diamonds conference_dubai

7/29/2019 diamonds conference_dubai

1/18

Varda Shine

The changing diamond landscape


2/18

What does the future of diamond supply anddemand look like?

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3/18

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2012f 2013f 2014f 2015f

Year-on-Year%G

rowth

Global Polished Diamond Demand Growth

Macro-economic forecasts are supportive of growth in

polished diamond demand over the short to medium term

3

Global Consumer Polished Demand Growth (nominal) (2012-15)

Source: De Beers


4/18

Emergence of middle class and strength of luxury sector

should continue to support demand for diamonds going

forward

4

Global Growth of Middle Classes in emerging markets1

(2010 to 2015)Worldwide personal luxury goods market evolution(2010-2014F, bn)

Global Growth of Middle Classes in emergingmarkets1 (2010 to 2015)

2010 2011E 2012F2 2013F2 2014F2

173

191201-203

216-218 235-240

CAGR 2011E-14F

+7-9%

+10%

+6-7%

+7-8%

+8-10%

Indonesia+55

Russia+32

Brazil+21

Turkey+15

Mexico+09

SouthAfrica

+05

India+180

China+142

Russia35% Turkey

34%

SouthAfrica

29%Mexico

25%

Indonesia115%

India97%

China83%

Brazil44%

Mins of people 2010-2015

% change2010-2015

Note 1: Middle-class households are those with annual income >USD5,000 in China, India and Indonesia and exceeding $10,000 in the other countries.Note 2: At constant exchange ratesSource: De Beers analysis from BCG report Winning in Emerging-Market Cities, Sep 2010; Altagamma Oct 12


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0

20

40

60

80

100

120

140

160

180

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

mc

ts

Baseline production Committed projects Probable projects

Long-term view: Production to recede graduallyfrom pre-crisis levels after 2017

5

Global production in carats

Source: De Beers. All non-De Beers forecasts based on publicly available sources

Rough diamond industry now

requires investment in new

projects even to maintain

production.

In the next few years, additional

production from Gahcho Kue,

Argyle and Petra mines likely to

bring production back to (but notabove) pre-downturn levels.


6/18

Global production

2011 gem diamond production by

country (value)1

2011 gem diamond production by

country (carats)

Total 138Mcts Total US$19.3bn

Source: Kimberly process certification scheme; De Beers estimates

18%

6%

8% 20%

25%

Angola

All OthersRussia

DRC

17%Botswana

South Africa

Australia

6%

Canada

5%

18%

6%

22%

9%

12%

1%Australia

Russia

DRC

Botswana

23%

Canada

South Africa

Angola

9%

All Others

Notes

1 All values estimated at De Beers prices (SSV)


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A structural supply deficit should continue toprovide the industry with price upside

Supply Demand Gap (smoothed from 2014)

7

Supply @ constantprices

Consumer Demand(nominal)

60

80

100

120

140

160

180

2011A 2012F 2013F 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F

Source: De Beers


8/18

US is the top diamond jewellery market, with China and

India expected to increase their share of diamond demand

8

Consumer Demand Forecasts (Nominal Polished Sales)

2011 ~ USD23bn 2016F ~USD31bn

USA37%

China10%India

10%

Japan10%

Gulf8%

Taiwan2%

HongKong2%

Turkey

2%

RoW19%

USA35%

China15%

India13%

Japan

7%

Gulf9%

Taiwan2%

HongKong

2%

Turkey2% RoW

15%

+35%

Source: De Beers


9/18

Changing dynamics

9


10/18

Botswana sales agreement

10 year sales agreement wassigned in 2011 (effective 1January 2011)

As part of the agreement DeBeers is moving all its functionsrelating to sales by the end of2013

When achieved, De Beers willreceive financial benefit in theform of increased margin

The agreement introduces apurchase entitlement or sales

window for the GRB

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11/18

Other producers

South Africa State Diamond Trader

Increased number of local tenders

Local beneficiation targets Namibia

10% unaggregated sales

Branding

Canada 10% unaggregated sales

Branding

11


12/18

Midstream changes

Liquidity more constrained

Impact of Basel II and Basel III

Pace of increased transparency vs. otherindustries

Stocking behaviour

Retail expansion

12


13/18

Likely midstream impact

13


14/18

Likely midstream impact

Rough diamond centre moving to southern Africa

Continued growth of demand from Asian markets expected

New trade routes likely to continue developing

New opportunities

14


15/18

Botswana transfer progress update

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16/18

Wave 1 of transfer activities completed and

Wave 2 is well underway and on track

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Wave 1 recap:

6 aggregation cycles have taken place from Botswana

Other functions (i.e. QA, DRM, Finance, HR, IT and part of the

EVPs Office) are also in place and well settled

First wave of employee transfer complete

Wave 2 status:

Planning for relocation of remaining functions (e.g. Sales, Supply

Chain, Sight Management, Beneficiation, etc.) largely completed

All 2013 milestones currently on track

Majority of the relocations are to take place August-October 2013

Second Wave of employee transfer on track

Infrastructure set up on schedule


17/18

In conclusion

The supply and demand fundamentals for the industry arevery positive

But some of the traditional truths of the industry arechanging

With this change comes opportunity

It is up to us to establish how we maximise thisopportunity

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18/18

The diamond is our guide

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