DIAMOND

9 November 2011 | Vol.26 No.683

By Chaim Even-Zohar INTELLIGENCE

The Final Days of the Oppenheimer Diamond Dynasty Chairman Nicky Oppenheimer called it a “bittersweet time.” Those who talked to Nicky after the dramatic, though not wholly unexpected, announcement of the Oppenheimer family’s exit from the diamond empire it had created found him more sad than excited. “The discussions around accepting this [$5.1 billion] offer have been very difficult for Jonathan and me; after all, the Oppenheimers have been involved in the diamond industry for more than 110 years. However when presented with the offer from Anglo, we had to think in the wider context of what was in the best interest of the family as a whole. After much debate we came to the unanimous decision that the right way forward for the family was to accept Anglo American’s offer.” The end of any dynasty is generally shrouded in Nicky Oppenheimer drama – stuff that movies are made of and about which bestseller books are written. There is the carefully BRIEFS planned “public scenario,” the media-spin, the attempts to craft and manage the final version of the dynasty’s history and, what investigative journalists call, the “real behind the scenes story.”

Lack of Natural Successor It was known that the Oppenheimer family wanted “out” of De Beers, especially Nicky’s sister, Mary, and mother, Bridget, but that Nicky really would have wanted his son to continue the Oppenheimer legacy. The Oppenheimers held chairman and director positions in both Anglo American, which was founded by Nicky’s grandfather, Ernest, in 1917, and in De Beers, of which Anglo American wrestled control in the 1920s , for about 100 years. Jonathan was groomed to lead A Confidential Service for Executives in the Diamond and Diamond 6913 2011 KP PLENARY  6915 4 CORNERS OF THE GLOBE  6917 DIGGING THE DIRT Jewelry 6919 MOVERS AND SHAKERS  6920 BRIEFLY NOTED  6921 OFF THE SHELF Business EDITORIAL

the fourth Oppenheimer generation in the diamond dynasty. Botswana Puts Shareholders ‘on Notice’ One may recall the elated Daily Telegraph story of only A decade ago, the Oppenheimer family still owned some 8 a few years ago, in September 2005, announcing “Jonathan percent of Anglo American; this holding has dwindled to closer Oppenheimer, the heir apparent of the diamond dynasty which to only 2 percent today as the family has been offloading Anglo runs De Beers, moved a step closer to taking American shares mostly to Chinese buyers. (It may be recalled over from his father at the helm of the that, in 2006, the family holding company, E. Oppenheimer & family’s business interests when the Son, started to sell off it Anglo American’s shares to China Vision company announced a dramatic Resources. Further sales in 2010 brought the family’s holding to management shake-up.” The London below 2 percent.) daily continues: “For the past 18 De Beers’ shares are owned 45 percent by Anglo American, months, Mr. Oppenheimer, [then] 40 percent by the Oppenheimer family and 15 percent by the 36, has been managing director of government of Botswana, which had quietly been watching the the largest division of the company Oppenheimer disposal of Anglo American shares. Throughout the and its historical heart, called De past year, the financial markets had been awash with speculation Beers Consolidated Mines in that Anglo American may be looking to exit the diamond business. South Africa. … Following During Gareth Penny’s final days as De Beers Chief Executive the reorganization, Mr Officer, there had been market talk about a possible relisting Oppenheimer will now of De Beers. The Oppenheimer family had been rumored to be Jonathan Oppenheimer work closely with his “a seller” for many months. father Nicky at the The last thing Botswana wanted was to take the risk that top of the De Beers it suddenly would have a Chinese partner. It needed to put group. He will also chair the Canadian arm, which is expected in safeguards. It wanted to use its 15 percent as leverage to to open its first diamond mine in 2008.” control its diamond future. Botswana found that opportunity The sad fact is that Jonathan didn’t “have” what it takes when it renegotiated its marketing agreement with De Beers. to assume the reigns. Throughout the years, Nicky had often In the first few months of 2011, afterDTC Chief Executive Officer faced embarrassing questions about his son’s abilities – which Varda Shine and her team had completed all the negotiations were invariably rebuffed with fatherly love and passion. It didn’t with Botswana for a ten-year marketing contract, the negotiations change the facts. In the last few years, Nicky kept his son close suddenly grinded to a halt. The signing was delayed and delayed. to him allowing Jonathan to serve as “Head of the Chairman’s There were all kinds of excuses – lawyers took time, waiting for Office responsible for the Direction and Implementation of overall a new CEO to come in, etc. – but as we then reported in this Group strategy.” Whatever that means. publication, the sticking point was one single clause that would Over the past year, Nicky’s frantic attempts to catapult

Jonathan into the leadership position were clear to all. When Sir John Parker announcing the appointment of the new De Beers CEO, Philippe Mellier, – a few days after Diamond Intelligence Briefs had first published his identity – Nicky repeatedly stressed the team decision of “Jonathan and I.” Indeed, in the first presentation to shareholders, Mellier expressed the words “Jonathan and Nicky” many a time. Jonathan joined Mellier on many of his meetings to the diamond centers, especially Antwerp. There was clearly a re-shifting and re-positioning of the Jonathan role in De Beers during the past year. The concerted efforts to “position” Jonathan came in the wake of Nicky being slighted by Anglo American Chair Sir John Parker, who refused to appoint Jonathan as a Director at Anglo American after Nicky decided to step down after serving there for more than 40 years. Sir Parker gave all kinds of “governance reasons.” These were lame excuses. To deny an Oppenheimer his rightful place in the board room of Anglo American is akin to refusing Mickey Mouse entry into Disneyland. The writing was on the wall.

DIAMOND INTELLIGENCE BRIEFS 6910 EDITORIAL

allow Botswana to renegotiate the 10-year contract in the event agreements. We believe that this is a matter of about six months there would be a change in the shareholding of De Beers. – and that the deal will be finalized in the second quarter of 2012. Both Anglo American and the Oppenheimer family’s Central Botswana will have the opportunity “to buy cheap” – but it Holding Ltd. company resisted that clause. A ten-year marketing still will need US$1.3 billion cash to do so. That’s a lot of money. contract is “bankable” – it has enormous value. A package of Moreover, it still may be “overpaying” since a minority share De Beers’ shares is worth far more with a 10-year guaranteed should be priced lower than a controlling shareholding. diamond off-take agreement with Botswana than without it. The Last Thursday, when Anglo American Chair and CEO together agreement guarantees a 10-year orderly cash-flow. The two with Nicky flew into Gaborone to inform President Ian Khama major shareholders in De Beers didn’t want that clause – but of the deal, the Botswana president had plenty of reasons to Botswana didn’t give in. be satisfied. The one clause that had held up the De Beers marketing agreement for such a long time had paid off. Never No Willing Seller-Willing Buyer Environment before had the country exercised the amount of leverage and In the end, Botswana made a compromise with its shareholders. influence on a De Beers share transaction. The 10-year marketing contract would NOT be renegotiable in the event a change in shareholding would take place among the EXISTING shareholders. This would have dramatic financial consequences for Nicky: to get optimum value for his family’s shares in De Beers, he would need to sell his stake either to Anglo American or to Botswana (or to both). Selling to a third party became a lesser option. Giving the appropriate spin, Nicky told staff and clients that “if we were ever to sell our stake in De Beers, Anglo American was always going to be its natural home as they have been major shareholders in De Beers since 1926 and have a good knowledge of the diamond business.” With all due respect to Nicky, if another party would have paid more – the family would undoubtedly have gone for the higher option. But Botswana denied them the opportunity to shop around. The government used its leverage artfully.

Sales Price is Below Market Value No one will cry too much when getting a US$5.1 billion price – and an option for additional payments under certain circumstances. The leading diamond analyst in the market, DTC Botswana Sorters Royal Bank of Canada’s Des Kilalea, thoughtfully notes that “the price agreed is some 30% below our valuation.” The US$5 The Effects of One Clause billion price tag sounds less attractive if one is being told the Anglo American is really a winner here. A few months ago, very same day that the true value would be US$1.5 billion more. it was willing to sell out. The markets called Anglo American There are other estimates that put the actual market price even either a buyer or a seller of De Beers’ shares; it was clear that higher, but that isn’t really relevant. What is important to realize the current structure of three shareholders was not sustainable. is that Botswana’s clever contract renewal negotiations limited It had a 45 percent holding that it wasn’t managing; it wasn’t the Oppenheimer family’s options. consolidated in its balance sheet; it could not use its stake as collateral to reduce its financing costs. Change was needed. What’s in it for Botswana? The final text of the Botswana marketing agreement provided The terms of the agreement allows Botswana to exercise an opportunity to buy the Oppenheimer family’s stake in De its pre-emptive rights and increase its own shareholding in De Beers at a bargain price. What a difference one clause in a Beers to 25 percent, leaving Anglo American with 75 percent. marketing contract can make. In a statement, the Botswana government says that “this option will be explored in the coming months.” It is not in a hurry; it Following are excerpts from the Anglo American press release can make this decision at any time before the deal is actually of November 4th announcing its acquisition of the Oppenheimer closed – after getting the necessary regulatory and shareholder family's interest in De Beers.

DIAMOND INTELLIGENCE BRIEFS 6911 ANGLO AMERICAN ANNOUNCEMENT

Anglo American Agrees to Acquisition of Oppenheimer Family’s 40% Interest in De Beers for US$5.1 billion nglo American plc and CHL Holdings Limited (CHL) have certain that Anglo American will provide strong support to Philippe announced an agreement for Anglo American to acquire Mellier and the De Beers management team,” says Oppenheimer. Aan incremental interest in De Beers, increasing Anglo American’s current 45 percent shareholding in De Beers to up Benefits of Anglo American’s to 85 percent. Increased Shares Anglo American has entered into an agreement with CHL and “This transaction is a unique opportunity for Anglo Centhold International Limited (CIL), together representing the American to consolidate control of the world’s Oppenheimer family interests (CHL Group), to acquire their 40 leading diamond company – De Beers,” percent interest in DB Investments and De Beers sa (De Beers) for says , Chief Executive of a total cash consideration of US$5.1 billion, subject to adjustment Anglo American. “Today’s announcement as provided for in the agreement. marks our commitment to an industry with highly attractive long term supply and Terms demand fundamentals. Underpinned Under the terms of the existing shareholders’ agreement by the security of supply offered by a between Anglo American, CHL and the government of the new 10-year sales agreement with our Botswana, the latter has pre-emption rights in respect of the partner, the Government of the CHL Group’s interest in De Beers, enabling it to participate in the Republic of Botswana, this forms a transaction and to increase its interest in De Beers on a pro rata compelling proposition. De Beers’ Cynthia Carroll basis, to up to 25 percent, according to a press release issued management team has led the by Anglo American and CHL. In the event that the Botswana business successfully through the government exercises its preemption rights in full, Anglo American, financial crisis and into a stable position and it is now well placed under the proposed transaction, would acquire an incremental 30 for the future, with improving performance throughout 2011,” she percent interest in De Beers, adds. “I believe that the benefits brought by Anglo American’s taking its total interest scale, technical, operational and exploration expertise and to 75 percent, and the financial resources, combined with the unquestionable leadership consideration payable by of De Beers’ business and iconic brand will enable De Beers to Anglo American to the CHL enhance its position across the diamond pipeline and capture Group would be reduced the potential presented by a rapidly evolving diamond market,” proportionately. Carroll concludes. The transaction is Sir John Parker, Chairman of Anglo American, adds: “The expected to be accretive purchase of an incremental interest in De Beers is fully aligned with to underlying earnings the Board’s strategic priorities. The value created in De Beers and before depreciation and the diamond industry by the Oppenheimer family over the past Philippe amortization on fair value century has been a remarkable achievement. We look forward Mellier adjustments in the year of to increasing our involvement in the business and building strong acquisition. The transaction links and relationships with De Beers’ Sightholders and partners.” does not alter the existing arrangements for the management of De Beers, including Nicky Oppenheimer’s position as chairman, Impact on Botswana and Southern Africa prior to completion. Philippe Mellier will continue as CEO of On behalf of Botswana, the Minister of Minerals, Energy, and De Beers. Water Resources, Dr. Ponatshego H Kedikilwe, says “The diamond The transaction is subject to regulatory and government industry is a major contributor to our economy in Botswana. approvals and required third-party consents (if any) and is We are grateful to the Oppenheimer family for their vision and expected to close in the second half of 2012. contribution to the diamond industry and to Botswana and we will proudly take forward that legacy with Anglo American. We A ‘Momentous and Difficult’ Decision look forward to building on the excellent relationship we have Commenting on the agreement, Nicky Oppenheimer, with Anglo American, both through our ownership of De Beers representing the Oppenheimer family interests, says: “This has and through the Debswana joint venture.” been a momentous and difficult decision as my family has been In its statement, Anglo American says it looks forward to working in the diamond industry for more than 100 years and part of De more closely with governments through De Beers’ joint venture Beers for over 80 years. After careful and deliberate consideration partnerships in Botswana and Namibia and with De Beers’ BEE of the offer, and what is in the best interests of the family, we partners in South Africa to share expertise and tailor programs to unanimously agreed to accept Anglo American’s offer…I am employees and the wider communities as may be appropriate.

DIAMOND INTELLIGENCE BRIEFS 6912 REACTIONS TO KP PLENARY AGREEMENT

Industry and Interested Parties Respond to KP Plenary Agreement As DIB reported in its cover story last week, the recent Kimberley Process (KP) Plenary in the Democratic Republic of Congo resulted in an agreement enabling the immediate resumption of rough exports from two KP-compliant mines in Zimbabwe’s Marange diamond fields. While this agreement and its various components, as well as other Plenary decisions, were welcomed by international trade and governing bodies, some responses, specifically from NGOs, were less positive. Below are some of the varied reactions, including an explanation of the U.S. stance on the Marange agreement, which was to abstain from the vote. To read the KP Plenary Administrative Agreement, click here: http://tinyurl.com/cpjkkvy

WFDB's Avi Paz Warns KP Agreement EU Urges Zimbabwe to Honor Commitments is 'Just the Beginning' n behalf of the European Union (EU), Catherine Ashton, n praising the KP Plenary decision on Marange, World Othe High Representative of the Union for Foreign Affairs IFederation of Diamond Bourses (WFDB) President Avi and Security Policy and Vice-President of the Commission, Paz expresses hope that the decision will enable a period has officially commended the KP agreement on Marange. of stability for members of the diamond supply pipeline. Recalling the June KP Intersessional in Kinshasa, where “Zimbabwe has a great role to play in the future of no consensus was reached regarding the exports of world diamond production,” Paz says in a WFDB statement. diamonds from Marange, Ashton cites the subsequent “The country’s diamond wealth can and must serve as a EU initiative as helping to preserve “the credibility” of the means to raise the living standards of all its citizens. It is of KP. “After months of intensive negotiations with all parties, utmost importance that all players in the pipeline support an agreement has now been reached on the basis of this this resolution, regardless of their criticism of it,” Paz adds. initiative, which protects the integrity of the KP, respects Paz also congratulates Zimbabwe Minister of Mines and the core concerns of Zimbabwe and the EU, recognises the Mining Development Obert Mpofu, KP Chair Mathieu Yamba, concerns of Civil Society and meets the expectations of and WDC President Eli Izhakoff for their determination in diamond producing and importing countries,” Ashton says. pursuing the agreement. The EU statement also urges Zimbabwean authorities The WFDB president warns, however, that this agreement to honor their commitments “without further ado,” and is just the beginning of a long process. “All parties now recognizes that this agreement “is a positive outcome will have to step up to the plate and make sure they not only for the KP but also for the people of Zimbabwe, respect the agreement in full. We can be sure that the enhancing transparency so that they can benefit from the Zimbabwean people and their representatives, NGOs, revenues that will derive from the export of their natural the global diamond business community, and the world resources.” at large will be looking over the KP’s shoulder, critically and continuously. This is an opportunity not to be missed,” Paz concludes.

WDC: 2011 KP Plenary was ‘Historic Success’ he World Diamond Council (WDC) welcomes what it calls Tthe “historic success” of last week’s KP Plenary in Kinshasa, specifically acknowledging the leadership of KP ChairMathieu WDC Delegation Yamba. at KP Plenary “The agreements approved and adopted by the KP on Marange, as well as on other important issues, including measures on reform, exhibit beyond doubt that the Kimberley Process is effective, resilient and viable,” the WDC says in a statement, which also commends the KP for its intent to enforce its requirements by declaring that unless Venezuela submits its annual reports and other statistical data by December 20, it will be removed from the KP. The WDC also says it is “particularly pleased” that the Plenary endorsed the need for professional administrative support to improve and further develop the structures and processes of the KP. “At this Plenary, the KP has demonstrated that, in spite of a difficult two years, it is capable of transcending serious challenges and fulfilling its mandate to break the link between conflict and the diamond supply chain,” says the WDC. The WDC also urges continued and constructive engagement with the Civil Society Coalition, acknowledging the essential role they play in the future success of the KP.

DIAMOND INTELLIGENCE BRIEFS 6913 REACTIONS TO KP PLENARY AGREEMENT

Civil Society: KP Lets Zimbabwe off the Hook (Again) ccording to the NGOs composing the KP Civil Society U.S. Abstains So KP Can ‘Move Forward’ ACoalition, which boycotted last week’s Plenary, the s previously reported, the United States abstained in KP has thrown away its main point of leverage over the Athe KP Plenary vote to allow for the resumption of Zimbabwean government by allowing it to export diamonds Marange exports. When explaining its stance, Victoria from Marange without first fulfilling previous commitments Nuland, Spokesperson for the U.S. State Department, says to reform its diamond trade. in a November 2, 2011, Daily Press Briefing that the U.S. A joint press release issued by the NGOs accuses the did not want to prevent the KP from moving forward. KP of dispensing with any “meaningful link” between “And whereas we think this compromise might have been Zimbabwe’s compliance with the 2009 Joint Work Plan stronger – and that’s why we abstained – the compromise and the KP’s authorization of diamond exports. that was agreed does include provisions for continued The NGOs argue that while a previous agreement oversight and continued reporting by civil society. So between the KP and Zimbabwe gave local civil society we judge that rather than having the entire Kimberley representatives the official status of Local Focal Point Process deadlocked over Zimbabwe, we would abstain, (LFP), allowing them to access Marange so they could we would let this go forward.” formally report back to the KP, the new agreement, while She continues to say that the U.S. government is also maintaining that civil society organizations retain access maintaining its own American-targeted sanctions against to the Marange fields, strips the LFP of its official status. individuals and entities in Zimbabwe that are undermining The LFP status promised protection for activists who have democracy there. According to previously been arrested and harassed over their work on Nuland, these sanctions prohibit Zimbabwe’s diamond industry. U.S. persons from engaging in “It’s a pure business deal that leaves out key concerns any transactions with those of Zimbabwe’s civil society: that is protection of the locals people on the list; some on the list from human rights abuses in and around Marange and currently include the parastatal ensuring that Marange diamonds are properly accounted entity that oversees the diamond for, for the benefit of the suffering Zimbabwean people,” exports from Marange. says Zimbabwean human rights activist and head of the Victoria When asked whether she Centre for Research and Development Farai Maguwu. Nuland thinks the Mugabe government “Given the chance to keep Zimbabwe to its previous will live up to the KP agreement’s commitments, the KP has shown itself incapable of doing transparency requirements, Nuland says, “Well, that is the right thing,” asserts Shamiso Mtisi, Coordinator of obviously the expectation and the standard that the the Local Focal Point and Environmental Lawyer at the Kimberley Process will endeavor to hold the government to.” Zimbabwe Environmental Law Association. Concludes Nuland: “Previously, we had no ability to Adds Alan Martin, Research Director of Partnership affect Zimbabwe behavior. With this compromise, as I said, Africa Canada: “The integrity of the entire clean diamond we do have some eyes on this process, we have reporting supply chain is on the line.” requirements, we have civil society there, which was a better situation than we’ve had in the past. So we need to test it now, and we need to see if the Mugabe government does indeed AWDC: ‘KP is the Only Framework that Works’ meet the commitments that it signed up to.” he Antwerp World Diamond Centre (AWDC) heralds the KP Plenary Tagreement on Marange as “a very important milestone” in the history of KP. “After two years, this agreement on the Marange region was reached through patience, perseverance, hope and trust from all the KP Ari Epstein members. The extremely important contributions of the KP chair, Mathieu Yamba, and of the European Union to reach this agreement were very significant,” says Ari Epstein, Chief Executive Officer of the AWDC. “The agreement doesn’t only mean stability,” adds Epstein. “It also proves once again that the Kimberley Process is the only framework that really works. It protects both the integrity of the rough diamond chain and the benefit of the producing countries,” he concludes.

DIAMOND INTELLIGENCE BRIEFS 6914 4 CORNERS OF THE GLOBE

U.S. to Be KP Chair in 2012 The Kimberley Process (KP) Plenary meeting in Kinshasa last week determined that the United States will be the next KP Chair in 2012 with South Africa serving as Vice-Chair. Moreover, when South Africa becomes Chair in 2013, the UAE will become Vice-Chair, thus paving the way for Chairmanship in 2014. Sources at last week's Plenary revealed that until the last moment, senior officials within theU.S. State Department were against the country assuming the leadership role - mostly due to budget issues - and that industry representatives intervened directly with Secretary of State Hillary Clinton, who made the final decision. According to some insider perspectives, the U.S. was also hesitant to take the KP helm because it felt that some of the major reforms it wants to push through may be UNITED STATES more difficult to achieve while being Chair.

KIDJA Beneficiation SA Mines Minister: Govt. Working to Boost Sector Venture Launched in Not Nationalize It South Africa While speaking at a mining conference in London last week, South African South Africa’s Northern Cape Mineral Resources Minister Susan Shabangu publicly reiterated that nationalizing Provincial government and the De the country’s mines is not government policy despite rumors to the contrary. Beers The minister did recognize social and economic reasons that have spurred (DTC) of South Africa have launched the debate about the merits of nationalization, but she stressed the importance a joint diamond beneficiation of the government and the mining industry working together to resolve tensions SOUTH AFRICA SOUTH AFRICA venture to benefit southern Africa that exist between communities and mining companies, reports BuaNews. called the Kimberley International She then went on to highlight the government’s commitment to the promotion of Diamond and Jewellery Academy the country’s mining industry to achieve both industrial growth and social transformation. (KIDJA), which offers specialized training for entry-level students, current workers in Govt. Goals to Strengthen Mining Sector the diamond and jewelry sector, diamond In her address, Shabangu spoke of a government-approved beneficiation policy cutting and polishing trainers as well as framework for the mining sector, which the Department of Mineral Resources is owner-managers in the diamond and currently finalizing in consultation with all involved parties. jewelry sectors. Additionally, according to the minister, in order to address the lack of adequate Commenting on the need for a local infrastructure, be it electricity, roads, or export logistics at the ports in the mining industry, diamond beneficiation strategy inKimberley , government had made large investments such as a Cabinet Commission, chaired Premier of the Northern Cape, Hazel Jenkins by President Jacob Zuma, which has been established to ensure a successful and says: “Our province accounts for 33% of timely implementation of the national infrastructural program. She also spoke of the rough diamond production, and over 95% National Planning Commission, which is due to release its medium-term program of of the South African diamond production infrastructural development later this month, reports BuaNews. passes through Kimberley. However, despite Minister Shabangu also noted the formation and work of the Mining Industry Kimberley being renowned for its diamond Growth and Development Task Team (MIGDETT), established in 2008. Through MIGDETT, mining, very little in terms of medium government has developed a medium-term growth and development strategy for and large-scale diamond beneficiation the country’s mining sector. and jewellery manufacturing has been Shabangu has also publicly confirmed that South Africa is seriously considering undertaken in Kimberley.” the creation of a single window for processing mineral rights as well as associated According to DTC Managing Faried environmental authorization and water licenses. This, she said, will go a long way to Sallie, De Beers and its clients have ease the administrative processes both within government as well as for the mining contributed two companies. million rand towards Shabangu said that these efforts, the establishment of among others, demonstrate that a bursary scheme government listens to the investment for KIDJA, which community and assesses and implements expects to turn out whatever measure is in line with national 150 new graduates interest, reports BuaNews. and “up- skilled” industry workers Premier of the Northern Cape, Hazel Jenkins with diamond every year. and jewelry manufacturing students on a walkabout to the cutting and polishing section of the Academy, while Managing Director for DTC South Africa, Faried Sallie, looks on.

DIAMOND INTELLIGENCE BRIEFS 6915 4 CORNERS OF THE GLOBE Tendai Biti

SRDSIL Aims to Revive Marange Rough Supply Deal Following last week’s Kimberley Process (KP) Plenary agreement enabling the

INDIA immediate resumption of rough exports from compliant mines within Marange, the Surat Rough Diamond Sourcing India Limited (SRDSIL), a consortium formed in the summer of 2010 by more than 1,500 Indian diamantaires to directly source Zim Finance Minister rough diamonds, will be sending delegates to Zimbabwe later this month to revive to Revise Budget a rough diamond supply deal it had signed last year regarding Marange rough, Upwards to Include reports the Times of India. Marange Diamond In October 2010, SRDSIL and the Zimbabwe Diamond Consortium (ZDC) had signed Revenues

a deal for the supply of $1.2 billion worth of rough diamonds from Marange in exchange ZIMBABWE Zimbabwe Finance Minister for training 1,000 of the region’s unemployed youths in diamond cutting and polishing. Tendai Biti has said on record However, the deal was put on hold and the consortium was left in limbo after last that the government’s initial budget November’s KP Plenary in Israel banned the export of rough diamonds from Marange. projections for 2012 will now have to be Last week, immediately after the KP issued its approval for Zimbabwe to resume its revised to take into account proceeds rough diamond exports from Marange, some SRDSIL representatives met in Antwerp from diamond sales following last week’s under the leadership of their chairman, Ashit Mehta, according to the Times of India. Kimberly Process (KP) Plenary agreement “The diamond consortium has got back its lost sparkle following KP’s decision on approving the immediate resumption of Zimbabwe. We are planning to import the first shipment of rough diamonds from rough diamond exports from Marange. Zimbabwe as soon as possible,” Mehta told the news source from Antwerp. “The “Our budget is worth US$3.4 billion. diamond consortium’s foundation was laid keeping in mind the huge stockpile of We have based this on the anticipated rough diamonds with Zimbabwe worth $5 billion. Only Surat has the potential to revenue. We had not factored in the process Zimbabwe diamonds and thus the consortium is looking to import majority of diamond revenue that will increase the diamond produced in Zimbabwe,” added Mehta, as quoted by the Times of India. following the decision by the KP,” reports According to Mehta, before flying to Zimbabwe to finalize the US$1.2 billion deal, New Zimbabwe, quoting Biti from Harare six SRDSIL directors are going first toRussia to work out a long-term contract for rough last week. “I will engage with the Ministry of diamond supplies from Alrosa. Mehta expects the first official rough diamond auction Mines and Mining Development because in Surat to take place in December. I am seriously considering increasing the Budget to factor in the KP decision,” Biti added, as quoted by the news source. GJEPC Holds International Colored Gemstones According to Mines and Mining Mines to Market Conference Development Minister Obert Mpofu, India’s Gem and Jewellery Export Promotion Council (GJEPC) held its first Zimbabwe will earn over US$2 billion from INDIA International Colored Gemstone Mines to Market Conference last week in Jaipur. renewed diamond sales. Sources estimate The two-day conference brought together a diverse group of international experts to that there are 4.5 million Marange discuss various aspects of the colored gemstone trade across the globe. Based on the diamonds stockpiled. GJEPC’s International Mines to Market Diamond Conference held last year in Mumbai, “Our current diamond production is the Mines to Market for colored gemstone was intended to reinforce India’s position estimated by volume, to be in excess of as the global hub for colored gemstones. 25% of the world production, and going “In the Financial Year 2010-11, India exported colored gemstones worth US$315.22 by the values realised to date per carat, million registering an increase of 9.92 per cent as compared to US$286.78 million Zimbabwe is set to earn in excess of USD$2 exported during 2009-2010. However, considering that India’s total exports stand at billion annually in gross revenues,” Minister US$43 billion achieved in 2010-11, the share of Colored Gemstones exports is relatively Mpofu told journalists after the KP Plenary, small. Therefore, looking at the potential in this field, we in The Gem & Jewellery Export as cited by Radio VOP. Promotion Council are determined to expand our exports of Colored Gemstones “The ministry has the pleasure that it is significantly in the next three years. With Mines to Market initiative, the industry stands to ready to lead and champion the economic address all the global concerns, forge a solid road ahead, determine all the necessary recovery of this country through a robust, steps that need to be taken to establish and maintain a flourishing Colored Gemstones dynamic and aggressive policy to grow trade globally,” said GJEPC Chairman Rajiv Jain in his opening address. mining sector in Zimbabwe whose growth Last week’s conference, which had more than 350 registered guests, covered is currently bullish and set to contribute in topics including mining and geology, enhancements, treatments and other research, excess of 50% of our GDP,” Mpofu added, branding and marketing, logistics and finance, among others. according to the news source.

DIAMOND INTELLIGENCE BRIEFS 6916 DIGGING THE DIRT

IGE AB: Commissioning Underway Diavik Mine Begins Wind on Bakerville Diamond Mine Farm Construction IGE Resources AB has commenced commissioning of the initial plant at the Rio Tinto’s Diavik Diamond Mines Inc., Bakerville diamond mine in South Africa. Production capacity will be ramped up operator of the Diavik diamond mine in successively over the next 18 months, with full capacity expected in April 2013, reports Canada’s Northwest Territories, has begun the Scandinavian mineral resources development company. construction on a wind farm at its mine Recovery tailings from the bulk sampling conducted three years ago on the site to generate wind energy and reduce surface deposits have been processed through the Bakerville x-ray machine resulting in diesel consumption. recovery of diamonds averaging 0.24 carats/stone in size. This indicates the potential Diavik currently relies on diesel fuel for for further grade upliftment from that originally indicated for the surface deposits, all of its energy needs. Once operational, notes IGE Resources. the wind farm is expected to reduce During a recently completed drilling program to delineate the license’s known the mine’s total diesel consumption potholes (vertical geological structures), a total of by 10 percent, or 25 holes were drilled up to a maximum depth of 48 The Diavik Diamond Mine approximately meters, with a number of holes intersecting deep four million litres, gravel deposits in cavities. Based on the drill results, resulting in 100 fewer two sites have been selected for initial exploitation, truckloads travelling which was scheduled to commence in January along the winter 2012, but is may to be ahead of schedule. The road, reports CBC pothole material will be processed at 120 tons News. Greenhouse per hour through a scrubber, a Dense Medium gas emissions are Separation plant and an X-ray flow-sorter located expected to be on the property, says IGE Resources. reduced by 6 percent, In the next phase, further processing plants or approximately totalling 250,000 tons per month in capacity will be 12,000 tonnes. erected to treat surface deposits at an expected Modelled after grade of three carats per hundred tons with one plant remaining dedicated to pothole similar turbines in Europe, the four turbines, processing (which have a potential for significantly higher grades) based on results from each about 100 meters high, will have the first phase, reports the company. IGE Resources estimates that at this treatment a total capacity of 9.2 megawatts of rate, revenue projections from the surface deposits alone stand at US$3.75 million per electricity, notes CBC News. The turbines month at a current average diamond price of US$500 per carat. will still function until the temperature hits -40, which they say is 10 degrees colder than previous technology, adds the news De Beers Signs New Multi-currency Credit Facility source. De Beers SA has signed a new US$2 billion multi-currency credit facility, which “The benefits of the initiative are is split between an US$800 million term loan maturing in March 2015, and a US$1.2 numerous and will be realized for many billion revolving credit facility maturing in October 2016. years to come.” says Diavik Diamond Proceeds will be used in part to refinance the miner’s existing US$3 billion multi- Mines Inc. Acting President and Chief currency revolving facility agreement dated March 23, 2005, and the US$200 million Operating Officer Alasdair Martin. “We term loan agreement dated May 2, 2007, as well as for general corporate purposes. are optimistic that the innovations, “With a long-term supply/demand differential, De Beers believes that the experience, and knowledge gained from fundamentals of the diamond business are attractive, and that the company is well our wind farm will be able to be shared positioned to generate strong returns built on a sustainable model,” the company with others in the North,” he adds. says in a statement. Under the current plan, construction “With several large upstream projects underway, and exceptional growth in and commissioning of Diavik’s wind farm, emerging consumer markets such as China and India, De Beers stands on the cusp which received funding from both Rio Tinto of an exciting period of growth. Today’s announcement further ensures that De and Harry Winston Diamond Corporation, Beers has a capital structure that enables us to continue to create value for our is expected to be completed next year. shareholders,” says De Beers Chief Executive Officer Philippe Mellier. Located on East Island at Lac de Gras, For more details about Anglo American expanding its shares in De Beers, read it will be the first large-scale wind farm Chaim Even-Zohar’s editorial. in northern Canada once operational.

DIAMOND INTELLIGENCE BRIEFS 6917 The DIGGING THE DIRT Letšeng Star

Gem Diamonds Achieves ‘Excellent Prices’ despite Overall Softening of Diamond Prices

underlying fundamentals supporting the Ellendale diamond market in the medium to long term. Gem Diamonds’ Ellendale mine in Western Australia recovered 32,647 carats Letšeng during the third quarter, a 29 percent The Letšeng mine in Lesotho continued decline in volume from a year ago. “Ore to deliver a strong operational performance processing challenges faced by Ellendale with production in line with expectations during the prolonged rainy season in and the continued recovery of high value the first half of the year have impacted and exceptionally large diamonds. Gem significantly on production forecasts for the Diamonds recovered 29,786 carats during full year. The shortfalls associated with the the third quarter, up 23 percent in volume processing of difficult ore have continued from a year ago. The miner exported into the second half and will lead to a 22,733 carats for sale during the period, below budget and below guidance Clifford Elphick up 1 percent in volume from 2010, for a performance for the year in terms of total value of US$55.2 million, up 46 percent tonnage treated and carats recovered,” em Diamonds reports that it has in value from the comparable period a says the miner in its interim report. enjoyed “a good performance” year ago. According to Elphick, “Ellendale’s Gduring the third quarter, “despite The Letšeng Star, a 550-carat white production is disappointing, but measures a softening in rough diamond prices, which gem diamond, was recovered at Letšeng are being taken to improve the situation.” was especially evident in lower quality in August and was sold in October into a During the period, Ellendale sold diamonds since the peaks of July 2011," profit-sharing arrangement for a rough a combined total of 23,393 carats, a 9 according to Gem Diamonds Chief value of US$16.5 million. Excluding the percent year-over-year increase in volume, Executive Officer, Clifford Elphick. Letšeng Star, the average value of the at an average price of US$1,015 per carat, During the period July 1 to November exports for the third quarter of 2011 was a 55 percent year-over-year increase in 2011, rough and polished diamond prices US$2,426 per carat, a 44 percent increase value. Total value of rough diamonds sold softened across the diamond market as a in value from a year ago. reached US$23.7 million, a 68 percent whole, reports the miner in its third quarter According to Gem Diamonds, 15 increase in value compared to a year ago. interim report, which estimates that rough rough diamonds achieved a value of in Ellendale achieved an average price diamond prices in the sector were down excess of US$1 million each during the of US$5,153 per carat for its fancy yellow by up to 35 percent and polished prices period. Letšeng also recovered a total of diamonds during the third quarter, which fell by up to 15 percent from the mid 2011 50 rough diamonds that achieved prices were sold to Tiffany & Co. For its commercial highs. “However, prices for the exceptional greater than US$20,000 per carat in the goods, Ellendale achieved an average quality diamonds remained fairly robust.” period, totaling 152 for the year to date price of US$182 per carat during the third According to Gem Diamonds, its and contributing 69 percent of Letšeng’s quarter compared to US$76 per carat a Letšeng and Ellendale mines “both revenue. Furthermore, Letšeng recovered year ago. achieved some excellent prices for their 171 rough diamonds greater than 10.8 exceptional quality, top colour diamonds carats in size. Ghaghoo and Cempaka in recent sales.” Elphick also says in the In related Letseng news, the feasibility Regarding its other mines, Gem Diamond report that the mines continue to deliver study for the expansion project, Project reports that first stage development of the “some of the world’s finest diamonds” and Kholo, is on track and will be presented Ghaghoo diamond mine in Botswana is that the company remains confident in the to the Board this month. “advancing well,” according to schedule and on budget. Gem Diamonds also Ellendale Mine completed the sale of its 80 percent interest in its alluvial diamond mining company PT Galuh Cempaka in Indonesia in October for a total of US$5 million.

DIAMOND INTELLIGENCE BRIEFS 6918 MOVERS AND SHAKERS

IDE Appoints Moti Besser as New Managing Director Stuller Inc. Hires Barbara The Israel Diamond Exchange (IDE) has appointed Moti Besser as its new Managing Ryan as VP of Jewelry Director. Besser, who was most recently the Managing Director of Israel’s State Comptroller’s DTC sightholder and diamond-jewelry Office, had served as Managing Director of the Israel Diamond Manufacturers Association manufacturer Stuller’s Inc. hired Barbara (IsDMA) from 2002-2007. Ryan as Vice President of Jewelry last He was asked by the new IDE President, Yair Sahar, to take on the position at the month. Ryan formerly served as Divisional IDE and to play an active role in the president’s initiatives to renew and advance the Vice President for diamond-jewelry retailer Exchange. Helzberg Diamonds. In her new role, Ryan’s “Moti Besser brings significant responsibilities will include identifying and added value to this position, due to understanding emerging trends and his extensive experience in managing developing compelling product collections large and complex organizations in that meet customers’ needs. the IDF [Israel Defense Forces], the “Barbara’s diversified background and public and the private sectors in Israel reputation as a leader, combined with and abroad,” says Sahar. “I have no her technical savvy make her the perfect doubt that Moti will make an important choice to take our jewelry business into contribution to strengthening the Israeli the future,” says Chief Merchandising Diamond Industry, which accounts Officer, Danny Clark. A 20-year industry for one quarter of Israel’s industrial veteran, Ryan served in numerous exports.” roles at Helzberg Diamonds including Moti Besser and Yair Sahar Adds Besser: The Israel Diamond divisional vice president–merchandise Exchange, the largest and most sophisticated bourse in the world with planning and technology where she 3000 members, represents a huge economic force in the Israeli economy and a experienced numerous successes such leading light among the world’s diamond bourses. I see my participation in leading as the development of a new sales and the exchange as a huge challenge, especially in light of the tough competition posed inventory planning and forecasting system by the world’s other diamond centers.” that resulted in increased automation and In the past, Besser served as Financial Advisor to the IDF Chief of Staff and the Head timesavings for the company. Additional of Budgets in Israel’s Ministry of Defense. Since leaving IsDMA, he served in several experience includes Macy’s district planner executive positions including Vice President of Amdocs UK and Managing Director of of fashion jewelry and watches, women’s State of Israel Bonds UK. shoes, handbags and accessories in Missouri and E-Commerce Buyer for retailer, Ross-Simons in Rhode Island. Zale Names Thomas A. Haubenstricker as Chief Financial Officer Specialty diamond and diamond-jewelry retailer Zale Corporation hired Thomas A. Theo Fennell Non- Haubenstricker as Senior Vice President, Chief Financial Officer of the company last Executive Director month. In his role as Zale’s new Chief Financial Officer, he will report to Matt Appel, Resigns Chief Administrative Officer. The Board of UK jeweler Theo Fennell According to Appel, Haubenstricker possesses a broad range of finance, accounting PLC has announced the resignation of and strategy leadership experience, along with a strong operational focus, which will Roger Pedder as a non-executive director be extremely valuable as Zale intensifies its efforts to return to profitability. with immediate effect. Pedder joined the “Tom’s financial expertise and recent turnaround experience should prove invaluable as board in July 2008. we continue to execute our multi-year strategy,” adds Theo Killion, Chief Executive Officer. “It is with regret that Roger Pedder has Haubenstricker joins Zale from Turnberry Advisors, where he served as a Managing found that with the many new and old Director since January 2010. Prior to that, he spent 24 years at Electronic Data Systems commitments that he has, that he found (EDS, later acquired by Hewlett-Packard) in various finance and strategy leadership it necessary to resign from the board of roles including Co-Chief Financial Officer, Vice President and Chief Financial Officer, Theo Fennell. We are most grateful for his EMEA Region, and Vice President, Finance for the combined Hewlett-Packard and wise counsel and contribution over the 3 EDS Business Services Group. years that he has been a Director,” says During his career, Haubenstricker has led business performance improvement Commenting on the resignation, Rupert programs focused on revenue growth, margin expansion and free cash flow generation. Hambro, Chairman of Theo Fennell PLC.

DIAMOND INTELLIGENCE BRIEFS 6919 BRIEFLY NOTED

Gemewizard to GIA to Offer Seminar on Diamond Treatments, Unveil New Version of Synthetics in Shanghai GemePrice System for The Gemological Institute of America (GIA) is offering a free seminar on diamond Fancy Colored Diamonds treatments and synthetics later this month in China at the Shanghai Jiao Tong University. Gemewizard, developer of color The seminar, scheduled for November 22, will be taught by GIA Director of Research communication systems for the fancy and Development Dr. Wuyi Wang, who has more than 20 years of expertise in diamond colored diamond, colored gemstone geochemistry and the treatments of and jewelry industries, has announced diamond and other gem material. Dr. Wuyi the release of the new version of its online Wang has a doctorate in geology Wang wholesale pricing system, GemePrice. The from the University of Tsukuba in Japan new system, which now allocates prices and a bachelor’s degree in geology from to fancy colored diamonds as well as Beijing University in China. He is widely to gemstones according to the Color published in gemological and geological Codes generated by Gemewizard, will be publications, including GIA’s Gems & launched at the Israel Diamond Exchange Gemology, the Journal of Gemmology, on November 15th, 2011. American Mineralogist, and Earth and “GemePrice for fancy colored Planetary Science Letters. diamonds is the culmination of a full His presentation will cover the decade of development and refinement following subjects: major diamond color of our color communication software treatment techniques, including irradiation with or without annealing, High-Pressure products,” says Gemewizard founder High-Temperature (HPHT) treatment and multiple-method treatments; the main Menahem Sevdermish. “This unique analytical techniques and identification features to differentiate natural counterparts; pricing system is the only system in the and an update on synthetic gemstones and diamonds, including Chemical Vapor international diamond and gemstone Deposition (CVD) and HPHT synthetics. market to display the exact color Wang has been recognized with numerous honors, including the Richard T. combination along with the price and Liddicoat and American Gem Society Awards, as well as the Dr. Edward J. Gubelin relevant gem parameters,” he adds. Most Valuable Article Award from Gems & Gemology. According to Sevdermish, the Wang will also present private similar seminars to Shanghai Diamond Exchange GemePrice database contains grades, members and the faculty and staff at the Tongji University. qualities, commercial names and prices of more than 350 fancy colored diamonds color combinations and over 50 types of RJC Announces New Certified Members the most traded gemstones with a visual The Responsible Jewellery Council (RJC) has announced that U.S. jewelry display of over 15 shapes. manufacturer Kama Schachter Jewelry, Inc., the U.S. office of diamond manufacturer Consequently, says Sevdermish, Leo Schachter Diamonds LLC, UK jeweler Kelsall Jewellery Design Ltd, and Antwerp- GemePrice users can easily find the price based diamond manufacturers D. Goldi BVBA, Diajewel NV and SuperDiam BVBA have of a specific diamond either by defining all achieved certification meeting the ethical, human rights, social and environmental any of the diamond’s parameters: color standards as established by the RJC’s Member Certification System. grade, shape, clarity and cut, or by The verification assessments of Kama Schachter Jewelry, Inc. and of Leo Schachter browsing through the pricelist. Diamonds LLC were conducted by Vidhi Aggarwal from SGS while the verification assessment of D. Goldi BVBA was conducted by Stefaan Bierens from WF&Co Bedrijfsrevisoren. Ann Van Vlaenderen from WF&Co verified Diajewel NV and Roshini Wickramsinghe of SGS verified Harriet Kelsall Jewellery Design Ltd. Lastly, Peter Warbrick from SGS conducted the verification assessment of Super Diam BVBA. The aforementioned firms are independent third- party auditing firms accredited to the RJC’s Member Certification System, according to Michael Rae, RJC’s Chief Executive Officer.

DIAMOND INTELLIGENCE BRIEFS 6920 OFF THE SHELF

Macy’s to Give Flagship $400 Million Overhaul U.S. department store Macy’s Inc. is investing US$400 million in remodeling its flagship store inManhattan , including expanding the selling space in what is already the world’s largest store, adding luxury shops and restoring the historic building’s façade, reports Reuters. The renovation is to begin in the spring and continue in phases before concluding in late 2015, adds the news source. The current store is six times bigger than the average Macy’s and has 11 floors of selling space. According to plans, the building will expand by 100,000 square feet to 1.2 million square feet of selling space partly by relocating some offices and clearing out some stockrooms. Saks Inc. Posts The renovated store, which will remain open during construction, will include a 1.8% Rise in Comparable variety of new luxury shops and will reportedly enlarge the existing Luis Vuitton store. Store Sales The flagship store will also have luxury items unavailable at other Macy’s locations. Specialty retailer Saks Incorporated Additionally, Macy’s says it plans to feature in the updated store interactive directories, reported that owned sales totaled a system to stream video of store events and a shoe locater system, among others US$235.7 million for the four weeks ended attractions, Reuters reports. October 29, 2011, a slight 0.8 percent The store, which runs along 34th Street between Broadway and Seventh Avenue, increase over the same period a year was expanded in three phases in the 1920s and took its current form in 1931. Macy’s ago. Comparable store sales increased says it will preserve all but one of the 43 wooden escalators in the store, restore the 1.8 percent for the month. store’s exterior and reopen one of its 34th street entrances, according to Reuters. For the third quarter ended October “Historically, this store has been just about the single best investment we ever 29, 2011, owned sales totaled US$678.6 made with any capital dollars,” according to Macy’s Chief Executive Terry Lundgren, million compared to US$649.6 million as quoted by Reuters. “Putting more in this store is a better investment of capital.” for the prior year third quarter ended An estimated 20 million shoppers visit the flagship store annually, and tourists October 30, 2010, a 4.5 percent increase. account for around 25 to 30 percent of sales, reports the news source. Comparable store sales increased 5.8 percent for the third quarter. On a year-to-date basis, for the nine J.C. Penney Posts 6.6% Drop in Total Sales months ended October 29, 2011, owned U.S. department store retailer J. C. Penney Company, Inc. has reported that total sales totaled US$2.05 billion compared company sales for the four-week period ended October 29, 2011, decreased 6.6 percent to US$1.88 billion for the prior year nine to US$1.186 billion. Its comparable store sales for the month decreased 2.6 percent. months ended October 30, 2010, an 8.5 While sales overall were soft, women’s apparel and accessories experienced percent increase. Comparable store sales sales gains in October. Geographically, the southeast was the top performing region. increased 10.3 percent for the nine months.

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DIAMOND INTELLIGENCE BRIEFS 6921