42 / 90
39
In fact, supply through term contracts with a number
of selected customers seems to be the preferred mode
among suppliers offering a relatively stable volume
and mix of goods, often supplemented by auctions,
especially of large stones.
Whereas BHP Billiton used auctions to sell production
from its Ekati mine, Dominion Diamond Corporation,
which acquired 80 per cent of the mine from BHP
in 2013
23
, has recently announced that the company
plans to sell its production from Ekati and its share of
the Diavik mine production through contract sales to
approximately 30 companies from July 2014
24
.
MORE ROUGH DIAMONDS ARE BEING SOLD LOCALLY
Producing countries have been playing a more active
role in the sale and distribution of rough diamonds.
This is driven by a strong desire on the part of national
governments to increase their share of value-add
of the primary resource, and has resulted in the
establishment of domestic sales channels such as
the State Diamond Trader in South Africa, and the
Okavango Diamond Company in Botswana.
The trend towards in-country value addition to
diamonds saw perhaps its largest milestone yet in 2013,
with the move of De Beers’ Global Sightholder Sales to
Botswana, and the organisation of De Beers’ first ever
international ‘Sight’ in Gaborone in November 2013.
FIG. 21:
ROUGH DIAMOND SALES METHODOLOGIES
Source: De Beers
DESCRIPTION
SALESMETHOD
ƒ
Agreement for the continued sale of a certain
type and amount of rough diamonds over an
extended period. Contract lengths vary.
Generally, the price is set by the seller and the
same prices are charged for the same products
to all buyers.
TERM CONTRACT
ƒ
Ad hoc sales agreement between seller and
buyer for a particular type of range of rough
diamonds with no guarantee of continued
supply. Price, either set by seller or subject to
negotiation between buyer and seller.
WILLING BUYER,
WILLING SELLER
(OR ‘PLACED’
SALES)
ƒ
Discrete sales event at which bidders compete
for the purchase of a parcel of rough diamonds
through a series of ‘rounds’. Various types can
be employed such as multiple unit auctions and
open ascending price auctions. In most auction
types (except for tenders – see below),
participants have the opportunity to amend
their offers in response to other bids submitted.
When one bidder has outcompeted the others
in the process, the auction is complete. Price is
an outcome of the competitive bidding process.
AUCTION
ƒ
Discrete sales event at which bidders submit a
single bid for the purchase of rough diamonds
through a ‘closed envelope’ approach. The
highest bid submitted is the winner and as a
rule participants have no opportunity to amend
their offer once submitted.
TENDER