DIAMOND VALUE CHAIN

(an overview)

© DIMEXON 2010 PRIVATE & CONFIDENTIAL ANTWERP · DUBAI · MUMBAI · HONG KONG · SHANGHAI · SHENZHEN
Diamond Value Chain

RETAIL SALES
POLISHED DIAMOND
SALES
ROUGH DIAMOND
SALES CONSUMER DEMAND
JEWELLERY
EXPLORATION
MANUFACTURING
CUTTING &
POLISHING
PRODUCTION

© DIMEXON 2010 PRIVATE & CONFIDENTIAL

Diamond Value Chain – An Overview
1. EXPLORATION for diamond resources is usually carried out by finding and evaluating kimberlite and
lamproite pipes containing diamond ore.

2. PRODUCTION of rough diamonds involves extraction of diamond ore from Open-pit / underground /
offshore / alluvial mines and passing it through various processes.

3. Producers sort diamonds into various categories & prepare for ROUGH DIAMOND SALES or trading.

4. Rough diamonds undergo different stages of CUTTING & POLISHING to become polished diamonds.

5. POLISHED DIAMOND SALES are transacted either through the Cutters & Polishers directly or through the
Diamond Brokers to the Jewellery / Fashion Accessory manufacturers.

6. JEWELLERY MANUFACTURING involves both in-house and outside designers creating products for the
manufacturers.

7. Independent stores and retail chains comprise the jewellery RETAIL SALES to consumers.

8. CONSUMER DEMAND is driven by people across the world desiring to own diamond jewellery.

© DIMEXON 2010 PRIVATE & CONFIDENTIAL

 Diamond Value Chain – An Overview
Jewellery
Rough Cutting & Polished Retail Sales
Exploration Production Manufacturing
Diamond Sales Polishing Diamond Sales >250000
<100 players <100 players >10000
<100 players >1000 players >1000 Players Players
Players

• ALROSA • Yossi Glick • Pluczenik • Tiffany & Co.

• De Beers • De Toledo • Cristall • Richemont
• Rio Tinto • Spira • Diarough • LVMH
• BHP Billiton • Others <100 • Rosy Blue • Signet
• Petra Diamonds • Chow Tai Fook • Independent Manufacturers 10000+
• Diamcor • Chow Sang Sang • Independent
• Endiama • Dimexon Retailers 250000+
• Others 1000+

Rough Cutting & Polished Jewellery

Production Diamond Sales Retail Sales
Polishing Diamond Sales Manufacturing

Catalogue /
Sightholders / Long Term Contract Holders QVC
TV
ALROSA

De Beers Internet Blue Nile

Rio Tinto Department Macy’s

Stores Harrods
Rough Diamond Polished Diamond End
BHP Billiton Importers /
Dealers Dealers Consumer
Distributors
(independent) (independent) Discounter Walmart
“Juniors”
Diamcor
Jewellery Graff Tiffany
Endiama
Chains Kay
Petra
Cutters & Polishers Jewellery Manufacturers
Diamonds Jewellery Bachendorf’
(independent) (independent)
Retailers s Koohenji

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 Exploration: the complex constraints
The exploration of a potential diamond site is a complex and lengthy process with the probability of finding the
deposit with a possibility to commercially develop it into a diamond mine is only 1 – 3 percent.

There are two different types of explorations: TRENDS & UPDATES

• Greenfield: Searching for kimberlite & lamproite deposits in
untapped areas. This is a High Risk & High Return affair.
• Brownfield: Conducting search near to the known diamond
deposits where the geology is better understood. This is a Low
Risk & Low Return affair.
• Small explorers when find a diamond site, the big
players buy them hence saving the exploration efforts.
• 13 additional mines are under development in Russia,
India, Canada & Southern Africa expected to start by the
year 2020. Collectively they may produce 23 million
carats of diamonds per year.

Economic Design &

Exploration Surveys Licensing
Appraisal Construction

• Initial exploration
• Surveys to guide a
decision on more
detailed exploration
• Probability of success
~1-3 %
• Structural drilling to • Multi-step economic • Obtaining construction • Mine facilities
assess diamond appraisal of the ore and operation permits construction
content body • Environmental • Infrastructure
• Identification of • Evaluation of requirements development
indicator materials environmental impact compliance • Overburden removal
• Probability of success • Probability of success • Beneficiation plant
~10%* ~25%* construction

3 – 5 years

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Production: mining mechanics
The production of rough diamonds consists of three stages:

EXCAVATION PROCESSING EXTRACTION

(excavating the diamond ore (crushing the ore reducing it to (separating the diamonds from
from the mines) the manageable size) waste using various methods)

BIG PRODUCTION REGIONS

• Africa • Canada
• Australia • Russia

BIG PLAYERS
• ALROSA • Harry Winston
• BHP Billiton • Petra Diamonds
• De Beers • Rio Tinto

LEADERS
BY VALUE BY VOLUME
• De Beers • ALROSA
• ALROSA • De Beers
• Rio Tinto • Rio Tinto
• BHP Billiton • BHP Billiton

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Rough Diamonds: sorting & sales
Producers SORT the rough diamonds based on the four basic parameters popularly known as the 4 Cs – CUT,
CARAT, COLOR & CLARITY. Each parameter has various gradations allowing diamonds to be classified in
thousands of different categories by the time them reaching to the final stage.

Eg. – A one carat diamond may cost anywhere from USD 100 to USD 25,000.

Three different ways to sell Rough Diamonds

• Long Term Contracts / Sightholder System:

Producers sell diamonds to the holders of long term
contracts (or sightholders) originally established by
De Beers.

• Auctions: Auctions allow buyers to make purchases

without a long term commitment giving them
advantage of changing market conditions.

• Spot Sales: Producers sell a range of rough

diamonds on one time contracts.

THE ANTWERP CONNECTION

With more than 500 years of history as a center for diamond cutting, polishing and trading, Antwerp today remains the world’s major global
diamond hub. It is the key destination for the secondary, or open, rough-diamond market. Indeed, more than 80 percent of the world’s rough-
diamond volume is traded in Antwerp.

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Cutting & Polishing: shaping the diamonds
Transforming rough diamonds to polished diamonds involves 5 major steps:
1. Identification: determining the optimal cut 4. Polishing: cut the facets

2. Cleaving / Sawing: breaking the rough diamond into pieces 5. Inspection: quality assurance

3. Bruiting: giving desired shape to the diamonds

During the entire cutting & polishing process, the diamonds lose 50-60 percentage of their weight.

Different Shapes
• Round Brilliant Cut has 58 facets and is
considered as the Ideal cut.
• Fancy cuts have different shapes like Oval,
Heart, Square, Pear etc.
• It takes a couple of hours to several months
to cut a stone.

Regional Dominance

Previously the major cutting & polishing

centers were Belgium, Israel, USA and Russia
which has now been shifted to Asia with India
as the World’s biggest cutting & polishing
center followed by China and Thailand.

© DIMEXON 2010 PRIVATE & CONFIDENTIAL

Polished Diamonds: demand & sales
The single most important factor affecting polished diamond pricing is consumer demand.

Sales at Offices Sales at Trade Shows

Majority of polished diamond sales take place at companies’ Approximately 30-40 % of total polished diamond sales takes
central and regional offices. Most of them based at India, Antwerp, place at trade shows. Hong Kong holds the largest gathering
New York and U.A.E. followed by Las Vegas. Basel and Switzerland observes mostly
watch manufacturers.

© DIMEXON 2010 PRIVATE & CONFIDENTIAL

 Jewellery Manufacturing: the fragmentations
Being the cost effective centers, India and China enjoy roughly 80 percent of World’s jewellery manufacturing
in terms of volume. In terms of value also, their share grew from 27 percent to 55 percent in past 10 years.

LEADING PLAYERS BRAND VALUE & RECOGNITION

• Tiffany • Chow Tai Fook A diamond engagement ring by Cartier may enjoy up to a 40 percent premium over an unbranded ring
• Richemont • Chow Sang Sang with a stone of identical size and quality. Another key element of jewelry manufacturing is design.
• Bulgari • Rosy Blue Jewellery that is well designed and distinctive will help set a manufacturer apart from the crowd.

© DIMEXON 2010 PRIVATE & CONFIDENTIAL

 Retail Sales: dynamic scenario
More than a quarter million retailers sell jewellery to consumers around the world. With increasing impact of
internet sales channels and strengthening of Global retail chains has made jewellery retailing highly dynamic.

Demand for diamond jewellery in major markets, 2010, 4 billions

25.1

7.8 8.4
7.3
6 5.6

United China India Japan Persian Gulf Others

States

Retailers enjoy some of the highest markups in the industry due to their ability to leverage two key factors:
• the powerful association of diamonds with love and romance in the eye of the consumer.
• the relative obscurity of diamond pricing.

© DIMEXON 2010 PRIVATE & CONFIDENTIAL

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