Supply Shortage Main Issue Facing Industry – Rio Tinto Survey

Diamond experts worldwide consider a shortage in supply of rough diamonds one of the main challenges facing the industry, according to a survey performed by Rio Tinto Diamonds.

Of 159 respondents 31 considered supply shortage the most important challenge facing the diamond industry over the next five years.  Pricing and lower profit margins came in second backed by 20 respondents, while 19 listed synthetic/artificial diamonds as the biggest challenge facing the industry.

Other perceived challenges included reputation and image, supply chain transparency, conflict diamonds and the implementation of the Kimberley process.  Only 6 to 8 participants indicated social responsibility/community relations and economic conditions as a challenge to the industry.

Nearly all stakeholders agreed that guaranteeing an ethical chain of production was important for improving consumer confidence in the jewelry industry.  Some survey participants suggested improving relations and support of indigenous and local communities.

“We believe that RTD should show more often to the public and consumers that it is a clean company with a clean history and that it sells clean and issue-free products,” a European customer who participated in the survey said. “This is contrary to most other mining companies who are claiming the same but seem not to be believed by the public for one reason or another.”

RTD produces over 90 percent of the world’s supply of pink diamonds produced at its Argyle diamond mine in Western Australia. The company also owns 60 percent of the Diavik Diamond Mine in Canada's Northwest Territories, and a 78 percent stake in the Murowa diamond mine in Zimbabwe.

The company is a wholly-owned subsidiary of Rio Tinto Group, one of the world’s largest diversified mining groups.

RTD mined a total of 7.853 million carats of diamonds in the first half of 2008, down 31 percent from 11.446 million carats in 2007.

Despite the drop in production volume, diamond revenues rose to $571 million from $445 million the year before as a result of a rise in rough diamond prices.  EBITDA from diamonds was $239 million, while net income rose to $108 million from $90 million in the year earlier period.