DE BEERS has outlined changes to its rough diamond sales process in which it will target sightholders that are best positioned to deliver the goods to the market.
Citing people familiar with the matter, Bloomberg News said De Beers explained the proposed new system at its most recent ‘sight’ or sales meeting, held in Gaborone, Botswana last week.
It involves dividing up sightholders – some 80 to 85 polishing and cutting companies invited to ten exclusive tenders a year – into three categories consisting of dealers, manufacturers and integrated retailers. In so doing, De Beers hopes to sell its diamonds to the buyer most suited to delivering the item to the consumer.
De Beers may also decide to slim down the number of buyers, said Bloomberg News.
According to the newswire, the current sales system rewards the most frequent buyers which encourages a market abuse in which sightholders sometime purchase diamonds they don’t need in order to secure future purchases when the market is in better shape.
Cutters and polishers – also known as the mid-stream in diamond sector parlance – have had a hard time of it lately. Demand has been low whilst bank credit for the sector has been shrinking, hurting the ability of cutters and polishers to manage inventories.
Asked about proposed changes to the way De Beers sells its diamonds, Anglo American CEO, Mark Cutifani, told Miningmx in February that no buyer would be unaffected. “We have to re-think and re-imagine it, but we also need to do it with the midstream, not to the mid-stream,” he said.
De Beers reported 50% lower profits of $558m for the 2019 financial year – a hefty decline from its 10-year profit peak of $1.8bn in 2014. Anglo American owns 85% of De Beers.