the accom-panying sense of excitement and adventure.‘‘The exploration folk,’’ says Cleaver, ‘‘are themost wonderful people. They are quite pre-pared and happy to go to remote places andspend months, sometimes years, of theirlives there. They are very, very passionate. Ifthese mines were sitting in London or Paris,diamonds wouldn’t be rare and wouldn’t sellfor what they do.’’ J.B.

I n May this year, Kering, owners of the jew-elry-making brands Gucci, Boucheron,Bottega Veneta, Pomellato and Qeelin,

announced that by 2016, all diamonds andgold in Kering products would be sourcedfrom verified operations that do not have aharmful impact on local communities, wildlifeor the ecosystems that support them.

According to its Sustainability Targets pro-gress report, Gucci’s purchase of 30 kilos (66pounds) of Fairmined gold — ethical gold ex-tracted by artisanal and small-scale minerscertified under the Alliance for ResponsibleMining’s standard — from the Sotrami minein southern Peru is the biggest purchase ofFairmined gold to date in the luxury sector.Where diamonds are concerned, Kering hasteamed up with external experts to enable thecompany to go beyond the Kimberley ProcessCertification Scheme (established in 2003 toprevent ‘‘conflict diamonds’’ from entering themainstream market) to prevent harm to com-munities and natural ecosystems.

Transformative to the industry was theestablishment of the the World DiamondCouncil, set up in 2000 to represent the en-tire industry from mining to retail, and thefoundation of the Kimberley Process — aunique collaboration between the World Dia-mond Council, the United Nations, 81 coun-tries and the nongovernmental organizationsGlobal Witness and Partnership AfricaCanada. The Kimberley Process remains thediamond and jewelry industry’s benchmarkfor the ethical sourcing of diamonds.

Kering is far from the only luxury companynow paying attention to its ethically drivenconsumers and aiming to go beyond theKimberley Process requirements.

The family-owned jewelry giant Chopard isworking with the Alliance for Responsible Min-ing to ensure its miners attain Fairmined cer-tification. At the Golden Globe Awards thisyear, Cate Blanchett wore diamond earrings

from Chopard’s Green Carpet Collection whenshe accepted her award for best actress.

‘‘Our clients have become more concernedwith where their jewelry comes from and how itis created, not just its quality and beauty,’’ saysChopard’s co-president and creative director,Caroline Scheufele. ‘‘They value our ability tocombine luxury with global responsibility.’’

Chopard’s long-term commitment to sus-tainable luxury includes using diamondssourced from the IGC Group, a member ofthe Responsible Jewelry Council.

‘‘In addition to adhering to the KimberleyProcess, many of our diamonds are laser-en-graved with a unique Gemological Institute ofAmerica tracking number,’’ says Francois Graff,chief executive officer of Graff Diamonds. ‘‘In-visible to the naked eye, it allows the dia-mond’s origins to be traced while protecting theperfection and beauty of the stone.’’

Fashion industry players are also increas-ingly following their ethical instincts. Design-ers including Vivienne Westwood, Sass &Bide and Karen Walker are contracting outbeading and sewing via the Ethical FashionInitiative, a joint effort by the United Nations

and the World Trade Organization that sup-ports some 5,000 artisans in Kenya andmore in locations including Haiti and Ghana.

This fall, the leading Japanese fashion re-tailer Cross Company is launching an eco-friendly fashion chain with ambitious goals togenerate $9.8 billion annually. During thisyear’s Berlin Fashion Week, an Ethical Fash-ion Show featured 116 brands, up from 36exhibitors in 2012.

Many jewelers are starting to addressbroader issues around raw materials head-on. Arctic Circle Diamonds creates 100 per-cent Canadian jewelry, incorporating dia-monds from mines that protect ecosystems,control water use and limit emissions, andwhich are cut, polished and set by Canadianartisans into designs of gold supplied by theCanadian Royal Mint.

More than 100 jewelry designers and re-tailers, including Cartier, Boucheron, Tiffany,Piaget and Blue Nile, are signatories of theGolden Rules against dangerous gold miningpractices set out by the environmental cam-paigners Earthworks, based in Washington,D.C. C.A.

The Jwana Game Reserve, adjoining the Jwaneng diamond mine in Botswana.

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In 2008, in the aftermath of heateddebate about the questionable journey ofcertain diamonds, De Beers recognizedthe time was ripe for a diamond brandthat spoke more intimately to itsconsumers and secured their trust. Itcreated Forevermark, the diamond brandfrom the De Beers group of companies,reflecting the company’s proprietarytechnology and increased transparency.

Forevermark was a turning point inthe criteria De Beers laid out for boththe aesthetics and the ethics ofdiamonds. The core of Forevermark’soffering is a unique inscription on eachdiamond that represents a promise ofsomething greater: a commitment torarity, beauty, the communities fromwhich it was mined, responsiblesourcing, environmental considerationsand the leveraging of closely guarded,patented De Beers testing andinscription technologies.

Today, China is one of Forevermark’smost important markets. ‘‘While brandscome under increased scrutiny fromconsumers who have a greaterunderstanding of artisanship and finecraftsmanship and a heightenedawareness of business, social andenvironmental responsibility, trust is thetop driver for Chinese consumers whenconsidering diamond-jewelry brands,’’says Forevermark’s chief executiveofficer, Stephen Lussier. ‘‘Ethicalsourcing appeals to the Chinese becauseit indicates the company is more likely tobe honest with them and provide agenuinely high-quality product.’’

Only a small number of mines in theworld have been approved asForevermark sources. Forevermark minesassume full responsibility for employeehealth and safety, provide employeebenefits and career opportunities, offer

HIV education and medication andimplement initiatives to empower women.They also have long-term plans to restorethe land they occupy. The Jwaneng minein Botswana has set aside areas of land inits vicinity dedicated to conservation andnature reserves, while the diamondmanufacturer Venus Jewel in Surat, India,supports educational charities that helpdisadvantaged young women.

‘‘I see it as a privilege to sell ourcustomers a diamond that has thepromise of being not only rare andbeautiful but, most importantly,responsibly sourced,’’ says JackDeAngelis, president of the authorizedForevermark jeweler Morton andRudolph Jewelers in New Jersey. ‘‘Ourcustomers feel great purchasing adiamond that helps people in so manyways.’’ C.A.

W alter Huehn speaks with the un-bridled enthusiasm of an under-graduate. But he is, in fact, the

highly experienced chief executive officer ofElement Six, a synthetic diamond super-materials company and part of the De Beersgroup of companies.

Element Six (so named because carbon,of which diamond is comprised, is sixth onthe periodic table of the elements) developssynthetic diamonds for a range of uses, in-cluding the production of abrasives, drawingupon diamond’s quality as the world’s hard-est material.

Diamond-coated cutting tools last longer,

cut faster and provide a better finish thancarbide-tungsten tools. They are used in anumber of industries, such as aerospace,automobiles and mining. The first sector inwhich synthetics made the breakthroughfrom being just a material to a commercialsolution, the oil and gas industry, is now halfa century old. More than 70 percent of oil-drilling equipment now uses syntheticdiamond.

‘‘Once you reach 70 percent penetra-tion,’’ says Huehn, ‘‘the challenge changes— it’s about competition, performance, con-sistency, differentiation. We’re not making amaterial anymore, we’re designing customsolutions based on a sophisticated material.Rather than just giving our customers some-thing and saying ‘make the best of it,’ wedesign a synthetic-diamond-based solutionthat enables them to come up with the mostdifferentiated solution possible.’’

The challenge is for synthetic manufactur-ers to start producing the material in ever-greater quantities. ‘‘For the past 20 years,’’says Paul May, professor of chemistry atBristol University and head of the CVD

Diamond Group there, ‘‘we’ve beensaying that once we can get a largenumber of diamond manufactur-ers making diamond of high qual-ity, then finally industries like theaerospace industry will take noticeand start treating diamond as acheap industrial material ratherthan as an expensive luxury.’’

It would be ironic if natural dia-mond’s high-cost allure and rarityheld back the synthetic diamondindustry. ‘‘Polycrystalline dia-mond,’’ says Professor May, ‘‘canbe made for a few dollars per carat. ElementSix, for example, will sell you a polycrystallinediamond that is one centimeter square byhalf a millimeter thick, which is solid dia-mond, for £40 [$66].’’ For the syntheticsbusiness, getting that message across to awide range of industries is imperative.

The next major progression, May sug-gests, will come when single-crystal (as op-posed to polycrystal) diamonds of six inchesin diameter are manufactured. At that point,he says, synthetic diamond will be able to

compete with silicon and move in-to the area of semiconductors.

The potential applications atthat point could be ‘‘world break-ing,’’ says May. He points to thepotential of synthetic diamonduse in solar energy, taking advan-tage of the fact that diamondemits electrons at much lowertemperatures than metals. Thisallows diamonds to convert thesun’s heat into electricity at com-paratively low temperatures,even on a cloudy day, making syn-

thetic diamond a direct competitor to photo-voltaic cells, which rely on light.

This sort of application is a long way fromthe traditional use of diamond as an abras-ive. ‘‘Everyone is stunned to hear about allthe things that have nothing to do with abras-ive properties,’’ says Huehn, pointing to dia-mond’s potential in water purification, disin-fection and the transportation of drugsthrough the body in targeted ways.

The world of synthetic diamonds is clearlya dynamic one, but requires monitoring. The

recently released De Beers Diamond InsightReport highlights the risk of undisclosed syn-thetics entering the market and weakeningconsumer confidence in diamond jewelry. Infact, Element Six is involved in developingsensors that help the industry identify syn-thetics. As the report notes: ‘‘The industryhas been successful in safeguarding con-sumer confidence. Continual investment indeveloping and deploying technology will berequired to sustain that success in future.’’

For Huehn, De Beers’ involvement in syn-thetic diamond is hardly counterintuitive.‘‘Let’s make sure we really understand syn-thetic applications for industrial purposes,’’he says. ‘‘The excitement of gemstones andthe excitement of synthetics is very different.At the end of the day, it’s all diamond.’’

J.B.

Walter Huehn, CEOof Element Six.

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THE WORLD’S HARDEST MATERIAL | Industrial applications

Synthetic diamonds for energy, medicine and semiconductors

Bruce Cleaver,De Beers strategy head.

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TO THE ENDS OF THE EARTH | New exploration

Extending the search in tropics and tundra