De Beers Trims Sightholder List

De Beers’ Diamond Trading Company has announced a drastically reduced sightholder list.

The number of clients is now 75, down from 93. Six new companies were added, and 24—or approximately one in four—were dropped. The overall number rises to 79 if clients that have sights only from DTC Namibia and DTC Botswana are included. All companies will receive contracts that run from 2008 through 2011.

The DTC won’t release its official list until April. At first indications, it seemed American sightholders did unexpectedly well. Stuller, Julius Klein, Michael Werdiger, and Premier Gem all confirmed to JCK they had received renewed sightholder status.

The news was not as good in Antwerp and India, which were said by informed sources to have suffered a net loss of five or six sightholders apiece. Israel was said to have lost three. Thailand’s only sightholder did not reapply.

DTC spokeswoman Louise Prior stresses that nothing is definite until the DTC completes its third-party verification of clients’ profiles. “It is very possible the list will go down before March 31 because of the third-party verification,” she says. “It may not, but I will be surprised if we have 79 clients when we start the new contract period at the end of March.”

Among the factors that could knock clients off the list: contravening De Beers’ Best Practice Principles, its list of ethical dictates. “Let’s just say there are a few companies under investigation at the moment,” Prior says.

But she notes that, even if other companies are removed, their “goods will be reallocated during the ITO [intention to offer] period. We don’t have a reserve list of sightholders.”

One company that didn’t get on the list, even though it was widely expected to, was retail chain Sterling, which two years ago hired broker I. Hennig to improve its rough diamond sourcing. Sterling spokesman David Bouffard tells JCK, “A sight was not essential to the development of our rough diamond initiative.” He added that the company is confident it will find alternative sources.

One well-respected company that lost its sight is New York’s Hasenfeld-Stein. Spokesman Steven Feldman notes that only 25 percent of the company’s product comes from the DTC. “We have anticipated this for some time,” he says. “Seventy-five percent of our business is outsourced anyway. It’s business as usual, and we don’t expect this to have any impact on our business going forward. Our relationship with the DTC has always been and remains excellent.”

Prior says that, in addition to offering former sightholders consulting services from PricewaterhouseCoopers, the DTC is considering an endorsement service for unsuccessful applicants. “We will be losing some fabulous businesses, simply because we cannot offer them supply,” she says. “So what we are looking at is some kind of program for former sightholders where we will publicly endorse those companies as a DTC-endorsed business saying they have passed the BPP hurdle and have also submitted consolidated financial accounts. We are looking at how we can roll that program out to clients coming off the list so we can retain relationships with them.”

Prior stresses, as all DTC executives do, that the company no longer can supply a long list of businesses because its own supplies have dwindled. “We have fewer goods to sell this time around because of the reduction from [Russian producer] Alrosa and because of our commitment to the beneficiation goals of the governments of Botswana and Namibia,” she says.

DTC managing director Varda Shine says, “Competition for rough diamonds is now fiercer than ever, and we are confident that the diverse range of companies to which the DTC is able to offer supply are those best placed to add real value to the rough diamonds we sell.”