Mines, Fees, CPAs - DTC Considering Developments to SoC

Naturally this set the rumor mills fast into action with one Israeli economic news site reporting that De Beers has declared war on Lev Leviev and will block his efforts to become a Sightholder.

What exactly DTC is planning is not officially known. It won't discuss this publicly until it talks with its clients about this directly, but sources in the DTC shrugged off these reports, to say the least.

One thing for sure is a limitation on diamond mining companies that can apply to become Sightholders – under certain and specific conditions. Notice about the policy went out to Sightholders, brokers and applicants alike yesterday (Wednesday).

“The policy, contrary to allegations in the press and elsewhere, is not to prevent or prohibit diamond mining entities from applying to become Sightholders," says Rosalind Kainyah, DTC’s External Relations Director. "Our primary concern is that it is simply not possible for the DTC to supply any company that has a material interest in diamond mining such that it competes with De Beers in the diamond mining sector without this raising fundamental legal and commercial concerns.”,    

She goes on to say that the DTC’s concern is with supplying companies that, by virtue of the scale of their diamond mining activities or the importance of diamond mining in their overall portfolio, can “legitimately be considered to be material competitors of the De Beers group of companies”.

The concern, at least partially, is that a competitor will be exposed to De Beers' proprietary information. “The exchange of such information can give rise to very significant legal and commercial concerns both for the DTC and applicants,” she adds.

Due to this, Sightholders and applicants are required to sign a 'self-declaration of non-material interest in diamond mining activities’, with a clear definition of what 'a material interest' is:

Applicants who (i) are relevant diamond mining companies or (ii) control or are controlled by relevant diamond mining companies and/or (iii) are controlled by a company that has a material interest in diamond mining.

A "relevant diamond mining company" is defined as any business or company where over 5 percent of the annual group world-wide turnover AND over $25 million of annual group world-wide turnover is derived from the mining of diamonds.

Another development on the table is a two percent charge to cover marketing costs. The DTC isn’t confirming this, but the likelihood of this happening is strong for the reason that Sightholders and applicants are willing to accept this – easily!

When asked how they feel about paying 103 percent for their DTC boxes (the two percent charge plus one percent that goes to the broker) all said they are willing to do so as DTC boxes still cost less then ‘outside’ goods, plus they know that as Sightholders they will get a steady supply. In other words - it’s worth it.

What else is in store? There is a good chance that a sight will be granted for two and a half years. One Sightholder joked that this is necessary to allow De Beers enough time to go through the lengthy marketing plans each Sightholder intends to implement, saying the answer to this item alone in the questionnaire is “a heavy book”.

Will they be required to have a CPA attached to them at every business meeting? This probably raised a smirk in the DTC halls, but some Sightholders say they will be required to be audited by external CPAs on behalf of the DTC to ensure that they meet Best Business Practice standards set by the company.