De Beers CEO: We Won’t Be Raising Prices 5 Percent a Year

In an interview yesterday at the Forevermark breakfast, De Beers CEO Philippe Mellier denied reports the company aims to raise prices an average of 5 percent a year. He also touched on synthetics and whether De Beers currently has a deal to enter that market.

One note: Mellier will speak on these topics and more at a session on De Beers’ Perspectives on the Diamond Industry, on Friday, May 30, at the Surf Ballroom in Mandalay Bay, 4 p.m.–5:15 p.m.

JCK: There have been reports that De Beers plans to raise prices 5 percent a year. Is that true?

PM: I said that we believe that the market will rise from 4 to 5 percent a year. This is our projection for the market. We never talk about prices. Clearly, the market is going to grow. I can’t say more than that. My comments were not interpreted the right way.

JCK: So you don’t have any price targets?

PM: We price according to what we see in the market. This is not something that we talk about.

JCK: The CEO of Anglo American said recently that he felt that De Beers had not delivered what was expected to Anglo. Doesn’t that increase pressure to raise prices? 

PM: What Mark [Cutifani] said two weeks ago is that Anglo American paid top dollar for De Beers. We are all judged in our return on capital employed. If you take into account the price that was paid, we are below the threshold, which is 15 percent for return on capital employed. If you look at De Beers on an asset basis, we are performing at 20 percent. We have an objective to achieve 15 percent return on capital employed taking into account the price paid. That is a business objective. We have a plan to achieve that. But it has nothing to do with pricing.

JCKYou mentioned at the breakfast you see new technology to produce synthetic diamonds coming. Can you elaborate on that?

PM: The technology to produce synthetics is constantly evolving. We know all the potential routes to develop the technology to produce synthetic diamonds. We always invest a lot of money in R and D. We opened a research center close to Oxford [University], which is the biggest diamond research center in the world. We are exploring new technologies, and we are at the forefront of what can be done to produce man-made diamonds.

JCKA Botswana NGO said that De Beers has a deal that if it ever does enter the synthetic gem market, it will give Botswana a 25 percent of that business.

PM: No. We have a subsidiary, Element Six, that produces synthetic diamonds for industry. We are a marketer of rough-gem diamonds, and we are on the industrial side. The only thing that those have in common is we know the technology very well. All the rest is stories and rumors.

JCKWe hear mostly about Forevermark. Is De Beers still committed to De Beers Diamond Jewelers, its retail chain? 

PM: Yes. It is a joint venture with LVMH. We are both committed to it. We are expanding the market in greater China, and we are enjoying growth. The year so far is going well. It is a small operation, but for us it is an important operation.

An interview with Forevermark CEO Stephen Lussier will run next week.

JCK News Director