Dan Atkinson in London
Gathering storm clouds overshadowed bumper half-year profits from diamond conglomerate De Beers this week. The sliding value of the rand and renewed uncertainty over a critical trade deal with the Russian government, combined to cast doubt on the survival of the company’s worldwide marketing cartel.
Director Gary Ralfe said two weeks ago he had to fly to Moscow for emergency talks and to protest at a jump in the number of Russian stones leaking on to world markets, undermining the De Beers sales system.
Meanwhile, De Beers, the world’s largest diamond producer, is coping with the after-shocks of the walkout from the cartel in June of the world’s biggest diamond mine, Argyle in Australia.
The mine had complained that De Beers’s prices and quotas were tilted against smaller gems of the Argyle type; this week De Beers said it was trying to help the Indian cutting industry, unsettled by the walkout, to adjust.
De Beers chairman, Julian Ogilvie Thompson accused Argyle of “rather a selfish act”. Should other producers walk out of De Beers’s Central Selling Organisation (CSO), he said, “things really wouldn’t work at all well”.
Argyle accounted for just 6% of the CSO’s rough- diamond intake; even without it, the CSO still controls about 80% of gemstone sales.
Far more serious is the threat of a breakdown in the detailed discussions with Russia, the second-largest producer in the world. An outline bargain struck in February seemed to have averted the threat of a Russian walkout from the CSO, but the presidential elections and political in-fighting in Moscow have delayed final agreement.
A Tass news agency report on June 24 suggested, contrary to impressions received from De Beers, that months of hard bargaining lay ahead.
Russian gem leakages, which averaged more than $62- million a month during 1993 and 1994, dropped to an average $12,2-million in March and April. But in June, leakages rose to perhaps $50-million.
Ralfe said the August shutdown of cutting centres in Antwerp and Tel Aviv made it hard to judge present leakage levels.
De Beers’s attributable earnings rose 18% in US dollar terms in the six months to June 30, well ahead of analysts’ expectations.