Steve McClelland (Inspira Diamonds), talk for the GAA Western Australia, 2010

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An educational talk to the Gemological Association of Australia (WA) division in Nov, 2010 for purpose of education of members on diamond value chain process.
The talk has also subsequently been presented to the GAA (SA) division in March. 2011.

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Steve McClelland (Inspira Diamonds), talk for the GAA Western Australia, 2010

  1. 1. Presented by Steve McClelland for GAA WA, 2010Director/Sales Manager Inspira Diamonds Pty Ltd Steve MClelland, Inspira Diamonds, for GAA, 2010 1
  2. 2. introduction many hands
  3. 3. outline 2010This presentation is a brief glimpse behindthe apparently glamorous world ofdiamonds:•to highlight what is meant by “diamondpipeline” and diamond chain,•to outline who are the typical industryparticipants, with insight into whathappens before the jeweller and consumerlevel•To understand the value addition withinthe diamond chain•To appreciate with new respect howdiamonds reach us from the earth,• and gain an understanding of the human http://www.google.co.uk/images?hl=en-GB&rlz=1T4DAAU_en-involvement in the process of diamond GBAU273AU275&q=argyle+mine+images&um=1&ie=UTF- 8&source=univ&ei=rP_YTP-value JHIfovQPxpbmkCg&sa=X&oi=image_result_group&ct=title&resnum=1&ved= 0CCgQsAQwAA Steve MClelland, Inspira Diamonds, for GAA, 2010 3
  4. 4. global diamond figures many hands
  5. 5. the diamond jewellery value chain In US$ billionGLOBAL GLOBALROUGH PRODUCTIONproduction, The of finished Jewellery , diamond2009 value chain 2009$7.06 billion $58.7Source: Source:http://www.diamonds.net/news/NewsItem.aspx?ArticleID= http://www.duke.edu/web/soc142/team7/Diamond%20Gl32505 obal%20Value%20Chain.htm
  6. 6. the diamond pipeline Source: IDEX 2009 diamond pipeline Steve MClelland, Inspira Diamonds, for GAA, 2010 6
  7. 7. Diamond Pipeline: from original value 100 115 127 133 166 320 % % % % % % mine sorting polished Jewellery polishing retail dealing manufacturingSource:http://www.duke.edu/web/soc142/team7/Diamond%20Global%20Value%20Chain.htm Steve MClelland, Inspira Diamonds, for GAA, 2010 7
  8. 8. exploration and mining many hands
  9. 9. formation of diamond Geological model of pressure and temperature needed for diamond materialArgyle fact: product formed atlower depth and higher pressurethan usual diamond materialSource: John Mann, Sorting & Valuation Projects, Federal Police training presentation, 2003 Steve MClelland, Inspira Diamonds, for GAA, 2010 9
  10. 10. For the purpose of thispresentation we will use the Argylemine as a primary exampleThe Argyle mine from Satellite imageshttp://www.google.com.au/imgres?imgurl=http://www.satimagingcorp.com/galleryimages/argyle_view_diamond_mine_3d-wide.jpg&imgrefurl=http:// Steve MClelland, Inspira Diamonds, for GAA, 2010 10
  11. 11. Argyle: open cut mining Currently in transition to undergroundhttp://www.google.co.uk/images?hl=en-GB&rlz=1T4DAAU_en-GBAU273AU275&q=argyle+mine+images&um=1&ie=UTF-8&source=univ&ei=rP_YTP-JHIfovQPxpbmkCg&sa=X&oi=image_result_group&ct=title&resnum=1&ved=0CCgQsAQwAA Steve MClelland, Inspira Diamonds, for GAA, 2010 11
  12. 12. Argyle- life expectancy 2018/2019 Underground mining exploration model, block caving diagramSource: John Mann, Sorting & Valuation Projects, Federal Police training presentation, 2003 Steve MClelland, Inspira Diamonds, for GAA, 2010 12
  13. 13. Argyle Facts: 0.017% of the Argyle mine totalproduction is its signature stone: pink diamond.The Argyle mine has In 2010 Rio Tinto announceddrastically reduced itsoutput, from producing a a $803 million expansion tothird of the worlds the Argyle minediamonds, to in 2010 not underground projecteven rating a separate extending its minelife tomention in worlddiamond output, as 2018-2019.reported by Rapaport,Sept, 2010. Source: http://businessweek.com/news/2010-10-6/rio-says-rough- diamond-prices- Steve MClelland, Inspira Diamonds, for GAA, 2010 13
  14. 14. at the mine…..diamond recovery process Blasting Crushing of ore Scrubbing Heavy media separator Source:google images Xray separator Steve MClelland, Inspira Diamonds, for GAA, 2010 14
  15. 15. at the mine…..diamond concentrateDuring this part of the process the Caustic recoverydiamond product and non-diamond product are separatedand treated with responsible ACIDpractices. PH neutralise oreThe diamond concentrate isseparated by size and the pinks areseparated for processing in Responsible returnAustralia. of ore Steve MClelland, Inspira Diamonds, for GAA, 2010 15
  16. 16. mine extractionThe process of extraction andseparation of the ore from itsKimberlite host, forms theproduction or output level of themine, which is measured in caratsper tonne of ore.250 tonnes of ore mine andprocessed to produce 1 carat,depending on the mine(Cited by Wall St Journal) http://www.slideshare.net/Platipus/diamond- ethical-supply-chain-deconstruction-2010 Steve MClelland, Inspira Diamonds, for GAA, 2010 16
  17. 17. examples of rough diamond shapes Steve MClelland, Inspira Diamonds, for GAA, 2010 17
  18. 18. rough diamond modelsmakeable sawable maccle Steve MClelland, Inspira Diamonds, for GAA, 2010 18
  19. 19. rough sorting and rough trading many hands
  20. 20. rough sorting…Apart from extraction of thediamond from the ore body,the first real value add ofdiamond product begins atthe sorting level. Steve MClelland, Inspira Diamonds, for GAA, 2010 20
  21. 21. sorting…sorting and more sortingDiamonds are sorted andgraded on colour, size, andcarat weight by machine, andhand sorting (dependent onsize and value)With final sorting done by ahighly experienced team ofdiamond graders.Notice how the diamonds arelabelled and separated, which isthe beginnings of mine chain ofcustody. Steve MClelland, Inspira Diamonds, for GAA, 2010 21
  22. 22. Rough sorting examples….. Steve MClelland, Inspira Diamonds, for GAA, 2010 22
  23. 23. transparency to government andpublic…… Example KP certificate After recovery rough guaranteeing conflict free origins , diamonds are sent from the required for export/import rough minesite to sales office in diamonds Antwerp. An estimate of value has been placed on the exported goods by an appointed Royalty valuer and Government representatives, based on historical outputs The goods are then approved for export, along with its KP certificate (non-conflict guarantee). Steve MClelland, Inspira Diamonds, for GAA, 2010 23
  24. 24. and yet more rough sorting ……. Steve MClelland, Inspira Diamonds, for GAA, 2010 24
  25. 25. rough sales preparation andpresentation…•Diamonds are also sorted intomeaningful assortments forpresentation to the customers•The Sales team presents the goodsat monthly interval sales, also called“sights”.•Prices are based on theextrapolation of what the polishedprice might achieve in themarketplace•Customers purchase their allocatedgoods, very often in millions ofcarats, or dollars, by merehandshake.•Most production will leave Antwerpfor manufacture overseas. Steve MClelland, Inspira Diamonds, for GAA, 2010 25
  26. 26. Steve MClelland, Inspira Diamonds, for GAA, 2010 26
  27. 27. polished manufacturing many hands
  28. 28. Most of world’s polishing takes place inIndia :an estimated 1 million people areemployed by diamond industry in India Thankfully not all working in these conditions! http://www.diamondfacts.org/ Steve MClelland, Inspira Diamonds, for GAA, 2010 28
  29. 29. value add…The diamond is forever altered intoits final polished state, usually by aform of SARIN, combined withyears of polishing experiencewithin the polishing team, and itssupervisor.The team try to maximise yield(commercial) whilst keeping inmind proportions/symmetry/cut(brilliance). Steve MClelland, Inspira Diamonds, for GAA, 2010 29
  30. 30. polishing process•Sawing – the process of dividing a stone into two piecesusing either a blade or a laser.•Cleaving – a process where the rough stone is split intotwo pieces to improve the shape or the quality.•Bruting – a process which shape the stone in to thedesired shape.•Polishing – the process of applying facets to the surfaceof the stone. Steve MClelland, Inspira Diamonds, for GAA, 2010 30
  31. 31. marking & cleavingby traditional methods Steve MClelland, Inspira Diamonds, for GAA, 2010 31
  32. 32. Diamond has a grain structure. It can be sawn againstthe grain and cleaved with the grain. Sawing Grain Cleaving Grain Steve MClelland, Inspira Diamonds, for GAA, 2010 32
  33. 33. Sawing for a Major and Minor stone Steve MClelland, Inspira Diamonds, for GAA, 2010 33
  34. 34. Sawing
  35. 35. 70% -30% 50% - 50%Steve MClelland, Inspira Diamonds, for GAA, 2010 35
  36. 36. Examples of commercial decisionsSteve MClelland, Inspira Diamonds, for GAA, 2010 36
  37. 37. Bruting Steve MClelland, Inspira Diamonds, for GAA, 2010 37
  38. 38. Polishing Steve MClelland, Inspira Diamonds, for GAA, 2010 38
  39. 39. safety in the polished manufacturingprocess…A combination of old traditionalhand method, or laser technologyis applied. Lasers assist in betterdiamond yield, and brilliance, andvery importantly are healthier forthe worker.Factories are now more efficient,cleaner, with better lighting andproduct output due to BEM andbest business practicerequirements driven by miningcompanies like RTD. Steve MClelland, Inspira Diamonds, for GAA, 2010 39
  40. 40. recent trends in value addition…. Trends to manufacturing to ideal proportions (known as triple EX), or hearts and arrows, strongly exhibited at the September HK fair, 2010 is an attempt by the industry to extract more value from the diamond product, whilst also satisfying consumer demand, since the ideal proportions are highly sought after and command higher prices. Steve MClelland, Inspira Diamonds, for GAA, 2010 40
  41. 41. polished trading many hands
  42. 42. diamond trade: Diamonds are traded at 28 registered diamond bourses worldwide Antwerp being the major recognised world diamond center The move to standardisation with Rappaport lists, and certification makes diamond trade more transparent At this stage most diamonds above 50pts will be sent to a lab for certification, where the 4c’s will be applied, the stone will be plotted and graded Steve MClelland, Inspira Diamonds, for GAA, 2010 42
  43. 43. international trade participants wholesalers jewelleryjewellers retailers brokers/dealers manufacturers consumer Pawn brokers resale Steve MClelland, Inspira Diamonds, for GAA, 2010 43
  44. 44. goods being sized and prepared for saleat a wholesaler Steve MClelland, Inspira Diamonds, for GAA, 2010 44
  45. 45. other value addition many hands
  46. 46. 4c’s classification Steve MClelland, Inspira Diamonds, for GAA, 2010 46
  47. 47. certification…more value add•In recent times (last 10 years) certification has become animportant tool, protecting the supplier and the consumer, andproviding consumer confidence through consistent gradingstandards.•It also impacts significantly on the value addition of a diamondproduct.•And a stone that is uncertified is commercially less than a stonethat is certified Steve MClelland, Inspira Diamonds, for GAA, 2010 47
  48. 48. even shipping and customs addsvalue… Steve MClelland, Inspira Diamonds, for GAA, 2010 48
  49. 49. branding , packaging and marketingadds further perceived value.. Steve MClelland, Inspira Diamonds, for GAA, 2010 49
  50. 50. Jewellery manufacture Many hands
  51. 51. jewellery design and manufacturing Probably the greatest impact on value addition…. Steve MClelland, Inspira Diamonds, for GAA, 2010 51
  52. 52. finished jewellery product IDEX estimated a mere 27% of the value of a finished piece of jewellery is attributed to diamond product, the rest being manufacture, design, gold and marketing http://www.idexonline.com/pdf_files/2009- diamond_Pipeline_Poster.pdf“Land I love”: Rohan Jewellery, 2009,inspired byAustralian diamonds MClelland, Inspira Diamonds, for GAA, 2010 Steve 52
  53. 53. conclusion & the future…. Many hands
  54. 54. Estimated globally: 11 million peoplesupported directly or indirectly by diamond tradehttp://www.diamondfacts.org/ Steve MClelland, Inspira Diamonds, for GAA, 2010 54
  55. 55. This presentation has shown a brief glimpseinto the many hands involved in the globaldiamond process.As consumers and business leaderswe must be aware of the cost tobring this “glamorous” product tothe market. And endeavour to leadthe world in ethical and respectfulpractices. Steve MClelland, Inspira Diamonds, for GAA, 2010 55
  56. 56. "Dying for a diamond?Unfortunately thousands of childrenare too”Asks World Vision, in their 2010 socialmarketing campaign against humaninjustice caused by our industry Steve MClelland, Inspira Diamonds, for GAA, 2010 56
  57. 57. major multinational NGO,industry and governmentfocus is currently beingdirected to ethical miningand business practice… Steve MClelland, Inspira Diamonds, for GAA, 2010 57
  58. 58. • NGO’s like UN, WDC, and CIBJO (WJCEF), Responsible Jewellery Council, UN Security Council, Global Witness, Partnership Africa Canada (PAC) just to a name a few..• Government of 74 countries participating in KP agreement• Mining companies like RTD, BHP drive ethical change downstream• trade organisations like Rappaport, IDEX, driving responsible mining and business practice Steve MClelland, Inspira Diamonds, for GAA, 2010 58
  59. 59. These organisations lead the worldinto best practice in the jewelleryindustryBut for these organisations to besuccessful in change : the actionneeds to happen at the trading andconsumer level, that’s at our level. Steve MClelland, Inspira Diamonds, for GAA, 2010 59
  60. 60. Look for : KP system of invoice guaranteesIn compliance with the Kimberly Process Agreement andWorldDiamond Council Recommendations:The diamonds herein invoiced have been purchasedfrom legitimate sources not involved in funding conflictand in compliance with United Nations resolutions.Theseller hereby guarantees that these diamond are conflictfree, based on personal knowledge and/or writtenguarantees provided by the supplier of these diamonds. Steve MClelland, Inspira Diamonds, for GAA, 2010 60
  61. 61. Look for: A “chain of custody” system which records a details of each diamond’s source, from each part of the supply chain, from non-conflict origins. A chain of custody system increases confidence in sourcing from non-conflict supply channels. “These chain of custodies, while voluntary, are becoming increasingly valuable (if not necessary) as more consumers demand them. “sourcehttp://www.duke.edu/web/soc142/team7/social3.htm Steve MClelland, Inspira Diamonds, for GAA, 2010 61
  62. 62. not all gloom and doom…. introduction to benefication… It is estimated 6 million people globally have access to healthcare thanks to revenue from diamondshttp://www.diamondfacts.org/ Steve MClelland, Inspira Diamonds, for GAA, 2010 62
  63. 63. the future......•2011 world production to plateau to 48 m carats•No new diamond deposits•De Beers warn contracted supply will force prices up next 15 years•Rio tinto warns rough-diamond prices will increaseIn the next decade as production willfail to meet demand from emerging BRIC economies (Brazil, Russia, India and China)•Increasing price of gold http://www.businessweek.com/news/2010-10-06/rio-says-rough- Steve MClelland, Inspira Diamonds, for GAA, 2010 diamond-prices-to-extend-gains-as-supplies-fall.html 63
  64. 64. Steve MClelland, Inspira Diamonds, for GAA, 2010 64
  65. 65. Steve MClelland, Inspira Diamonds, for GAA, 2010 65
  66. 66. our special privelege Many hands
  67. 67. 0.29 GIA Fancy Red , Argyle Steve MClelland, Inspira Diamonds, for GAA, 2010 67
  68. 68. 4.18 G SI1 HRD, Argyle Steve MClelland, Inspira Diamonds, for GAA, 2010 68
  69. 69. 0.39 si2 1PP, GIA, Argyle Steve MClelland, Inspira Diamonds, for GAA, 2010 69
  70. 70. 0.71 each, Princess pair, HRD, Argyle Steve MClelland, Inspira Diamonds, for GAA, 2010 70
  71. 71. 3.08 FancyYellow Green, GIA, Diavik Steve MClelland, Inspira Diamonds, for GAA, 2010 71
  72. 72. 1.00 F VS2 Emerald, HRD, Argyle Steve MClelland, Inspira Diamonds, for GAA, 2010 72
  73. 73. Credits and thanksCredits Written by Charmaine Thane, Inspira Diamonds with John Mann, Macro Diamond photography for Steve McClelland, Inspira Diamonds at GAA Nov, 2010. Where no photo source is cited the Photos appear courtesy of John Mann, Macro Diamond Photography Steve MClelland, Inspira Diamonds, for GAA, 2010 73
  74. 74. references many hands
  75. 75. http://www.google.com.au/imgres?imgurl=http://www.satimagingcorp.com/galleryimages/argyle_view_diamond_mine_3d-wide.jpg&imgrefurl=http://31/10/2010 Mann, John, Sorting & Valuation Projects, Federal Police training presentation, 2003 http://www.cibjo.org/index.php?option=com_content&view=article&id=235&Itemid=45,Oct-Nov, 2010 http://www.idexonline.com/pdf_files/IDEX_O nline-Pipeline_Poster_2006.pdf, 01/11/2010 http://www.businessweek.com/news/2010- 10-06/rio-says-rough-diamond-prices-to- extend-gains-as-supplies-fall.html, 01/11/2010 http://www.cibjo.org/index.php?option=com _content&view=article&id=268:luxury- companies-must-satisfy-consumers-deeper- social-conscience-states-report-released-at- cibjos-csr-session-at-shanghai- expo&catid=4:news&Itemid=19, Oct-Nov, 2010 Steve MClelland, Inspira Diamonds, for GAA, 2010 75
  76. 76. http://www.google.co.uk/search?sourceid=navclient&aq=0h&oq=kimberley+pr&hl=en-GB&ie=UTF-8&rlz=1T4DAAU_en-GBAU273AU275&q=kimberley+process+certificate, 01/11/2010 http://www.diamondfacts.org/images/facts/quote_lines8_fact06.jpg, 01/11/2010 http://www.diamonds.net/news/NewsItem.aspx?ArticleID=32505, 01/11/2010 http://www.worlddiamondcouncil.com/, 01/11/2010 http://www.slideshare.net/Platipus/diamond -ethical-supply-chain-deconstruction-2010, 01/11/2010 http://www.duke.edu/web/soc142/team7/Diamond%20Global%20Value%20Chain.htm,01/11/2010 Steve MClelland, Inspira Diamonds, for GAA, 2010 76
  77. 77. http://www.google.co.uk/images?hl=en-GB&rlz=1T4DAAU_en-GBAU273AU275&q=argyle+mine+images&um=1&ie=UTF-8&source=univ&ei=rP_YTP-JHIfovQPxpbmkCg&sa=X&oi=image_result_group&ct=title&resnum=1&ved=0CCgQsAQwA, 01/11/2010 http://www.info- diamond.com/rough/world-production.html, 01/11/2010 http://www.idexonline.com/pdf_files/2009- diamond_Pipeline_Poster.pdf, 10/11/2010 http://www.investmentinternational.com/ne ws/alternative-investments/diamond-prices- set-to-rise-after-mining-giant-de-beers- announces-cut-in-production-to-preserve- stocks-3524.html, 10/11/2010 Sanghvi and Virani, July, 2010: Is Social marketing effectivein the diamond industry? Dissertation CASS Business School,City University London Steve MClelland, Inspira Diamonds, for GAA, 2010 77

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