War in Ukraine prompts De Beers to step up diamond tracking efforts

Diamonds are displayed at De Beers Global Sightholder Sales (GSS) in Gaborone, Botswana November 24, 2015. REUTERS/Siphiwe Sibeko/File Photo

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CAPE TOWN, May 9 (Reuters) – De Beers, the world’s second-largest diamond producer, is stepping up efforts to officially track its products from mine to retailer, the company’s CEO said, as Western customers want reassurance that their purchases do not come from Russia.

De Beers, a unit of Anglo American (AAL.L), is also looking to adjust its supply chains, CEO Bruce Cleaver told Reuters in an interview, as it sees growing demand in the United States for its diamonds. after US authorities banned the import. of diamonds from Russia’s Alrosa (ALRS.MM), the world’s largest producer.

“Traceability and pipeline integrity are going to be the things that will accelerate after the Russian-Ukrainian war,” Cleaver said.

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“We’re in good shape to be able to prove that to our consumers. We’ve been working on provenance for 20 years,” he added.

Last week, De Beers rolled out its blockchain platform, first tested in 2018, to potentially record and track rough diamonds every time they change hands from when they are sold to middlemen until at the retail stage.

The platform aims to verify authenticity and responsible sourcing, ensuring that diamonds do not come from conflict zones where they could be used to fund violence.

Currently, around 25% of De Beers’ production is tracked by blockchain, a database of transactions shared over a network of computers. Once a transaction record is added to the database, it is very difficult to modify it.

In a bid to increase market share, De Beers is also exploring options to “redirect supply from other locations to” the United States where retailers are increasingly interested in the company’s brand. , said Cleaver.

As the United States imposed sanctions on Alrosa after the invasion of Ukraine, U.S. retailers Signet Jewelers (SIG.N) and Tiffany and Co also stopped using Russian diamonds in their jewelry.

“There’s even less global sourcing in America because Russian products won’t go…it’s hard to solve because I don’t have much more production to produce,” Cleaver said.

“We haven’t come to a conclusion, but we’re looking at changing the distribution model a bit to distribute a little more here and a little less there and that sort of thing,” Cleaver added.

De Beers’ sales totaled $4.82 billion in 2021, half of them in the United States, beating Alrosa’s sales of $4.2 billion, mostly in North America and Asia.

Independent analyst Paul Zimnisky predicts that Alrosa’s production this year will be 10% lower than the company’s March forecast of 34.3 million carats, and that the Russian state may buy some of its output.

Last month, Russia said it could buy rough diamonds from state-owned Alrosa through its state-owned Gokhran precious metals and gemstone repository to support the business as it has. during the years of weak demand following the global financial crisis of 2008. Read more

As a result, De Beers’ global market share, in terms of gross value produced, could rise from around 30% to around 40% in the near term, Zimnisky estimated.

Alrosa represents around 30% of the world production of rough diamonds and almost all of the Russian production.

Alrosa’s share price has fallen about 15% since Russia invaded Ukraine in February and following the US embargo on its products.

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Reporting by Clara Denina and Helen Reid; Editing by Susan Fenton

Our standards: The Thomson Reuters Trust Principles.

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