De Beers regains its luster with right to sell Australian diamonds
South Africa has secured an important victory in the world diamond trade, and in so doing has beaten back an international trend not to do business with the white-ruled republic.Skip to next paragraph
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De Beers Consolidated Mines has just won the right to sell through its London-based Central Selling Organization (CSO) most of the diamonds soon to be produced at the Argyle mine in Australia - the world's largest diamond mine.
Gaining control over the Australian diamonds reasserts De Beers' near monopoly on the international diamond market, cutting short feeble efforts to end that control for partly political reasons.
The decision will add Australia to the long list of diamond-producing countries that oppose South Africa for its racial policies but find commercial links in the diamond industry irresistible. Although the Soviet Union is not a member of the CSO, it cooperates with South Africa in the selling of diamonds. Angola, a black African state regularly invaded by South African troops as a result of the war in Namibia, is a full member of the CSO.
One of the few major diamond-producing countries not to participate in the CSO is Zaire, which pulled out of the organization last year.
The appeal of the CSO is the near total control it exerts over the marketing of diamonds worldwide. Most all the major producers participate in the CSO, which buys and sells about 80 percent of the world's diamonds. Mines sign contracts agreeing to sell their diamonds to the CSO, which in turn fine tunes the supply of diamonds to the marketplace in a way that maximizes prices for the sellers.
De Beers also insists by controlling the supply of diamonds that it protects consumers by avoiding large swings in prices.
The CSO was formed in the 1930s in response to severe problems in the diamond industry and recently has undergone its severest test. The diamond industry this year has been struggling through its worst recession in a half century, due largely to a falloff in demand for investment grade diamonds and the larger, more expensive lines of diamond jewelry.
''De Beers is delighted with the vote of confidence the Argyle mine has given the CSO during such a difficult period. (Argyle diamond mines joint venture) did extensive surveying (of other marketing possibilities) and found that it's best to go through the CSO,'' said a De Beers spokesman.
The arrangement is for the CSO to market practically all the gem stones produced at Argyle and up to 1984 nearly all the industrial and near-gem diamonds. After 1984, the CSO will market about 75 percent of the near-gem and industrial diamonds.
While adding Argyle to its membership list certainly helps the CSO, the size of the new mine's output can only enhance hopes throughout the industry that sales soon pick up. CSO has been stockpiling diamonds and forcing producers onto a quota system to avoid a glut of unwanted diamonds on the market.
Argyle's contribution to worldwide diamond production of all types will be tremendous. It is forecast to produce some 20 million carats when operating at full steam several years down the road. That is a huge output. Zaire is the world's largest producer of diamonds, accounting for about 12.5 million carats of diamonds in 1981.
However, quantity is not all important in diamonds. The value or grade of the diamonds produced is most important, and on this score the Australian mine is not in such a dominant position. Only about 10 percent of Argyle's production is of gem quality, which is lower than the average of gem production at most diamond mines.
Still, in value terms, Argyle is expected to place Australia somewhere near 5 th or 6th place in the world's list of diamond- producing nations. That made its decision to join the CSO all the more necessary for De Beers to continue its control of the world diamond trade.