Cecil Rhodes, founder of DeBeers, started in business by renting water pumps to miners during the diamond rush of 1867. With his profits he bought the claims of small mining companies and soon formed DeBeers Consolidated Mines in 1888.
Through a series of mergers, DeBeers soon became the sole owner of all mining operations in the country. Then in 1889, Rhodes negotiated a strategic agreement with the London based Diamond Syndicate, which agreed to purchase a fixed quantity of diamonds at a fixed price and the DeBeers diamond monopoly was born.
The astounding success of DeBeers continued well into the 1990s until Russia, Canada and Australia started distributing diamonds outside the DeBeers channel. This effectively ended the DeBeers monopoly of the diamond market.
Now with the financial crisis of 2007-2008, DeBeers is seeing diamond prices tumbling by at least 30%. This has forced DeBeers to cut production by 40% year to year at its Botswana mines.
The diamond business is suffering its worst year in a generation and now DeBeers is "bleeding cash." Questions about its financial stability arose in February when DeBeers accepted a $500 million dollar loan from its three shareholders -- Anglo American, South Africa's Oppenheimer family and the government of Botswana.
For the first time in its history, DeBeers faces a crisis without being able to control supply. The days of the DeBeers monopoly are history.
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Reader Comments (Page 1 of 1)
4-13-2009 @ 8:45PM
william lindblad said...
The tip of the Washington monument has an aluminum tip. In it's time, that tip cost more than gold. Aluminum is an ore of bauxite and the most abundant feldspar on earth, just a matter of extraction, which requires electricity to prove profitable.
Diamonds are not RARE, Morganite is.
Morganite, or pink Beryl, it not worth much but green beryl is. Green beryl is the most expensive stone on earth, also called an emerald.
Buying diamonds as a hedge would be a bad call as there are plenty in Arkansas in an area that the U.S. declared off limits to help DeBeers. DeBeers went with us in WWII and that move has yet to be forgotten.
Better move would be to find out who makes golden harvest glassware as this will be a big mover this year.