A few months ago I had the pleasure of attending a tech/kiteboarding networking event called Mai Tai in Cabarete, Dominican Republic. If there were ever an event designed almost specifically to appeal to me, this is it: kiteboarding, technology, startups, add in a few dashes of Burning Man / Robot Heart parties, and you have “me” encapsulated.
I met a rather idealistic, optimistic, wild-eyed and fascinating young lady who, after telling her of my odd interest in diamonds, quickly interrupted me to tell me a bit about Diamond Foundry, confidently boisting of how they were going to blow the diamond industry apart, completely uninterested and even a bit flippantly dismissive in what I had to say about the DDI or ForeverMark or Botswana.
“There have already been a few companies attempting such with lab-made diamonds. They never can quite get the color up there, can they? Mostly H-L colored stones, and most of them max out at about a carat.” I retorted.
“No, but they’ve figured it out and they’re perfect diamonds now”
I told her about the DDI and the good work they do in the field, helping artisanal miners in Sierra Leone, Angola, DRC, Côte d’Ivoire how to do their risky work, yet also minimizing the chances of death by drowning, cave-ins, geological prospecting and rough diamond valuation, and mitigation of environmental impact.
“I wonder if that’s actually even a good thing”, she posited, as I about gasped. “The people of Sierra Leone need to all become programmers.”
I’ll leave judgement of the wisdom, feasibility and maturity of that statement to my readers. “How could it be that, with no other economic options available to them at all, saving them from drowning or death by cave-in is somehow a bad thing?” I thought.
This week, Diamond Foundry came out of stealth mode with their billionaire and celebrity backers, and I’m trying to gather my thoughts. The goods listed on the rather tiny inventory on their site seem near identical to what has been offered by Gemesis / Natural Grown Diamonds for years, with colors mostly in the H-L range, and most stones under a carat. Maybe the better goods are forthcoming; They certainly have the hype. Furthermore, the stones are apparently not graded by a trusted 3rd party, but by a GIA-trained gemologist. Not to infer that those stones are incorrectly graded, but is there not a conflict of interest when the grading is done by the same party as the one doing the selling?
DF has already announced that they won’t be competing on price. Rather, they may price their goods at higher prices than competitors. With colors mostly in the H-L range, they certainly aren’t competing in quality either, it seems. What then are they competing with?
Assurance of origin. Diamonds born in California, from renewable energy, in a sustainable process. A 100%, nerve-soothing guarantee.
How is this better than assurance of diamonds being “responsibly sourced” by ForeverMark? Does this not seek to capitalize off of a common thinking that all of “Africa” is straw huts and AK-47’s, unsuitable for “ethical” consumers? Does this not do the same that CanadaMark may do, with assurance of Canadian origin, and allowing consumers to draw whatever conclusions they like (no matter how correct) from there?
Undoubtedly, DF’s customers will pay the premium for equal or lesser goods, and walk away from the jewelry counter thinking they’ve done something “ethical” and “good”. But what if they pick DF because of their opinions on De Beers being the “monopoly” that they no longer are? What if they pick DF because of fears of “conflict diamonds” that mostly don’t exist any more, or disappearing Marange diamonds that probably can’t be found in US stores anyway? What would be the “ethics” of collapsing national economies and livelihoods because of mutable and incorrectly-placed stigma? Will DF make diamond customers out of people that otherwise wouldn’t be?
Or maybe they choose DF because they’ve read of issues I’ve discussed on this humble blog: they’ve seen an antagonistic Peter Meeus speech and want nothing to do with him or the Mugabes or the Dos Santos clan? What if they’ve read about the problems at the KP that won’t ever be addressed because all decisions require unanimity? What if they read about under-invoicing and transfer pricing and want nothing to do with that problem, either? Wouldn’t the diamond industry, with almost no good news coming all this year and a gloomy forecast, then outright deserve to be “disrupted”?
From the perspective of a concerned consumer trying to do the right thing, there are plenty of legitimate gripes to be had about the diamond industry: lack of traceability and therefore the general absence of a guarantee that my diamond is doing ‘good’, weakness of the KP, under-invoicing and transfer pricing, enabling corruption, environmental damage, etc (I’ve made my gripes known here). But consumers are extremely powerful, and we are less powerful, not more, when we act on incorrect information. A speed-reader could be occupied for weeks reading one similar-sounding anti-diamond article after another, but there some are global standouts that actually deserve attention … that they should be ignored (I’m aware of the irony).
This is mostly a rehash of the old and boring “diamonds have no intrinsic value, are a bad investment and we only desire them because of De Beers” argument, as if the consumer is mindless (false), diamonds have no desirable qualities (false), and the only value to consider is what I am offered at a pawn shop or on eBay (false). This reasoning is, well, intrinsically “bullshit”, and Jewelry Atelier does a better job than me of responding to this argument and its other claims here. This argument appears to be more frequently-deployed to diamonds than other equally “valuable” goods for some reason. If the writer’s article is to be true, then it is also true for a multitude of other items people widely consider “valuable”. I won’t even bother reacting to the claim that we only demand diamonds because of “A Diamond is Forever”…
In addition to making nearly all the same claims made by the piece above, my favorite claim made here is that “De Beers has a global monopoly on diamond mining”. Words matter, especially when you have several million views. I remain perplexed about how exactly a company could create and enforce such a monopoly, unless they had somehow confiscated all shovels, pans and sieves in the world. Nevertheless, what they had, was a near-complete monopoly on the supply of rough (very different). It’s also important to note the tense of the verb: had. What they have now is far from it, unless CollegeHumor believes that 22% of global rough production and 37% of sales constitutes a “monopoly”. Being that this piece of trash was published in 2014, it seems that they either do believe so, or started with a conclusion and then lazily hacked together evidence to fit. I lean towards the latter. De Beers also liquidated their stockpile over a decade ago.
Jason Miklian created quite a stir when he published his excellent essay, “Rough Cut” in Foreign Policy. After an in-depth investigation in to diamond manufacturing in Surat, India (where over 90% of the world’s diamonds get cut and polished), he boldly concluded that up to 25% of the world’s diamonds are blood diamonds.
Mr. Miklian’s figure has been intensely debated, and there seems to be some confusion between the terms illicit diamonds and blood diamonds. Important nuance of the difference between “up to 25%” (which is a rather large range, but strictly means 0% at the low end, to 25% on the high end)” was therefore manipulatively lost in the headline when Jezebel.com reported that a full “quarter of all diamonds in stores are blood diamonds”: when given a range, they picked the highest end and saw it fit to publish, because it was more headline-worthy. In our tl;dr world, this may be all that most people read.
Moreover, it’s further dishonest to say that a full “quarter of all diamonds in stores” being blood diamonds. By writing “in stores”, we can assume that we’re talking about gem-quality diamonds, and not diamonds in general. While artisanally-mined stones (those most likely to be called “blood diamonds”) represent roughly 15% of world rough production, their share of world gem production is about 4%. However, it would also be dishonest to claim that diamonds mined artisanally are by definition “blood diamonds”, as the tough conditions of which they are mined — and who benefits — vary greatly dependent upon the mine, and when they are extracted. AADM is also ineradicable, and the more proactive approach as advocated by the DDI is most promising. Furthermore, “of all diamonds in stores” seems to lazy assume that all retailers have the same sourcing policies and therefore the same chances of winding up with a blood diamond. This is not the case, and Mr. Miklian himself even suggested to me that I look at Tiffany and Forevermark as viable options.
One could easily call alluvial Marange diamonds “blood diamonds” (or at the very least, less “diamonds doing good”), but those diamonds are not as likely to wind up behind a jewelry counter, as their quality is generally low and they have a noticeable green tint (casting further doubt on the headline “and nobody can tell which ones they are”). For what it’s worth, Ritani, Blue Nile and Brilliant Earth all have explicit an anti-Marange sourcing policy displayed on their respective websites, and trade in green-tinted stones is banned on the polished diamond trading network RapNet. Simply put, these companies understand reputational risk, and have been proactive about publicizing their efforts.
We could easily call many diamonds from the DRC “blood diamonds” (also an excellent article by Mr. Miklian), but of course, while one of the world’s top producers by volume, the quality of stones coming out of the DRC is generally low ($25/ct according to the KP) as well.
This business has recently gone defunct, but its literature is forever in my memory, and in that of Archive.org. Consider the following sentences: “Since [man-made diamonds] are in fact real diamonds, there is little remaining reason to endure the stigma now attached to natural diamonds. We feel the time has come to start transitioning those employed in diamond mining to sustainable livelihoods in other industries, while phasing out diamond mining altogether. It simply isn’t needed any more.”
Man-made diamonds certainly sound nice on paper, but are not without their limitations: the difficulty of removing nitrogen from the synthesis process generally results in diamonds of a color in the H-K range (if you don’t believe me, go ahead and look at Pure Grown Diamonds’ inventory yourself), the stones tend to max out at just under a carat, and environmental impact depends on how those HPHT machines get their energy.
I can find every reason in the world for being insensitive about future unemployment in the fossil fuels industry should we immediately transition to renewable energy sources, but to call for replacing all of what many countries, communities and millions of people depend on (some with no other options) with rows of HPHT machines, simply because of fungible “stigma”, is a sophomoric argument at best.
Diamonds, like Middle East geopolitics, are an issue that I’ve read a lot about, and the more I read and the more complexities I realize, the less pointed I become. Every time I’ve been linked somewhere, like clockwork this toad emerges from beneath his bridge to call me a shill for the diamond industry, including, as he foolishly and tastelessly somehow saw appropriate, on my fiancé’s Facebook page. Frustratingly, I’m still trying to figure out what exactly the point of this person’s argument is. Is it that by paying taxes to the Israeli Government, all business and citizens are complicit in the occupation, and therefore all diamonds cut and polished in Israel are “war diamonds”?
Frankly, I have too many friends that both live in Israel and disagree with their governments’ policies to buy in to this argument. I’ve already spent too much time thinking about this sad person.
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.
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
Diamonds are so hard to find that explorers have pretty much given up trying.
More than $7 billion has been plowed into the hunt for the gem since 2000, according to top supplier De Beers, and the results have been meager, with no major finds. That’s led producers including BHP Billiton Ltd. to pack up their maps and drills and head for home. The amount spent looking for diamond- rich kimberlite formations underground has dropped by half since 2007, when exploration investment topped $1 billion.
The diamond industry is facing what seems to be a perfect storm from many threats: decreased supply as a result of aging established mines and a lack of major new discoveries, increased demand from India and China, undisclosed synthetics being introduced into the pipeline (and nobody seems to know where they come from, of course). It’s certainly going to be very interesting times ahead.
I’ve found this particularly fascinating. De Beers addresses changing consumer tastes, the rise of demand from China, safeguarding the supply chain from synthetics, pressure from banks on the middle stream, etc.
“Unless major new discoveries are made in the coming years, supply can be expected to decline gradually from 2020,” De Beers said, forecasting rocky times ahead for the US$85 billion a year industry.
Existing mines in Botswana, South Africa and Namibia are becoming depleted and the need to dig deeper has made operations less profitable.
De Beers said exploration has now turned to Angola, the Democratic Republic of Congo, Zimbabwe, Arctic Siberia and Canada.