The war in Ukraine prompts De Beers to step up diamond traceability efforts

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Diamonds are displayed at the De Beers Global Sightholder Sales (GSS) in Gaborone, Botswana on 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 trace its products from mine to retailer, the company’s CEO said, as Western customers want peace of mind that their purchases are being made not arrive from Russia.

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

“Traceability and pipeline integrity will be the things that will be accelerated from the war between Russia and Ukraine,” Cleaver said.

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“We are well positioned to be able to prove that to our consumers. We’ve been working on origin for 20 years,” he added.

Last week, De Beers deployed its blockchain platform, first trialled in 2018, to register and track rough diamonds potentially with each change of ownership, from the moment they’re sold to intermediaries through to retail.

The platform aims to verify authenticity and responsible sourcing, ensuring 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 across a network of computers. Once a transaction’s record has been added to the database, it is very difficult to change it.

To increase its market share, De Beers is also exploring options to “re-route shipments from other locations into the United States,” where retailers are increasingly interested in the company’s brand, Cleaver said.

When the US imposed sanctions on Alrosa after invading Ukraine, US retailers Signet Jewelers (SIG.N) and Tiffany and Co also stopped using Russian diamonds in their jewelry.

“There’s still less shipments to America worldwide because Russian goods aren’t being shipped…that’s hard to resolve because I don’t have to produce much more,” Cleaver said.

“We haven’t come to a conclusion yet, but we’re trying to change the distribution model a little bit to give a little more here and a little less there and things like that,” Cleaver added.

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

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

Last month Russia said it could buy rough diamonds from state-owned Alrosa through its state-run precious metals and gems depository Gokhran to bolster the company, as it did during the years of weak demand after the 2008 global financial crisis. Continue reading

As a result, De Beers’ global market share, measured by gross value produced, could rise from the mid-30s to around 40% in the short term, Zimnisky estimated.

Alrosa accounts for about 30% of the world’s rough diamond production and almost all of Russia’s production.

Alrosa’s share price has fallen around 15% since Russia invaded Ukraine in February and after the US ban 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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