National Geographic Channel had an interesting episode called “Blood Red Rubies” that I tuned in to by total accident but stuck with.

The episode features a gemologist teaching local miners in Greenland how to properly mine for rubies. What particularly caught my eye was a very quick bit of conversation regarding beneficiation, or the participation in the value chain beyond the extraction of raw materials, but in the downstream cutting and polishing value-adding activities as well.

I found it interesting to note that such an initiative is not unique to diamonds (where Southern African nations are particularly interested in), nor is the confrontation of that desire with economic realities.

While in the main research phase of my project, I wanted to learn what were the places in the world whose diamonds should be sought out by consumers, and which should be avoided, even if, in a perfect world, that sort of thing were possible (it’s not). Generally, recommending an entire country be considered on or off-limits is a risky and foolhardy errand, and as I’ve learned, conditions and operations can vary greatly within a country and region. For example, diamonds from Rio Tinto’s mine in Murowa, Zimbabwe have evaded all tinge and drama that have generally accompanied diamonds from Marange. Obviously Marange is an easy entrant in to the latter category and not in the category of “diamonds doing good”, though the American jewelry industry has done a good job at keeping these stones out of their jewelry cases. The quality of diamonds coming out of the DRC is extremely low (and therefore the chances that these stones end up set in jewelry) at $8.84/ct, with the caveat that this depends on KPCS statistics being an accurate representation of production.

But what about Angola? There, the quality of diamonds is generally high at $136/ct (for comparison, in Botswana, the world’s greatest producer of diamonds by value is $156/ct), but equally high is the corruption, yet also the opportunity and the growth. Unfortunately, I’ve had an extremely difficult time getting accurate information out of this country through the few sources in-country that I’ve been able to connect with, but what I have found has only made me more curious. My full thoughts are available here.

Once upon a time…

BICC has an excellent report entitled “Legacy of a resource-fueled war: The role of generals in Angola’s mining sector” detailing the history of diamond mining, and in particular, artisanal diamond mining in the Lundas. This report specifically details the often-intertwined nature between the military and artisanal diamond mining in the country.

“Conflict”

Angola is one of the countries against changing the term “conflict diamonds” to encompass all violence, no matter the technicality that the current definition is restricted to: that the perpetrators be rebels (thugs on the government or private payroll are kosher). This seems like a no-brainer to me as well as to the countries where most diamonds are bought (U.S.A and the E.U.), but is a harder sell to the Southern and Western African producer countries.

Rafael Marques de Morais is the go-to man on corruption in Angola, the influence of the first family, and diamonds. His book “Diamanates de Sangue: Corrupcao e Torturo em Angola (Blood Diamonds: Corruption and Torture in Angola)” has gotten him embroiled in a libel and defamation suit against the Angolan generals and diamond mining companies that he accuses in his book of human rights offenses. I’ve wanted to get a hold of this book but cannot find an english translation.

Beneficiation

Some interesting headlines regarding benefaction and Angola:
Angola’s Endiama plans to buy gold to make jewellery

Angola’s national diamond company Endiama this year plans to purchase gold to make jewellery from the Central African Republic, the Democratic Republic of the Congo, Niger and Mali, the company’s chairman said in Cape Town.

Diamonds Help Angola Offset Drop in Oil Prices

“Value added activities in the diamond sector can have a positive impact on employment and economic diversification,” said the EIU in one of the most recent reports on Angola, while noting that these initiatives are just being launched.
Angola recently resumed diamond cutting and polishing, at a unit in Luanda and is planning to build a second unit in Lobito, Benguela province.

Chairman of the Board

“Angola: President’s Strategic Vision in Creation of Kimberley Process Highlighted”

The Chairman of the Kimberley Process stated that the diamonds that were used to feed armed conflicts today are called in Angola “Prosperity and development diamonds.”

Eureka!

Australian mining company Lucapa has been pulling type IIa diamonds out of the ground at the Lulo diamond concession, including an exceptional 131.4ct stone. In fact, I’ve read that the Lucapa operation has the potential to replace the country’s Catoca mine as the country’s largest.

So…

What I, as an amateur observer, can see:

• Current chair of the KP.
• Opposition to changing the definition of “conflict diamonds”.
• One of the most corrupt countries in the world (Transparency International)
• Production is expected to increase dramatically.
• Undisclosed partnerships with shell companies owned by the first family.
• Beneficiation and diversification a major priority for the country.
• Donor to the DDI, has been issuing licenses to artisanal miners.

This is simply an appeal to better information about the diamond production in this country. In my report I concluded that consumers might consider avoiding diamonds from Angola almost entirely because of admitted stigma, corruption and uncertainty, though I must admit I can be swayed to the other side based on better information.

With diamonds, much like the other subjects (religion, politics, foreign policy, etc), the more I read about the subject and the more complexities I realize, the less-pointed and more confused I get. There’s few greater joys to me than stumbling upon a fact or quote that turns my entire world upside-down. Here are (some) of those which launched me down longer roads of reading, research and rethinking:

1. De Beers is now 15% owned by the Government of the Republic of Botswana (GRB).

In 2004, the GRB acquired 15% of De Beers. For what it’s worth, this was also complete news to a Forevermark retailer I recently spoke with (given that being accepted into the Forevermark program was described to me as being the toughest application process with the most invasive background check this person had ever consented to, how do they not know this?). The remaining 85% is owned by Anglo-American, who increased their share from 45% when the Oppenheimer family sold its remaining 40% to … the company founded by Ernest Oppenheimer (Anglo), naturally.

In 2006, renowned industry analyst Chaim Even-Zohar bet that the GRB would sell their stake.:

“Anyone closely following the governmental strategies towards diamond mining and diversification will come to the inevitable conclusion that Botswana will sell – and probably sooner rather than later. Selling its stake in De Beers is, for many reasons, in the best interest of Botswana.” — Chaim Evan Zohar

Making bets on the future with certainty is generally a risky thing to do. Safe to say that this has not happened, and the GRB disagrees with that assessment. In 2013, De Beers moved their rough sorting and selling operation, DTC from London to Gaborone. This does appear to be, “for many reasons, in the best interest of Botswana”.

2. Most of the world’s diamonds (by weight) get polished in India

… but some mining companies like De Beers deliberately limit the size of the rough available to Indian sightholders, in order to protect the master cutting/polishing centers in Antwerp, New York and Tel Aviv. Moreover, a barrier to greater beneficiation (cutting and polishing in their country of origin) of diamonds in African countries, is that India maintains a massive cost of labor advantage over their African counterparts.
Not long ago, De Beers used to argue that:

“for a major diamond producer like Botswana, it would be national folly to prescribe that any percentage of their diamonds needed to be beneficiated locally.”— Former Managing Director, Gary Ralfe (2001)

Curiously enough, this position was reversed six short years (and a 15% acquisition by the Government of Botswana) later, under a new Managing Director:

“For the African diamond producing countries, beneficiation is not optional, not a passing whim motivated by political correctness, but an imperative, an absolutely essential and critical part of their macroeconomic policy designed to uplift their economies to provide education and jobs and healthcare for their people and to make poverty history…. We [De Beers] don’t embrace this out of misguided enthusiasm or altruism. No, we embrace it because it makes good business sense and because it is the right thing to do.” — Mr. Gareth Penny, Managing Director, De Beers

“Diversification and Beneficiation” is now proudly touted on De Beers’ website.

3. “Blood Diamond” wasn’t filmed in Sierra Leone.

A simple query of IMDB confirms this simple fact, but Ian Smillie, Executive Chairman of the Diamond Development Initiative, told me: “Small piece of info: the beach scenes in the movie were shot in Mozambique, but there are no mountains in the background in Mozambique, as in Freetown. But if you look at the movie, there actually are mountains – they used CG graphics to do it. Hollywood: dedicated to getting it right.” The country is still desperate to shake the stigma left from that movie, and of course now with the Ebola crisis, the urgency and difficulty of that job has increased dramatically.

EDIT: Rob Bates of JCK tells me: “You are correct about BD, but there were some stray shots filmed in Sierra Leone. (Zwick calls out one in DVD commentary)”

4. Cecil Rhodes’ first monopoly: water pumps

Years before purchasing all the mining concessions in Kimberley and founding De Beers with Rothschild money, Cecil Rhodes established his first monopoly by “[arranging] for the largest capacity water pump in southern Africa to be hauled to Kimberly where it was used in keeping diamond workings open during the seasonal rains. In the dry season this pump was able to be used in the production of a scarce and desireable commodity – Ice Cream.”

5. The Mysterious Car Crash: A Zanu PF Favorite

Edward Chindori-Chininga was a Zimbabwean Zanu PF MP, and Minister of Mines and Mining Development from 2000-2004. On the 1st of June, 2013, He had offered some incredibly nice things to say about the Kimberley Process and “its role and contribution to a conflict free diamond industry in Africa”, in addition to some very well-documented shortcomings and frustrations faced by African countries, and Zimbabwe in particular. Weeks later, he published a report critical of diamond mining operations in Marange, revealing extreme corruption, a lack of transparency (shocker in the diamond world, I know), smuggling, leakages of diamonds, etc. He also revealed to a researcher at PAC that he considered himself “a marked man”, and then days later was found dead of a “mysterious” car crash.

A co-worker of mine is originally from Mutare. When asked about this, he offered a little chuckle and noted with a sort of “yeah I’ve heard this one before” tone, that this is business as usual for ejected Zanu PF politicians whose perceived usefulness has run its course. Turns out, this is indeed business as usual for Zanu PF, and NewsDay catalogs a handful of such “mysterious” car crashes here.

6. Following UN embargo on Liberian diamonds, the Taylor regime relied on timber for funding.

Global Witness details:

To compensate for the loss of diamond revenue caused by international sanctions, Taylor sold Liberia’s forests to logging companies – shifting his sources of financing from blood diamonds to conflict timber. Among those who received logging concessions during this period was international arms dealer Leonid Minin who, at the time of his arrest in 2001, was planning a large arms deal for Liberia.[xiii] Also holding major concessions was Dutch national Gus Kouwenhoven, who ran the notorious Oriental Timber Corporation, which was involved in importing arms into Liberia and developed infrastructure that was used to transport weapons to Sierra Leone.

Namibia Diamond Trading Company (NDTC) chief executive Shihaleni Ndjamba has revealed that only 10 percent of the Namibian diamonds is sold locally while the rest is exported to De Beers Marine operation centre in Botswana. Briefing Prime Minister Hage Geingob on Tuesday, Ndjamba said although the state-owned company was still working on the current agreement of supplying 10 percent of diamonds to local sight-holders, it would welcome the government’s support in increasing the number of diamonds sold within the country.

via StarAfrica

CNBC Africa has a puff piece about resources in Botswana, particularly mentioning diamonds:

Mostly boilerplate stuff of a story told many times before, but a good primer, none the less. Briefly discusses the effort for beneficiation of resources in-country.

The Botswana-De Beers deal appears to be win/win. Botswana retains direct access to the world market for its diamonds while De Beers has long-term and uninterrupted access to one of the largest diamond supplies in the world. Over the long term, the De Beers move sets the stage for Botswana to emerge as a major participant in all aspects of the diamond industry, not just diamond mining. That’s good for the continued development of the country, already one of Africa’s success stories.

This article references how in 2013, De Beers moved their rough sorting and selling operation, Diamond Trading Company, from London to Gaborone.

Typically, rough diamonds have been hauled out of African countries and shipped to India, where they create an extraordinary amount of jobs in the cutting and polishing sector. Obviously if you’re an African country with ample diamonds but high unemployment, this might be the sort of thing that would anger you.

That sort of practice is, however, looking to change, by what is called beneficiation, which is where a country seeks to participate in the diamond pipeline beyond simply mining, but into diamond and jewelry manufacturing. This is one of the many good things going on in diamonds, but not without its challenges.

Personally, I see greater value in knowing that my fiancé’s center stone was cut and polished in either New York, Botswana, Namibia or South Africa. Why brand-name diamond manufacturers compete to consumers on minuscule differences in “the perfect cut” while glossing over more real differentiating features like this, I will never understand.

via Council on Foreign Relations

“The rough diamond course brings practical and relevant education to this gem producing region. By working with Ivorian officials and others in the industry, we can directly support artisanal miners and the development of the diamond sector as a whole. This is an essential step for a country that is now working hard to re-establish and grow the industry following its recent integration into the Kimberley Process Certification Scheme,” said Brad Brooks-Rubin, GIA’s global director of development and beneficiation.

Vice President Mujuru appeared to ignite a diplomatic storm Sunday after telling a church gathering that India had “built a whole town” from smuggled Marange diamonds.

Right now they are claiming that the Marange diamonds have been exhausted but no one here has any diamond rings or other jewels. No jobs were created locally in diamond polishing. All the diamonds were taken to India where they have built a town from Chiadzwa diamonds – it’s called Surat and yet Zimbabweans continue to struggle

via AllAfrica

[Executive head of the Non-Aligned Movement (NAM), Professor Arun Kulshreshtha] said Zimbabwe should take a leaf from countries that have developed vibrant economies from prioritising value addition and beneficiation.

“You should value add your diamonds and sell them at an auction that is located here. There is no reason of selling your diamonds in other countries.

“If you look at India, the city of Surat, they do not have the diamonds but look at Surat, it’s a diamond city with thousands of jobs.

Zimbabwean President Robert Mugabe said his country is planning to partner a Chinese company, Chow Tai Fook, to polish locally produced diamonds…
“We have discovered diamonds in the country and we are at production level but at the same time we have been thinking of cutting and polishing of diamonds.
“And of course we knew that there was a famous company that does polishing and goes beyond that, and so we would want to partner (it).”

via Rough & Polished