diamonds conference_dubai
TRANSCRIPT
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Varda Shine
The changing diamond landscape
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What does the future of diamond supply anddemand look like?
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0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2012f 2013f 2014f 2015f
Year-on-Year%G
rowth
Global Polished Diamond Demand Growth
Macro-economic forecasts are supportive of growth in
polished diamond demand over the short to medium term
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Global Consumer Polished Demand Growth (nominal) (2012-15)
Source: De Beers
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Emergence of middle class and strength of luxury sector
should continue to support demand for diamonds going
forward
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Global Growth of Middle Classes in emerging markets1
(2010 to 2015)Worldwide personal luxury goods market evolution(2010-2014F, bn)
Global Growth of Middle Classes in emergingmarkets1 (2010 to 2015)
2010 2011E 2012F2 2013F2 2014F2
173
191201-203
216-218 235-240
CAGR 2011E-14F
+7-9%
+10%
+6-7%
+7-8%
+8-10%
Indonesia+55
Russia+32
Brazil+21
Turkey+15
Mexico+09
SouthAfrica
+05
India+180
China+142
Russia35% Turkey
34%
SouthAfrica
29%Mexico
25%
Indonesia115%
India97%
China83%
Brazil44%
Mins of people 2010-2015
% change2010-2015
Note 1: Middle-class households are those with annual income >USD5,000 in China, India and Indonesia and exceeding $10,000 in the other countries.Note 2: At constant exchange ratesSource: De Beers analysis from BCG report Winning in Emerging-Market Cities, Sep 2010; Altagamma Oct 12
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0
20
40
60
80
100
120
140
160
180
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
mc
ts
Baseline production Committed projects Probable projects
Long-term view: Production to recede graduallyfrom pre-crisis levels after 2017
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Global production in carats
Source: De Beers. All non-De Beers forecasts based on publicly available sources
Rough diamond industry now
requires investment in new
projects even to maintain
production.
In the next few years, additional
production from Gahcho Kue,
Argyle and Petra mines likely to
bring production back to (but notabove) pre-downturn levels.
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Global production
2011 gem diamond production by
country (value)1
2011 gem diamond production by
country (carats)
Total 138Mcts Total US$19.3bn
Source: Kimberly process certification scheme; De Beers estimates
18%
6%
8% 20%
25%
Angola
All OthersRussia
DRC
17%Botswana
South Africa
Australia
6%
Canada
5%
18%
6%
22%
9%
12%
1%Australia
Russia
DRC
Botswana
23%
Canada
South Africa
Angola
9%
All Others
Notes
1 All values estimated at De Beers prices (SSV)
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A structural supply deficit should continue toprovide the industry with price upside
Supply Demand Gap (smoothed from 2014)
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Supply @ constantprices
Consumer Demand(nominal)
60
80
100
120
140
160
180
2011A 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
Source: De Beers
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US is the top diamond jewellery market, with China and
India expected to increase their share of diamond demand
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Consumer Demand Forecasts (Nominal Polished Sales)
2011 ~ USD23bn 2016F ~USD31bn
USA37%
China10%India
10%
Japan10%
Gulf8%
Taiwan2%
HongKong2%
Turkey
2%
RoW19%
USA35%
China15%
India13%
Japan
7%
Gulf9%
Taiwan2%
HongKong
2%
Turkey2% RoW
15%
+35%
Source: De Beers
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Changing dynamics
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Botswana sales agreement
10 year sales agreement wassigned in 2011 (effective 1January 2011)
As part of the agreement DeBeers is moving all its functionsrelating to sales by the end of2013
When achieved, De Beers willreceive financial benefit in theform of increased margin
The agreement introduces apurchase entitlement or sales
window for the GRB
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Other producers
South Africa State Diamond Trader
Increased number of local tenders
Local beneficiation targets Namibia
10% unaggregated sales
Branding
Canada 10% unaggregated sales
Branding
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Midstream changes
Liquidity more constrained
Impact of Basel II and Basel III
Pace of increased transparency vs. otherindustries
Stocking behaviour
Retail expansion
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Likely midstream impact
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Likely midstream impact
Rough diamond centre moving to southern Africa
Continued growth of demand from Asian markets expected
New trade routes likely to continue developing
New opportunities
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Botswana transfer progress update
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Wave 1 of transfer activities completed and
Wave 2 is well underway and on track
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Wave 1 recap:
6 aggregation cycles have taken place from Botswana
Other functions (i.e. QA, DRM, Finance, HR, IT and part of the
EVPs Office) are also in place and well settled
First wave of employee transfer complete
Wave 2 status:
Planning for relocation of remaining functions (e.g. Sales, Supply
Chain, Sight Management, Beneficiation, etc.) largely completed
All 2013 milestones currently on track
Majority of the relocations are to take place August-October 2013
Second Wave of employee transfer on track
Infrastructure set up on schedule
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In conclusion
The supply and demand fundamentals for the industry arevery positive
But some of the traditional truths of the industry arechanging
With this change comes opportunity
It is up to us to establish how we maximise thisopportunity
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The diamond is our guide