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De Beers Group is the World’s Leading Diamond Company; Interview with Sally Morrison, Director of PR - Natural Diamonds

on 10/2/2020
Established in 1888, De Beers Group is the world’s leading diamond company, with expertise in the exploration, mining and marketing of diamonds. Together with its joint venture partners, De Beers Group employs more than 20,000 people across the diamond pipeline and is the world’s largest diamond producer by value, with mining operations in Botswana, Canada, Namibia and South Africa. We learned from Sally Morrison, who is Director of PR - Natural Diamonds for De Beers Group, that a natural diamond's value is measured by its rarity, and since there is only a finite number of natural diamonds in the world, we would expect diamond prices and diamond values to go up over time. According to Ms. Morrison, De Beers has a deep and long history of understanding consumer attitudes towards diamonds and the emotional connection people have with them. We also learned from Ms. Morrison, that De Beers Group is in partnership with the government of Botswana and has a 50/50 joint venture to mine the diamonds, which contributed greatly to the growth of Botswana's economy, infrastructure, education, healthcare, and people's overall wellbeing.

Sally Morrison - Director of PR – Natural Diamonds, De Beers Group

Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News, talking with Sally Morrison, who is Director of PR - Natural Diamonds for De Beers. Sally, could you give us an overview? First, tell us about white diamonds and give us an overview of the industry, a little bit about De Beers and also why people, during this Covid-19 period, are investing and buying more diamonds rather than traveling.

Sally Morrison: Well first of all, I think diamonds are a very special category. I've actually had the privilege of working in a number of different places across the industry. In addition to diamonds, I've worked on colored gemstones at Gemfields, I worked on gold, at the World Gold Council, and more recently, launched a brand called Lightbox, which is a laboratory-grown diamond brand. I've just come back to work in natural diamonds again this spring, very happily so. Diamonds are a unique thing, right? Since very early in history, there has been something magical and storied about diamonds, something super special. Some things are logical and can be explained. Other things are emotional, like the connection people have with diamonds.

What's going on now has been described as unprecedented. There is a sense of people stepping back from the culture a little bit. They've been sheltering in their homes. They've either been with immediate family or perhaps, in some cases, separated from people they love. There's been a sense that we've all stepped off the Ferris wheel for a little bit and had a chance to reflect on what is meaningful in life. One of the things that has emerged as being most meaningful are the important relationships that we have with other people.

De Beers Group

The diamond is a symbol of forever, of love, of something that comes from super deep within the earth and has this timeless quality, something of great interest. You are seeing a lot of engagements coming out of Covid. We've heard anecdotally about a lot of people wanting to do something really great for their partner because they got through the Covid crisis together. So, I think there are lots of things going on there that are complex in many ways. In terms of investment though, we do have to distinguish between natural, rare things and things that can be made and manufactured in a laboratory. I'm talking very specifically about lab-grown diamonds.

What we've seen more recently is this shift in understanding that there are enduring important things that last forever and that will always be rare because there's a finite number in the earth. That’s different from lab-grown diamonds that are terrific for accessories and jewelry and when you want to have something pretty, but they are not necessarily a good long-term bet for investment, purely because like all manufactured products, as the technology gets better, manufacturing will become more efficient and therefore cheaper. So, they'll follow that kind of tech price curve.

Dr. Allen Alper: What about natural diamonds? Do they hold value? Like a nice diamond engagement ring.

Sally Morrison: We've seen that all rare finite things over time gain value. Special things that are rare, that will never be made again, whether that is a work of art, or a special wine, or indeed, a rare natural diamond, those things find a collector audience, a collector market, and gain over time. So yes, I think generally speaking, natural diamonds are a good long-term bet.

Also, natural diamonds have historically been a kind of store of emotional value. If women keep one piece of jewelry, it will be their engagement ring because that is the single most meaningful symbol and a tangible reflection of a relationship in their lives. It's not just a financial investment, it's this emotional investment. The diamond engagement ring has this cultural power, which is very, very deeply held.

De Beers Group

Dr. Allen Alper: That's very good. Yes. I know my wife loves her diamond ring.

Sally Morrison: Right.

Dr. Allen Alper: And she has always cherished it.

Sally Morrison: Yeah, it's not because of the ring, right?

Dr. Allen Alper: Right.

Sally Morrison: It's because of what the ring represents in her life with you, so, it's elevated beyond something that's decorative. For all of us working in diamonds, that's where the magic is.

Dr. Allen Alper: Right. And I know many times she just looks at it and feels happy, just looking at her ring shining there.

Sally Morrison: Yes, exactly.

Dr. Allen Alper: Could you tell our readers/investors about the different qualities of diamonds?

De Beers Group

Sally Morrison: Diamonds are measured by something called the 4Cs; color, cut, clarity and carat weight. Those 4Cs are a matrix used to determine relative rarity. So, why are some diamonds more expensive than others? Well, because they're rarer than others. Far fewer D quality, internally flawless, one carat diamonds are mined from the earth than lower color or smaller carats.

Relative rarity always determines value. We use the 4Cs as a baseline to determine value because it is a rarity scale. That's why we feel the 4C measurement is probably not appropriate for a lab-grown diamond, because by definition, a lab-grown diamond is not rare, we can make more of them in the lab.

And so, using the 4Cs to determine value in a lab-grown diamond is kind of meaningless because there will come a day, and I don't think that day is too far off, when everyone's tech is going to be so good, they're going to be making D quality stones. We have to remember that the way diamond value is measured is always to do with the amount of that product that exists in the world. If you go to a mine and look at the run of mine, along with the few stones that come out and then the relatively few gem quality stones that come out, and within that batch, even fewer are very high quality.

There aren't a lot of these things in the world and there are not ever going to be more. Natural diamonds were made billions of years ago during intense pressure and heat at the center of the earth. They've been pushed up, but there are no more coming. That's another reason why we would expect diamond prices and diamond values to go up over time, because there simply are no more. We can only mine what's there.

Dr. Allen Alper: That sounds very good. Could you tell our readers/investors a little bit about De Beers? I know probably everyone who ever heard of diamonds heard of De Beers, but give us an overview of De Beers.

Sally Morrison:De Beers is more than 100 years old and has been mining diamonds longer than any other company. It has a deep and long history of understanding consumer attitudes about diamonds. The people at De Beers are experts, not just in recovering diamonds and optimizing the production, but also precisely sorting rough diamonds within many different grades. Our sorting system is more accurate than anyone else’s. The expertise, at every step along the pipeline, all the way down to the consumer, has been perfected over many, many years. An ad agency developed the slogan, "A Diamond is Forever", for De Beers. Most people know that slogan. What is less well known is the huge amount of consumer research De Beers has done, decade after decade, to truly understand the emotional connection between people and their diamonds. It’s a very interesting Company.

Much of the operations now are in Botswana, where De Beers Group is in partnership with the government of Botswana in a 50/50 joint venture to mine the diamonds. People may not be aware now that the sight system—the sale of the rough goods—all takes place in Botswana. It has historically been in London, but it was moved to Botswana a number of years ago.

De Beers Group

De Beers Group

The other thing that's quite interesting is that in Southern Africa, where we have operations in Botswana, Namibia, and South Africa, diamonds have always been an engine of economic growth. When you look at a country like Botswana; in the mid-sixties, it was one of the poorest in the world and had less than five miles of paved roads, really no infrastructure. They discovered diamonds, and they took a view as a country that everything that was found under the feet of its population should be shared equally by the entire population. So the diamond revenues that have been generated in Botswana, have been consistently reinvested into development. You now see a country that has a very sophisticated infrastructure, incredible education and a fantastic healthcare system. It's one of the superstars of Africa in terms of economic development.

De Beers Group

De Beers Group

It's really fascinating and we should look at the country of Botswana as a poster child, not just for diamonds, but for all the extractive industries. A precious resource found under the earth can really benefit and elevate people's lives, and lift them up. So, De Beers Group is very, very proud to be in partnership with the government there. They have a most incredible production of gem quality diamonds. It's a very exciting place to be in business.

De Beers Group

Dr. Allen Alper: Oh, that's excellent. We've done many interviews of Presidents and Executives of diamond mining companies, who have had natural diamonds, very rare, almost the size of a hand that've gone for millions and millions of dollars.

Sally Morrison: Yes, they do have incredible output.

Dr. Allen Alper: So is there anything you would like to add, Sally?

Sally Morrison: We’ve been doing quite a bit of research during the pandemic and we are excited to be seeing increased positivity in consumer confidence. We'll be releasing a report each month. This is an ongoing tracker that we run to try and gauge consumer confidence across the luxury industry generally, and fine jewelry and diamond jewelry in particular. The early trends of increasing confidence that we shared in the last report that you saw, seem to be even more improved in the data that's just coming back in this month. We'll be happy to share that with you when we get it, but I think for people in the jewelry sector, there is really some hope for what's coming and things are getting better.

There are a number of reasons for that. People want to express their connection to other people who are meaningful to them, particularly intensely now, because we've been through this very difficult, emotional, disturbing, alienating time. So I think there's some pent-up demand. We're seeing increased confidence, with people venturing back out into stores and restaurants and that’s promising for retail. People are also being quite thoughtful now, more discerning about what they spend their money on. We're seeing a return to fewer things, but better things, simpler things, very high crafted things, beautifully finished things. It’s not about going out and getting a lot of things, but getting one thing that's really great. I think that's very promising for diamonds.

De Beers Group

Finally, this is a year when nobody has been able to travel. Summer holidays were canceled, children's camps were canceled, people are probably not going skiing this Thanksgiving or Christmas. For the jewelry industry, which has always had travel as its number one competitor for available disposable income, that’s off the table for a short amount of time. I'm sure that people will return to travel as soon as they feel comfortable, but right now, when it comes to the jewelry sector, we have an opportunity. There are people, who have unspent dollars and un-allocated budget, who can't go on a trip, but want to do something meaningful for a person in their lives.

We're hearing, anecdotally from people in the trade that husbands are coming in and saying, look, I couldn't take her to Paris for her anniversary trip, so I would like to upgrade her engagement ring. Or, I couldn't do this, couldn't do that, I'd like to get her a beautiful diamond anniversary band. All of us in the jewelry business need to really focus on the opportunity and not be anxious about the past. There's a window that's open right now and we have to take advantage of it.

Dr. Allen Alper: That sounds excellent. We’ll publish your press releases as they come out so our readers/investors can follow your progress.

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