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Home > Diamond News Center > Features > Articles

An Introduction to Beneficiation

06.02.08

 

 
 

When I was asked to write a commentary on beneficiation, I had to think about it for awhile because so much has already been written on the subject, and I wanted to be able to add to the discussion by bringing in another perspective by introducing what is happening at the opposite end of the pipeline.

To my way of thinking, it’s all about sharing custody of the diamond dream and what will eventually happen at the retail end of the pipeline.

Beneficiation has many aspects to it, but I believe that it is up to the retail jeweler and the consumer to make this dream come true.

The Pipeline

A few short months ago, at a conference in
Antwerp, the topic of conversation focused on the viability of the beneficiation process - and how beneficiation in the new cutting centers would affect the traditional cutting centers.

In retrospect, it seems such a long time ago - questions and discussions basically no longer valid in the scheme of things and the progress that is taking place.

As we all know, timing is everything. And in this context, Victor Hugo’s phrase to the effect that “there is nothing more powerful than an idea whose time has come to be” is very interesting.

Of course, the idea is important but without implementation - without action - an idea remains a vague concept to be discussed and debated.

Beneficiation is just at the beginning of the way and still has to prove to itself and others that it can bring results; otherwise, it will remain in the realm of dreams and hopes.

Location. Location. Location.

Beneficiation has a long way to go on the road to sustained development to prove that it was worth the investment in the process in the first place.

It is already a fact very much in play - albeit in different ways - in 3 southern African countries,
Botswana, Namibia, and South Africa.

In its simplest explanation, beneficiation is bringing cutting and polishing to the producing countries to add value to the diamonds mined in that country.

In practice, each country is going about it in a way that is beneficial for the type of goods that are mined in the country, and for the type of cutting and polishing facilities chosen to implement the process.

Sounds logical. Easy even. Not necessarily so.

Sustainable Development

How does a country go about implementing beneficiation?

After successful negotiations with the
DTC and coming to a new contract agreement with De Beers, Botswana basically said that now that they had control over the rough diamonds mined in the country, there would be certain prerequisites if DTC wanted to continue in Botswana and participate with them in the beneficiation process.

The
DTC promised its Botswana partner that it would set up cutting and polishing factories in the country.

But in order to accommodate
Botswana’s new policy, DTC needed its clients (sightholders) to implement beneficiation on a practical level.

To date, hundreds of millions of dollars (from private investors) have been invested in the new cutting and polishing centers in Africa, with more to come as the plans and programs progress.

The move to southern Africa (aggregation in Botswana in particular) is a signal for profound change and is one of those defining moments in the history of the diamond industry; one that is sending a powerful message along with it throughout all the global diamond exchanges and traditional cutting centers.

In essence, a sustainable supply chain bringing diamonds (aggregated, cut, and polished in
Africa) is being developed to process the rough and take the polished diamonds from a verifiable source as directly to the consumer as possible. The chief attributes of this are beneficiation of the natural resource and the empowerment of the more than 3000 employees who will be working in all facets of the diamond industry.


Challenging the Status Quo

The
DTC and its clients came to understand that the producing countries were no longer prepared to accept the industry as it was.

Diamond companies had to apply for a license - with a business plan for a certain type of goods to the
DTC and the governments (Botswana, Namibia, and/or South Africa) involved.

The companies would also have to make a commitment to build modern eco-friendly factories, to create jobs, to put together a workforce, to set up dedicated training programs, and to have a corporate social responsibility program for community development.

The companies would not just be outsourcing in another country from where there headquarters were located; they were expected to become an integral part of their respective African communities and would be solving a number of social problems starting with the most important one that involved creating employment opportunities for local residents near where their factories would be located.

For example, in
Botswana, 16 companies received licenses and contracts to prove that the goals that beneficiation set out were achievable - that beneficiation would be a viable factor across the global diamond industry.

The incentive that
Botswana and the other producing countries offered was access to a continuous consistent supply of rough diamonds.

Because of this, approximately 50 companies (in
Namibia, Botswana, and South Africa) have set out to remake the business in the way that the recently empowered producing countries think it should be.

A wide variety of goods will be cut and polished in the 3 countries including hearts and arrows, ideal cuts, melees,  fancy shapes, large sizes, and branded special cut - not to mention rounds of all qualities, sizes, and colors.

Social Entrepreneurs

As much as beneficiation is about sustainable development, it is about supply chain integrity,

WIth the implementation of beneficiation (by setting up cutting and polishing facilities and training programs), the sightholders were also developing sustainable supply chains from the mines to the minds of the consumer.

But more important than that, the companies would have to become involved with any number of community development programs for the benefit of local residents of the locations where they set up their factories.

And because of this requirement, diamond industrialists who decided to open factories inadvertently became part of a growing movement of investors (in other types of businesses) who have come to be known as social entrepreneurs.

For all intents and purposes, the diamond industry has raised the bar on social entrepreneurship in the unprecedented way that beneficiation is playing itself out. (But that’s another chapter in the beneficiation story that will be saved for another day. Eventually it will be online on my new internet site at www.beneficiation.biz which will give you easy access to information on the subject with reports about the progress of the different diamond companies involved.)

An Aspirational Brand Category

The product is diamonds.

The unprecedented opportunity for a competitive advantage is beneficiation.

Eventually, to succeed, the concept of beneficiation has to be accepted by the consumer.

Consumers, as always, will have the last word.

Marketing will be done by companies that will also act as change agents that will carry the message forward through parallel pipelines (in words and in deeds) to the consumer.

The success of beneficiation is dependent upon how it is presented at the retail jewelry level (online and off), and if it captures the imagination of today’s “generation why” consumer.

Directly Downstream

All of the players in
Botswana, South Africa, and Namibia have excellent distribution channels and some already have cause-related marketing programs underway.

During the next few years, diamond brands and diamond set jewelry (associated with beneficiating diamond companies) will be in retail jewelry stores around the world including top jewelry stores in India, Monaco, Russia, and Dubai; Fifth Avenue, Wall Street, and Madison Avenue in New York; the Ginza in Tokyo; Johannesburg and Capetown in South Africa; and Bond Street in London.

The Uchihara Group plans to import beneficiated diamonds from Diamond Manufacturing Botswana (DMB) for its “SA Birth” brand. Up until now, the company’s sales for this brand (with polished from
South Africa) were in Japan; however, plans are going forward to launch the brand (with diamonds from Botswana) in the United States and the Middle East.

Sotheby’s is associated with one of the companies active on the continent including Botswana and South Africa; Tiffany is beneficiating in Botswana and Namibia; Graff’s parent company is building the diamond technological park in Botswana; Exelco has jewelry boutiques that will highlight the hearts and arrows diamonds polished in their Botswana factory; Lazare Kaplan’s ideal cuts will be in the company’s boutiques worldwide; the Leo Diamond (cut and polished in the company’s factory in Moleopole) is sold in 2000 stores around the world; and diamonds cut at LLD in Namibia will  most likely be set in jewelry in Leviev retail stores in London and New York.

Building Momentum WIth Cause-Related Marketing

As part of its social investment responsibility, Motiganz Diamond Manufacturing Botswana has sponsored the Miss Botswana competition and the local
Botswana soccer team, Centre Chiefs (committing resources that could make it possible for the club to position itself as the best club in the country).

Based on the source of the rough, the brand, Botswana Diamonds, will be marketed in the
USA by the Tache Alliance and a retail partner with a marketing program that will guarantee the origin of the goods. Each diamond will be individually tracked and inscribed so it can be traced back to an individual Botswana sight.

Emanuel Namdar explained about his company’s involvement with beneficiation, saying, “In South Africa, we have pioneered the branding of African diamonds with the Proudly South African brand. Recently, we have brought this expertise to
Namibia; and we hope that we can do as well here for the mutual benefit of all of us starting with the Team Namibia brand.”

DD Manufacturing included 40 hearing impaired workers (in its first training program) who currently constitute approximately a third of the total workforce in its factory in Gabarone. Besides employment and skill development, DDM offers these individuals wider social support with the objective of improving their quality of life. This employment initiative runs alongside DDM’s financial commitment to the development of primary and secondary education to meet the specific needs of local hearing impaired children.

Russell Simmons (in association with an Israeli sightholder who manufactures in
South Africa) has done the most during the past year to raise awareness about beneficiation and empowerment in southern African countries.

After a DPS sponsored fact finding trip last year (that included a visit to Eurostar’s factory), Simmons has been making the cause for beneficiation by setting up the Diamond Empowerment Fund and raising awareness with the Green Initiative. Celebrities and politicians (including Oprah, Forrest Whitaker, and the former
US president, Bill Clinton) have made the DEF green bracelet a popular fashion accessory.

A Time For Profound Change

Even with lots of time and the “best will in the world”, those companies cutting and polishing in formal beneficial cutting centers will only succeed in building capacity and making changes in a small corner of the diamond world.

For beneficiation to really establish a place for itself in the minds of consumers, it will first be necessary to build the capacity needed for sustainable change (together with the acceptance of it) starting off in the diamond bourses worldwide.

This is one circumstance where it will take the global diamond village to raise awareness about what is happening in southern
Africa.

This deserves a concerted positive effort on the part of all of us for the benefit of everyone who is ready and willing to participate in the process.

By: Fran Goldstein
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