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De Beers: The Largest Diamond Mining Company

De Beers: The Largest Diamond Mining Company

De Beers: The Largest Diamond Mining Company

Posted by Sharif Khan on 4th Jan 2020

De Beers Group diamond mining

De Beers Group is a global corporation that deals in diamond exploration, mining, and trading. The London-based company boasts a history spanning over a century. The corporation has a presence in over 35 countries. However, most of its mining activities take place in Namibia, South Africa, Botswana, Australia, and Canada.

De Beers is arguably the world’s leading diamond company, both in terms of technological infrastructure and labor force. Presently, around 30,000 people work for the company. Though the firm employs people all over the world, more than half of its workforce comes from Africa. Ostensibly, that’s because most of their mining activities are concentrated on the continent.

History and Origin

De Beers was founded by Cecil Rhodes in 1888. The company was formed through a merger between Rhodes and Barney Barnato, one of the most celebrated personalities in the diamond industry. The term “De Beers” comes from the names of the two brothers who co-owned the farmland that produced most of the diamonds during this time. The brothers are Johannes Nicolaas De Beer and DiederikArnoldus De Beer.

Before the establishment of De Beers, Cecil Rhodes had already founded the British South Africa Company. The main objective of BSAC was to consolidate the mineral wealth of Mashonaland. The discovery of diamonds, such as the Star of South Africa in 1869, boosted the fortunes of BSAC immensely. Cecil Rhodes would sell such diamonds and plow back the profits to his company. When he founded De Beers a decade or so later, Rhodes was already a name to reckon with in the global diamond industry.

In 1926, De Beers cemented its place as the world’s largest diamond explorer and trader. The company sought collaborations with enterprising executives from other blue-chip diamond firms. De Beers appointed one Ernest Oppenheimer to its board, and in the same year, the corporation became a global monopoly in diamond production. However, the company’s success under the stewardship of Oppenheimer wasn’t short of controversies. During his tenure, De Beers came under censorship for price-fixing and other forms of high-handedness.

James Allen

Important Milestones in the History of the De Beers Group

1902 – Cecil Rhodes dies, leaving behind a company that enjoys over 90% of the global diamond trade. However, a rival mine, known as Cullinan, is established in the Kimberley.

Contrary to expectations, the owner of this mine refuses to collaborate with De Beers. Instead, he trades his diamonds with the Oppenheimer brothers, who have since become independent.

1905 to 1907– The Cullinan mine produces the world’s largest piece of rough diamond. It’s aptly named Cullinan. In 1907, this diamond is cut by the Asscher Brothers and offered to King Edward VII on his birthday.

1914 to 1918 – As the First World War rages on, diamond companies seek even more alliances and mergers. For the first time, the Cullinan mine falls under the management of De Beers.

1927 - Ernest Oppenheimer is appointed the chair of De Beers. Oppenheimer secures the job due to his membership in the company’s board, and the fact that he is already a significant shareholder. He brings in a wealth of experience that helps spur the growth of De Beers. However, Oppenheimer faces frequent accusations of fostering dishonest industry practices.

The 1930s – The Great Depression heralds the closure of several De Beers diamond mines. As the global diamond prices plummet, the company finds it hard to sustain its production activities. Smaller mines are the most affected.

1947 – While other global corporations are still smarting from the aftermath of the Great Depression, De Beers is already picking up the pieces in earnest. Besides diamond production, the firm now also embarks on rigorous marketing campaigns. Mostly, the corporation targets members of the higher social classes. The campaigns are a tremendous success. People no longer view diamonds as a measure of wealth, but also as a store of sentimental value. The year sees the coining of phrases like “A Diamond is Forever.” Once again, the diamond trade becomes big business, thanks to the efforts of De Beers.

The 1960s through 1970s – De Beers tries to penetrate the elusive US diamond market. However, the company faces severe challenges. During World War One, Admiral Stansfield Turner, the former CIA chief had accused the company of restricting the country’s access to industrial diamonds. According to Mr. Turner, those restrictions nearly hampered the US’ military prospects. So, apparently, De Beers is struggling to win the favor of the rather hard-lining American politicians and industrialists. Through persistence and resilience, De Beers would penetrate the US and all major diamond markets.

Whtieflash

Where Are Their Mines Located?

In Botswana, De Beers’s mines are located in four places, namely Jwaneng, Letlhakane, Damtshaa, and Orapa. Damtshaa is not fully operational though. Debswana controls all of these mines. You don’t need to be a genius to decipher the etymology behind the name Debswana.

Mining in Namibia is coordinated by Namdeb Holdings. Here, De Beers operates a 50-50 joint venture with the Namibian government. The government mainly provides physical infrastructures while the company takes care of the logistics.

In South Africa, the mining activities are consolidated by the De Beers Consolidated Mines. The two chief mines include the Voorspoedand Venetia. Again, the company operates the sites in a joint venture. De Beers has a 74% stake while Ponahalo Investments enjoys a 26% shareholding.

De Beers’ first mining explorations outside Africa happened in Canada in 2008. It was also Canada’s first underground diamond mine. The mines were located at the Snap Lake in the Northern Territories. But in 2015, mining activities ceased at the Snap Lake site. The company moved to Ontario where they opened their second mine in the country, the Victor mine. Besides the Victor mine, De Beers also operates the GahchoKué mine in Canada.

Reasons behind De Beer’s Success

Over the 20 th century, De Beers deployed different tactics to maintain its dominant position as a global diamond giant. Most notably, the company tried to influence independent producers to join its single distribution channel. However, that did not work as expected. But De Beers wasn’t taking these setbacks lying down. The company carefully researched on the diamonds produced by most of its rival firms. It then flooded the market with similar diamonds. Therefore, it was hard to distinguish between De Beers’ diamonds and those from competing companies.

Besides, De Beers purchased and hoarded diamonds manufactured by its competitors. The company then waited for the right time to pounce. As soon as the demand went up, the firm unleashed its diamonds. That’s how it managed to control diamond prices and stay ahead in the now-competitive industry.

Professional expertise is another factor that propelled De Beers to their dominant position. From time immemorial, the firm has always worked with skilled merchants. To make it to the executive, you needed to possess hands-on experience in the diamond trade. That explains why the Great Depression didn't completely obliterate the company.

As a matter of fact, De Beers took advantage of the Great Depression. The corporation bought and stockpiled diamonds when prices were at rock bottom. It would later sell them when the prices stabilized, making astronomical profits.

De Beers is also famous for its exceptional marketing techniques. Most diamond manufacturers promote their merchandise primarily as a store of wealth. However, De Beers markets its products as a symbol of love, purity, and commitment. Besides coining the phrase “A Diamond is Forever” that we mentioned earlier on, the company is also known for successful campaigns around the eternity ring. Also known as the infinity ring, the eternity ring is a symbol of timeless love. Another one of their trademark products is the trilogy ring. The ring is a symbol of the past, present, and future. Last is the right-hand ring, a special preference among women who believe in independence.

De Beers’ product advertisements frequently run on the print as well as the mass media. Ads of their gorgeous rings are also available on the company’s website.

It should also be remembered that De Beers takes corporate-social responsibility seriously. The company believes in empowering the local communities living around their mines worldwide. Through the Anglo American's Socio-Economic Assessment Toolbox, the company profiles the priority needs within a community. It then initiates projects aimed at meeting those needs. Also, they strive to protect and maintain the natural environment. That’s in line with the MDG goals of realizing environmentally-sustainable production activities.

In the late 20 th century, blood diamonds became a major ethical issue in the diamond industry. And De Beers was right at the center of it. Diamond producers in Australia and Canada chose to bypass the company’s distribution channels. Instead, such producers traded their merchandise either independently or through other channels. However, it wasn’t long before De Beers seized control of the situation. The company changed its model. It no longer sought partnerships with other diamond producers. Instead, it chose to sell only its own mined stones. Things have mostly remained that way to date.

The Company Presently

De Beers controlled over 80% of the world’s rough diamond trade from its inception to the late 2000s. However, that was long before serious distributors came up. Today, the company contributes only 35% of the world’s rough diamonds. Regardless, De Beers has continued to practice its ingenious marketing tricks. And in 2010, the company became profitable again. That was also due to a rise in diamond shopping among the US, Indian, and Chinese consumers.

In 2018, De Beers entered the blockchain industry, becoming the first-ever jewelry company to track its products via blockchain. The company presently holds Forevermark and De Beer Jewellers. Forevermark and De Beer Jewellers are some of the world’s renowned jewelry sellers. You can find different kinds of diamonds here, from engagement to bridal rings, and many of De Beers’ trademark rings. Besides these jewelry shops, De Beers also owns the International Institute of Diamond Grading & Research and the International Institute of Diamond Valuation. Not to mention, De Beers Ventures and Element Six. However, the company only claims a 60% stake in Element Six, with the rest owned by Umicore.

Just as diamonds take time to cut and polish, the journey of De Beers towards becoming a reputable diamond merchant wasn’t smooth. The company has experienced its highs and lows in the diamond industry. It had a monopoly on the market for decades. And though it no longer enjoys that status, De Beers is still a favorite place to shop for diamonds. Visit any of their stores and enjoy buying diamonds from master-class jewelers.