Probably the most interesting part of last week’s speeches from De Beers executives was not just its executives’ announcement that it will be reducing production by 50% — though that was startling enough.

 

There was also Varda Shine’s comment that the DTC is “exploring options for bringing surplus goods to the market once every avenue of Sightholder demand has been satisfied.”

 

Basically, if sightholders won’t buy the goods, the DTC is going to try to find people who will.

 

In a way you can’t blame them; De Beers’ latest sight was estimated at around $100 million – a mere fraction of its standard January sight (around $600 million.) It’s hard to see how they go on offering such small allocations.

 

Yet, with every solution, there are new issues raised.  This blog has an interesting argument that selling “outside” the system might “devalue” a company’s sightholder status, which, let’s not forget, is a cumbersome process that involves filling out a lot of forms and swearing allegiance to the company’s Best Practice Principles. Now, De Beers would argue that sightholders get the right of first refusal, and the new buyers will likely fall away once things improve.

 

And, anyway, it’s hard to imagine De Beers finding many new buyers for its diamonds that its 70 or so sightholders haven’t already found.

 

Chaim’s recent article does offer this one clue: “[De Beers] wants to sell the goods to anyone that has the money to pay for them,” he writes, “conceivably even to investment funds with outside investors who might be willing to finance rough and polished stockpiles.”

 

This would certainly be a change for the DTC – which was once appalled at the very idea that diamonds were a commodity.  But would the investment funds, or for that matter, any new buyers it finds, have to be BPP compliant? Will they sell them sight boxes, or just rough on a per-stone basis? (And will sightholders have that option?) Will this be outside Diamdel? We are truly in new territory here.

 

Spokeswoman Lynette Gould tells me that any extraneous sales “will be conducted on an ad hoc, transactional basis and there would be no contractual commitment on the part of the DTC with any relevant non-Sightholder purchasers, to repeat such sales.” She doesn’t comment on the issues above, but promises: “There’ll be more detail on this at the February Sight.”

 

On a related note, Charles Wyndham here takes some issue with a little snippet I wrote on tenders, which can be read here. (It’s item four.)

 

For what it’s worth, I don’t think writing that “perhaps” the sight system has “some logic” rises to the level of a full-fledged argument. I don’t really have any opinion on tenders, except to say  that it’s healthy that this industry now has multiple selling models, after years of having just one.  There is going to be a bit of experimentation going on and may the best mechanism win.  

 

But I’d be interested in readers’ feedback, particularly from those who have bought from the major rough dealers. Tenders: Pro or con?

Follow JCK on Instagram: @jckmagazine
Follow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine