gia presentation 2011

Presented by Steve McClelland for GIA MUMBAI, 2011

Director/Sales Manager Inspira Diamonds Pty Ltd

1 Steve MClelland, Inspira Diamonds, for GIA, 2011

introduction

many hands

outline 2011 1. This presentation is a brief glimpse

behind the apparently glamorous world

of diamonds:

2. to highlight what is meant by

“diamond pipeline” and diamond chain,

3. to outline who are the typical industry

participants, with insight into what

happens before the jeweller and

consumer level

4. To understand the value addition within

the diamond chain

5. To appreciate with new respect how

diamonds reach us from the earth,

6. and gain an understanding of the

human involvement in the process of

diamond value

http://www.google.co.uk/images?hl=en-GB&rlz=1T4DAAU_en-GBAU273AU275&q=argyle+mine+images&um=1&ie=UTF-8&source=univ&ei=rP_YTP-JHIfovQPxpbmkCg&sa=X&oi=image_result_group&ct=title&resnum=1&ved=0CCgQsAQwAA


the diamond jewellery value chain

In US$ billion

The diamond

value chain

GLOBAL ROUGH production, 2010 $6.89

GLOBAL PRODUCTION of finished Jewellery , 2010 $60.17

Source of data :http://www.idexonline.com/portal_FullNews.asp?TextSearch=&KeyMatch=1&id=35340, 25/07/2011

http://www.idexonline.com/portal_FullNews.asp?TextSearch=&KeyMatch=1&id=35340



the diamond pipeline:2010 year of recycling

Source: IDEX Source:http://www.idexonline.com/portal_ FullNews.asp?TextSearch=&KeyMatch=1&id=35340, 25/07/2011








the diamond pipeline: 2009 the worst year since WW2

Source: of data http://www.idexonline.com/pdf_files/2009-diamond_Pipeline_Poster.pdf, 10/11/2010 IDEX 2009 diamond pipeline


http://www.idexonline.com/pdf_files/2009-diamond_Pipeline_Poster.pdf



the diamond pipeline:2006

Source: of data IDEX 2006 diamond pipeline http://www.idexonline.com/pdf_files/IDEX_Online-Pipeline_Poster_2006.pdf, 01/11/2010


http://www.idexonline.com/pdf_files/IDEX_Online-Pipeline_Poster_2006.pdf




Diamond Pipeline: from original value

100%

115%

127%

133%

166%

320%

mine sorting polishing polished dealing

Jewellery manufacturing

retail

Source: of data http://www.duke.edu/web/soc142/team7/Diamond%20Global%20Value%20Chain.htm

exploration and mining

many hands

global diamond mining

Source- http://www.info-diamond.com/rough/world-production.html


Global production values 2010

Steve MClelland, Inspira Diamonds, for GIA, 2011 11

Rough Production Value in US$billion

Australia

Angola

DRC

Namibia

Botswana

South Africa

Source of data: http://www.idexonline.com/portal_FullNews.asp?TextSearch=&KeyMatch=1&id=35340,




Example at Argyle (RTD): open cut mining Currently in transition to underground

http://www.google.co.uk/images?hl=en-GB&rlz=1T4DAAU_en-GBAU273AU275&q=argyle+mine+images&um=1&ie=UTF-8&source=univ&ei=rP_YTP-JHIfovQPxpbmkCg&sa=X&oi=image_result_group&ct=title&resnum=1&ved=0CCgQsAQwAA


formation of diamond

Argyle fact: product formed at lower depth and higher pressure than usual diamond material

Geological model of pressure and temperature needed for diamond material

Source: John Mann, Sorting & Valuation Projects, Federal Police training presentation, 2003


at the mine…..diamond recovery process

Crushing of ore

Blasting

Scrubbing

Heavy media separator

Xray separator


at the mine…..diamond concentrate

During this part of the process the diamond product and non-diamond product are separated and treated with responsible practices.

The diamond concentrate is separated by size and the pinks are separated for processing in Australia.

ACID

Caustic recovery

PH neutralise ore

Responsible return of ore


mine extraction The process of extraction and

separation of the ore from its Kimberlite host, forms the

production or output level of the

mine, which is measured in carats per tonne of ore.

250 tonnes of ore must be

mined and processed to

produce 1 carat, depending on

the mine

(Cited by Wall St Journal)

http://www.slideshare.net/Platipus/diamond-ethical-supply-chain-deconstruction-2010


examples of rough diamond shapes


rough diamond models

sawable makeable

maccle 18 Steve MClelland, Inspira Diamonds, for GIA, 2011

rough sorting and rough trading

many hands

rough sorting…

Apart from extraction of the diamond from the ore body, the first real value add of diamond product begins at the sorting level.


sorting…sorting and more sorting

Diamonds are sorted and graded on colour, size, and carat weight by machine, and hand sorting (dependent on size and value)

With final sorting done by a highly experienced team of diamond graders.

Notice how the diamonds are labelled and separated, which is the beginnings of mine chain of custody.


Rough sorting examples…..


transparency to government and public……

Example KP certificate guaranteeing conflict free origins , required for export/import rough diamonds

After recovery rough diamonds are sent from the minesite to office RTD in Antwerp.

An estimate of value has been placed on the exported goods by an appointed RTD Royalty valuer and Government representatives, based on historical outputs

The goods are then approved for export, along with its KP certificate (non-conflict guarantee).


and yet more rough sorting …….


rough sales preparation and presentation…

•Diamonds are also sorted into meaningful assortments for presentation to the customers of RTD.

•The Sales team presents the goods at monthly interval sales, also called “sights”.

•Prices are based on the extrapolation of what the polished price might achieve in the marketplace

•Customers purchase their allocated goods, very often in millions of carats, or dollars, by mere handshake.

•Most production will leave Antwerp for manufacture overseas.


polished manufacturing

many hands

Most of world’s polishing takes place in India : an estimated 1 million people are employed by diamond industry in India


http://www.diamondfacts.org/

value add…

The diamond is forever altered into its final polished state, via a plan usually by a form of SARIN, combined with years of polishing experience within the polishing team, and its supervisor.

The team try to maximise yield (commercial) whilst keeping in mind proportions/symmetry/cut (brilliance).


•Sawing – the process of dividing a stone into two pieces using either a blade or a laser.

•Polishing – the process of applying facets to the surface of the stone.

•Bruting – a process which shape the stone in to the desired shape.

•Cleaving – a process where the rough stone is split into two pieces to improve the shape or the quality.

polishing process


marking & cleaving by traditional methods


Cleaving Grain

Sawing Grain

Diamond has a grain structure. It can be sawn against the grain and cleaved with the grain.


Sawing for a Major and Minor stone


Sawing

70% -30%

50% - 50%


Examples of commercial decisions


Bruting


Polishing


safety in the polished manufacturing process…

A combination of old traditional hand method, or laser technology is applied. Lasers assist in better diamond yield, and brilliance, and very importantly are healthier for the worker.

Factories are now more efficient, cleaner, with better lighting and product output due to BEM and best business practice requirements driven by mining companies like RTD and BHP.


recent trends in value addition….

Trends to manufacturing to ideal proportions (known as triple EX), or hearts and arrows,

is an attempt by the industry to extract more value from the diamond product, whilst also satisfying consumer demand, since the ideal proportions are highly sought after and command higher prices.


polished trading

many hands

diamond trade:

Diamonds are traded at 28 registered diamond bourses worldwide

Antwerp being the major recognised world diamond center

The move to standardisation with Rappaport lists, and certification makes diamond trade more transparent

At this stage most diamonds above 30-50pts will be sent to a lab for certification, where the 4c’s will be applied, the stone will be plotted and graded


international trade participants

wholesalers

jewellers retailers brokers/dealers jewellery

manufacturers

consumer

Pawn brokers resale


goods being sized and prepared for sale at a wholesaler


other value addition

many hands

certification…more value add

•In recent times (last 10 years) certification has become an important tool, protecting the supplier and the consumer, and providing consumer confidence through consistent grading standards.

•It also impacts significantly on the value addition of a diamond product.

•A GIA graded stone, can command more than a lesser lab for example

•And a stone that is uncertified is commercially less than a stone that is

certified


even shipping and customs adds value…


branding , packaging and marketing adds further perceived value..


Jewellery manufacture

Many hands

jewellery design and manufacturing

Probably the greatest impact on value addition….


finished jewellery product

IDEX estimated a mere 27% of the value of a finished piece of jewellery is attributed to diamond product, the rest being manufacture, design, gold and marketing

“Land I love”: Rohan Jewellery, 2009, inspired by Australian diamonds



conclusion & the future….

Many hands

Steve MClelland, Inspira Diamonds, for GIA, 2011

53

•2011 world production to plateau to 48 m carats •No new diamond deposits •De Beers warn contracted supply will force prices up next 15 years •Rio tinto warns rough-diamond prices will increase In the next decade as production will fail to meet demand from emerging BRIC economies (Brazil, Russia, India and China)

http://www.businessweek.com/news/2010-10-06/rio-says-rough-

diamond-prices-to-extend-gains-as-supplies-fall.html

contraction of supply......

consumption changes…

Consumption growth: India and China

Share of US market continues to decline, but still high in diamond content of jewellery

Emergence of “investment” diamonds

Reserves of mine production becoming depleted


http://www.idexonline.com/portal_FullNews.asp? TextSearch=&KeyMatch=1&id=35340, 25/07/2011







recycling as the “new mine”….

“2010:market value of global diamond recycling estimated at $6 billion “

Recycling tipped as the :”new mine”

Secondary market picks up : bought at most 80% off Rappaport , recycled and re-sold.

Increasing price of gold









This presentation has shown a brief glimpse into the many hands involved in the global diamond process.

As consumers and business leaders we must be aware of the cost to bring this “glamorous” product to the market. And endeavour to lead the world in ethical and respectful practices.


Credits and thanks

Credits

Written by Charmaine Thane, Inspira Diamonds with John Mann, Macro Diamond photography

for Steve McClelland, Inspira Diamonds at GIA AUG, 2011.


references

many hands

http://www.businessweek.com/news/2010-10-06/rio-says-rough-diamond-prices-to-extend-gains-as-supplies-fall.html, 01/11/2010

http://www.cibjo.org/index.php?option=com_content&view=article&id=268:luxury-companies-must-satisfy-consumers-deeper-social-conscience-states-report-released-at-cibjos-csr-session-at-shanghai-expo&catid=4:news&Itemid=19, Oct-Nov, 2010

http://www.cibjo.org/index.php?option=com_content&view=article&id=235&Itemid=45, Oct-Nov, 2010

http://www.idexonline.com/pdf_files/IDEX_Online-Pipeline_Poster_2006.pdf, 01/11/2010

http://www.google.com.au/imgres?imgurl=http://www.satimagingcorp.com/galleryimages/argyle_view_diamond_mine_3d-wide.jpg&imgrefurl=http://31/10/2010


Mann, John, Sorting & Valuation Projects, Federal Police training presentation, 2003

http://www.businessweek.com/news/2010-10-06/rio-says-rough-diamond-prices-to-extend-gains-as-supplies-fall.html

























http://www.cibjo.org/index.php?option=com_content&view=article&id=268:luxury-companies-must-satisfy-consumers-deeper-social-conscience-states-report-released-at-cibjos-csr-session-at-shanghai-expo&catid=4:news&Itemid=19




































http://www.cibjo.org/index.php?option=com_content&view=article&id=235&Itemid=45

http://www.cibjo.org/index.php?option=com_content&view=article&id=235&Itemid=45





http://www.diamonds.net/news/NewsItem.aspx?ArticleID=32505, 01/11/2010

http://www.worlddiamondcouncil.com/, 01/11/2010

http://www.google.co.uk/search?sourceid=navclient&aq=0h&oq=kimberley+pr&hl=en-GB&ie=UTF-8&rlz=1T4DAAU_en-GBAU273AU275&q=kimberley+process+certificate, 01/11/2010

http://www.duke.edu/web/soc142/team7/Diamond%20Global%20Value%20Chain.htm, 01/11/2010

http://www.diamondfacts.org/images/facts/quote_lines8_fact06.jpg, 01/11/2010

http://www.slideshare.net/Platipus/diamond-ethical-supply-chain-deconstruction-2010, 01/11/2010


http://www.diamonds.net/news/NewsItem.aspx?ArticleID=32505

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=32505

http://www.worlddiamondcouncil.com/

http://www.google.co.uk/search?sourceid=navclient&aq=0h&oq=kimberley+pr&hl=en-GB&ie=UTF-8&rlz=1T4DAAU_en-GBAU273AU275&q=kimberley+process+certificate









http://www.duke.edu/web/soc142/team7/Diamond Global Value Chain.htm

http://www.duke.edu/web/soc142/team7/Diamond Global Value Chain.htm

http://www.diamondfacts.org/images/facts/quote_lines8_fact06.jpg

http://www.diamondfacts.org/images/facts/quote_lines8_fact06.jpg












http://www.google.co.uk/images?hl=en-GB&rlz=1T4DAAU_en-GBAU273AU275&q=argyle+mine+images&um=1&ie=UTF-8&source=univ&ei=rP_YTP-JHIfovQPxpbmkCg&sa=X&oi=image_result_group&ct=title&resnum=1&ved=0CCgQsAQwA, 01/11/2010

http://www.info-diamond.com/rough/world-production.html, 01/11/2010


http://www.investmentinternational.com/news/alternative-investments/diamond-prices-set-to-rise-after-mining-giant-de-beers-announces-cut-in-production-to-preserve-stocks-3524.html, 10/11/2010

http://www.idexonline.com/pdf_files/2009-diamond_Pipeline_Poster.pdf, 10/11/2010

http://www.google.co.uk/images?hl=en-GB&rlz=1T4DAAU_en-GBAU273AU275&q=argyle+mine+images&um=1&ie=UTF-8&source=univ&ei=rP_YTP-JHIfovQPxpbmkCg&sa=X&oi=image_result_group&ct=title&resnum=1&ved=0CCgQsAQwA











http://www.info-diamond.com/rough/world-production.html





http://www.investmentinternational.com/news/alternative-investments/diamond-prices-set-to-rise-after-mining-giant-de-beers-announces-cut-in-production-to-preserve-stocks-3524.html










































Sanghvi and Virani, July, 2010: Is Social marketing effective in the diamond industry? Dissertation CASS Business School, City University London


http://www.diamondworld.net/contentview.aspx?item=6109, 26, Jul, 2011 http://www.diamondintelligence.com/magazine/default.aspx?SubCatId=64,

26 Jul, 2011









http://www.diamondworld.net/contentview.aspx?item=6109

http://www.diamondworld.net/contentview.aspx?item=6109

http://www.diamondintelligence.com/magazine/default.aspx?SubCatId=64

http://www.diamondintelligence.com/magazine/default.aspx?SubCatId=64

copyright issues

©Copyright of author : Charmaine Thane, 2011.

Where no photo source is cited the Photos appear courtesy of John Mann, Macro Diamond Photography

This presentation has been provided for the use of the GIA, and other non-profit educational institutions, for the purpose of instruction and education, provided that the copyright of the author, all cited articles and all images are observed.


gia presentation 2011

Education

diamond pipelinehttp

diamond chain5

diamond concentrateduring

ved steve mclelland

gia mumbai

oresteve mclelland

nondiamond product

glamorous world of diamonds