Diamond Industry: an overview James Allan April 2010 Contents (cid:131) Diamond industry in perspective (cid:131) Who are the producers (cid:131) Production profile (cid:131) Last two years> what happened? (cid:131) Market capitalisation for the juniors (2008 to 20101) (cid:131) Supply demand forecast to 2020 (cid:131) Leverage off the diamond market (cid:131) Conclusion 2 Diamond production in perspective ($bn) 9 Diamonds 14 10 Platinum (3PGE) 27 29 Nickel 50 2009 2008 73 Gold 74 80 Aluminium 99 112 Copper 126 0 20 40 60 80 100 120 140 3 Concentration of production by value (2008) 16% 0% 2% 5% De Beers 44% Alrosa Rio Tinto BHP Billiton Gem Diamonds Petra Diamonds 9% Others 4 producers Control 82% of supply 24% 4 Share of global diamond production (140 million carats) 2008 2% 10% South Africa Botswana 22% Namibia Russia Angola 20% Australia Canada DRC 8% Lesotho 1% Tanzania Sierra Leone 13% Zimbabwe 20% Other 4% 5 Share of global diamond production 20,000 Zimbabwe 18,000 Tanzania 16,000 Sierra Leone 14,000 Lesotho 12,000 Australia DRC 10,000 m $ Namibia 8,000 Angola 6,000 South Africa 4,000 Canada 2,000 Russia 0 Botswana 5 9 5 0 0 1 0 0 0 2 2 2 6 Cutting centre debt levels 16,000 14,000 12,000 10,000 m $ 8,000 6,000 4,000 2,000 - 0 2 4 6 8 0 2 4 6 8 0 2 4 6 8 8 8 8 8 8 9 9 9 9 9 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 7 The last two years…..market (cid:131) Early 2008> Positive market >Diamond Polished Prices shortage leading to rising diamond prices… (cid:131) September 2008>Collapse of Lehman Brothers (cid:131) September 2008>Credit tightened in financial market (cid:131) October 2008>Credit lines withdrawn for diamantaires (cid:131) October- December 2008>Collapse in diamond prices 8 The last two years…..producer response (cid:131) “Old De Beers” would have bought up diamonds and stockpiled (cid:131) “New De Beers” cut production by 90% in Q1 2009>reduced supply to the market (Economics 101) (cid:131) Increased production from Q28000 7000 De Beers Sales 1980-2009 (cid:131) Sales 1H 2009 down 68% 6000 5000 (cid:131) 2009 sales lowest since 1986 4000 3000 2000 1000 0 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8 8 8 8 8 8 8 8 8 8 8 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 9 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 9 Concentration of production 2009 De Beers Others 31% 21% Petra Diamonds 1% Gem Diamonds 2% BHP Billiton 7% Rio Tinto 7% Alrosa 31% 10