U.S. Diamond Manufacturers Letter to DTC

580 Fifth Avenue, Suite 2000

New York, NY 10036

Tel.: 212-944-2066  Fax: 212-202-7525

dmia.net

November 12, 2007

Mrs. Varda Shine

Managing Director

The Diamond Trading Company

17 Charterhouse Street

London

EC1N 6RA

United Kingdom

Dear Varda,

With the final stages of the Diamond Trading Company’s Supplier of Choice review and Sightholder selection process coming to an end, the Diamond Manufacturers & Importers Association (DMIA) would like to share our thoughts and concerns with you regarding the overall American diamond industry.

As always, the DMIA approaches this communication with you in a positive and proactive manner. Our communications and sharing of industry’s topics are done in a way that we can work together as partners to build a stronger and more dynamic diamond industry.  We are committed to this mission and share the mutual respect that has been evidenced by our interactions over the years.

We come to you not only as New Yorkers and Americans, but also as international diamantaires and committed business persons participating in a global economy, that share a common concern for the infrastructure and distribution chain within the diamond industry.  We recognize that all the major diamond centers rely on the health and well-being of the American economy and on the domestic consumption of polished diamonds.

The DMIA acknowledges the merits and necessity of beneficiation, and we support the DTC’s role in this initiative, as well as your support of black empowerment, and all the social and environmental issues that you have undertaken recently in your drive for corporate responsibility.  However, there must be a balance so that the positive results of beneficiation do not come at the expense of rough diamond allocations to American Sightholders, as well as secondary market distribution to domestic non-Sightholder manufacturers.

The merits of having American Sightholders and an active diamond cutting base in the United States are many.  The American Sightholder is a leading promoter of diamonds in general, and the Diamond Trading Company in particular, to the retail market, the largest consumer of polished diamonds and diamond jewelry in the world.  American Sightholders educate their customers about the significance of what it means to be a Sightholder and the importance of adhering to Best Practice Principles.  The American diamond dealer better understands the domestic marketplace and the requirements and intricacies of the retailer and consumer.  The American manufacturer is as technically advanced and sophisticated as any foreign manufacturer, able to add value, creativity and understands better how to service the domestic industry.  All of the strengths of the American diamantaire are important to the image of the diamond industry and the Diamond Trading Company.  Continued rough supply to American manufacturers is crucial in supporting the win/win solution for the entire diamond and diamond jewelry industry.

The elimination of sights to American manufacturers not only damages those who lose their direct supply from you, but also burdens those who rely on a limited outside supply.  As evidenced by previous reductions in the Sightholder list, when a firm loses their direct and consistent supply, they are forced into the open market, increasing the competition for a limited supply of outside goods.  Subsequently, prices are driven upward having little to do with the demand for polished diamonds by consumers.  The result is increased market volatility, bank and market debt increasing to unacceptable levels, payment terms being extended, and receivables becoming more difficult to collect. The irreparable damage that is affected upon the marketplace is symptomatic of the problems and desperation that we are experiencing today.

It is important to put into perspective what continued rough distribution to America represents.  The amounts allocated to American manufacturers are a very small percentage against both the overall sales made by the DTC per sight and on an annual basis. It is hard to imagine that the quantity of goods needed to continue American supply would have any significant impact on the overall initiative of beneficiation.

Figures from the U.S. Government indicate significant American aid and support for the countries of Botswana, Namibia, and South Africa (see attached).  The cost of this support is born by the American taxpayer, including those who work in the diamond industry. It would be an unacceptable contradiction for those who support beneficiation in the African continent to suffer the consequence of having rough diamonds taken away from American manufacturers, the ensuing loss of jobs, and the loss of tax revenue.  This support should not and cannot be unconditional in the adoption of policies by these countries that have the effect of damaging employment and the welfare of industry within the Unites States of America.

The development and growth of the American diamond industry infrastructure has taken more than one hundred years to evolve.  This infrastructure has been built by American diamond manufacturers, importers and dealers not only for the benefit of Americans, but also for the benefit of the entire international diamond community. The loss of American Sightholders and the further erosion of domestic diamond cutting will undermine and compromise that infrastructure. It is in the interest of all mining companies, all diamond centers, as well as all Sightholders to insure the well-being of the American industry by supporting the domestic manufacturing base. Simply put, the American market and the world diamond community will remain more stable by making sure that those who built and know how best to serve the domestic market continue to do so.

In summary, we acknowledge the dilemma of beneficiation and seek a balance between the needs of governments, producers, American manufacturers, importers, and dealers, and the entire international diamond community. We must include amongst our highest common priorities the commitment to the stability, employment and financial foundation of the American diamond and diamond jewelry industry.  In conclusion, we urge the Diamond Trading Company not to diminish the direct supply of rough to American manufacturers for cutting in the United States.

Thank you for the opportunity to express and share our concerns with you.

Sincerely,

Ronald J. Friedman

President, Diamond Manufacturers & Importers Association of America

cc:

Nicholas F. Oppenheimer, Chairman, The Diamond Trading Company / De Beers Group

Gareth Penny, Managing Director, De Beers Group

Secretary of State Condoleezza Rice

Secretary of Commerce Carlos M. Gutierrez

Secretary of Labor Elaine L. Chao

Secretary of Treasury Henry Paulson

Governor Eliot Spitzer

Senator Charles E. Schumer

Senator Hillary Rodham Clinton

Representative Carolyn B. Maloney, 14th Congressional District

Representative Jerrold Nadler, 8th Congressional District

Representative Charles B. Rangel, 15th Congressional District

Mayor Michael R. Bloomberg

Governor Kathleen Blanco

Senator Mary Landrieu

Senator David Vitter

Representative Charles Boustany Jr.