De Beers defends need to control diamond supplies
DE BEERS Consolidated Mines is fighting to keep its control over sources of diamonds in Russia and Australia, where it swallows up total diamond production through exclusive buying agreements.
It also plans to prospect in China to make sure no mainland diamonds are about to flood the market and hurt prices.
The company, which produces about half of the world's gem diamonds, and sorts, values and sells about 80 per cent of the world's rough diamond production, keeps a close eye on possible rival sources of diamonds.
It set up the Central Selling Organisation (CSO), which has come under fire as a monopoly.
De Beers argues that the CSO is a good thing for the industry, smoothing out fluctuations which otherwise would force producers to close mines, and would make it impossible to engage in long-term developments.
Alex Barbour, a director of De Beers, said: 'Our argument is that the success of the single-channel market is there for history to see.
'Diamond prices have increased at a steadier rate than any other commodity.' He said the industry was in deep trouble in the 1930s, when diamond prices collapsed, and many mines were being closed.
Through promotion, and the organised buying of rough diamonds, the industry had generally maintained an even keel.
De Beers pockets were deep enough for it to lend Russia US$1 billion earlier in the decade, and to advance it another US$1 billion tied to future sales.
It is continuing talks with Russia over renewal of their existing sales agreement.
Mr Barbour said Russia understood the importance of the agreement.
'We realise that Russia is certainly concerned about maintaining market stability,' Mr Barbour said.
In Australia, De Beers has an exclusive contract to buy diamonds, taking about 40 million karats annually.
Australia's major producer, Ashton Mining, has threatened to stop selling its diamonds through the CSO unless the De Beers-controlled cartel gives it a fairer deal on prices and purchases.
Ashton's contract with the CSO expires in mid-1996. It has a 40 per cent interest in the world's largest diamond mine, at Argyle in West Australia.
In Asia, De Beers has been in contact with China since the early 1970s, mainly at provincial level.
'It's such a vast country that one has to look there,' Mr Barbour said.
Philip Dobbs, De Beers' representative in China, said De Beers had signed a contract to prospect two north-eastern provinces.
Last year, it signed a letter of intent with a new mainland mining company that is being set up, the China Geology and Mining Group Corp.
