Diamond Merchants Going Upstream

With the rough suppliers encouraging diamond manufacturers to enter into joint alliances with diamond jewelry manufacturers and retailers, the need for the industry to look "upstream" - to team up with diamond mines in an effort to secure the continued supply of rough diamonds, is often viewed as something beyond reach.  

Mistakenly, mining is seen as something only for the "big players". Nothing could be further from the truth.  

This was proven again this week by IDI's Dan Gertler, who, very quietly, and for relatively little money, took a major stake in Lesotho's Satellite Pipe Project, presently being developed by Canada's publicly listed Minegem Inc. It's going to be a small mine: 290,000 carats a year, valued at about $45 per carat and is expected to be operational within a few months. But the interesting part is that Gertler will be able to purchase the entire production at market prices - for the life of the mine! Lev Leviev has similar arrangements with Namco in Namibia and Catoca in Angola. Tiffany has a comparable (more limited) arrangement with the Diavik mine.

Diamond manufacturers, in their strategic planning, should not ignore the exciting opportunities, which are developing upstream. The risks maybe higher - but so are the rewards.