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DeBeers

Prior to the early 2000's an international cartel known as the DeBeers Corporation had nearly monolithic control of the price of rough diamonds. DeBeers bought and distributed a large percentage of the world's uncut, rough diamonds (especially from diamond producing areas located in Africa) and controlled the prices of the remaining diamond rough indirectly.

How does DeBeers operate? DeBeers Corporation is an international cartel that has controlled the price of diamonds since the mid 1930s. Anglo-American Corporation owns 45% of DeBeers; 40% is owned by the Oppenheimer family, which established DeBeers monopolistic, single-channel approach to rough diamond distribution; and 15% is owned by the government of Botswana. DeBeers buys rough diamonds from diamond producing nations: e.g., the Republic of South Africa, Botswana, Namibia, the Democratic Republic of the Congo, et al.

DeBeers sells these rough diamonds to approximately 80 "sightholders" (largely consisting of diamond cutting firms and jewelry manufacturers) which are the only companies authorized to buy rough diamonds directly from DeBeers. The sightholders are invited to attend a "sight" held at DeBeers Central Selling Organization in London, England approximately ten times a year (acceptance of the invitation is mandatory). Each sightholder is given a box of diamonds. The price of the diamonds is fixed by DeBeers, subject to some negotiation permitted for the sightholder, including the ability to defer acceptance of a portion of the box of diamonds until a later date.

Below is a link to an excellent article from MonoPetro as to how the DeBeers sight system works.

http://www.monopetro.com/en/central-selling-organisation-cso

Other Suppliers of Diamond Rough

"For over 100 years, De Beers had a monopoly over the mining and selling of the world’s diamonds. Diamond prices were largely controlled by De Beers as it controlled the world’s (rough) diamond supply. The monopoly started to break in 2000 when producers from Canada, Russia and Australia decided to sell the diamonds they mined directly to manufacturers instead of using De Beers as a middle man.....This new direction in diamond distribution has allowed diamond mining and production companies to be independent from De Beer’s influence and to become major players in the diamond industry." Andrea DiVirgilio, Top 5 Diamond Companies in the World, 12/13/2013.

As noted, there are currently three other major participants in the rough diamond market. Russia, Canada and Australia (in addition to a few other independent nations) sell all or a portion of their rough diamond production to individuals or companies independently of DeBeers. In 2014, DeBeers and Russia together, controlled 81% of world-wide diamond rough production -- DeBeers 46% and Russia (ALROSA) 35%.* In 2014 there were three other major diamond producers collectively controlling approximately 16% of the remaining world rough diamond production*:

Rio Tinto (largely Australian production) --6%*
Dominion (Canadian production)-- 6%*
Petra Diamonds (Botswana production)-- 4%*

!n 2014, all told, the five companies/organizations listed above, accounted for approximately 95% of the world's total rough diamond production

*Please refer to the table for Rough Diamond Sales for 2014 from an article entitled "Rough Bubble Bust" by Martin Rapaport, published in December 2015:

Retail Prices

One interesting aspect of the diamond business is that when dealing in better quality diamonds, small diamond retailers are generally not at a significant competitive disadvantage to large jewelers or department stores that purchase diamonds in bulk. Students who major in business administration are familiar with the term "economy of scale." This refers to the way that businesses that purchase large quantities of wholesale goods (like Wal-Mart or Costco, for example) generally receive substantial discounts. This allows them to sell the goods at a discount to the consumer. Companies that buy smaller amounts are generally at a competitive disadvantage because they generally pay more at the wholesale level and are unable to match the retail prices of large companies.

Generally, diamond retailers that purchase large amounts of cut diamonds at substantial discounts receive "the run of production" from a cutting factory or other wholesale vendor. This includes many sizes, shapes and qualities of diamonds-- which may include substantial quantities of lower quality diamonds (e.g., diamonds of lower color or clarity) or unpopular goods that are difficult to sell (e.g., unpopular shapes, or diamonds that are cut improperly to save weight). These lower quality, less desirable diamonds must sell in quantity at a discount or they will simply accumulate in the cutting factory's inventory.

On the other hand, diamond manufactures need to get all they can for top quality diamonds, which they generally sell individually or in small lots-- they generally do not discount significantly for bulk purchases. For example Ideal cut diamonds with better color, clarity, and desirable shapes (especially round brilliants, and other popular shapes that are extremely well cut) comprise a very small percentage of overall diamond production (1-2%).

It doesn't make sense for diamond manufacturers to sell the very limited amount of better quality, better cut diamonds in popular shapes at a significant discount to large companies for bulk purchases-- these stones are in short supply and in great demand.

Dimonz

As the proprietor of the Dimonz Company, I (Bill Bailey) do all of the buying for my company. I am a Graduate Gemologist (G.I.A.) with many years of international trade experience, buying diamonds in Antwerp, Bangkok (for smaller diamonds) and New York. I know the diamond market well. By paying cash or check for my diamonds (rather than getting them on consignment as many retail jewelers do), avoiding unnecessary middlemen, and buying from sightholders and manufacturers, I am able to obtain substantial discounts on the diamonds I purchase for resale. In most cases, I buy well enough to offer diamonds to you at actual wholesale prices, generally available only to people in the diamond trade.

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