JOHANNESBURG (Mineweb.com)
-- Everyone is walking very carefully at present, but this Wednesday’s
presentation in Johannesburg underscored the major changes that technology
poses to the miners who dig diamonds out of the earth.
This is a marketing battle for the hearts and minds of American women – the
women who once bought fur clothing.
Clarke McEwen, COO of Gemisis, which produces cultured gem diamonds in
Sarasota, Florida, is diplomatic. His company is not taking on the once-mighty
De Beers. It is not in the game of undercutting prices or producing gems by
the container-load. It is operating in the lucrative niche market of coloured
diamonds.
For the present…
Cultured diamonds
Gemisis, whose process replicates that by which diamonds were produced
millions of years back in the bowels of the earth, and Apollo, which uses a
different, vapour deposition technology at its facility in Boston,
Massachusetts, might well be seen to represent the same threat to De Beers
that the advent of the PC represented to the old IBM.
Gemisis, let’s be clear, is not producing “synthetic” gems. These are
not imitation diamonds like cubic zirconia – they are diamonds that are
indistinguishable from and as perfect as those mined from the earth’s crust.
Sure, De Beers might be trying to differentiate its “natural” stones from
the “cultured” ones. Using well-tried advertising messages De Beers’s
strategy is to play on people’s emotions – to attempt to create the
impression that the “cultured” variety is somehow less attractive than the
“natural”.
Tell that to Mr Mikimoto and his successors in the pearl industry.
On the other side of the coin, Gemisis’s “cultured” stones are
all-American – they are demonstrably not tainted blood diamonds or diamonds
from countries where politicians and civil servants may have been unduly
influenced financially by agents claiming to operate for the likes of De
Beers. Remember what happened when American women were persuaded that natural
furs were associated with the murder of species and tainted by animal blood.
Fur sales collapsed in the States. American cultured diamonds are demonstrably
produced by ethical means.
De Beers has the Kimberley Process that is intended to ensure that natural
diamonds cannot be tagged as blood or conflict diamonds. Well, come year’s
end when “Blood Diamonds”, the new Leonardo di Caprio film, hits cinemas
in November, De Beers’s spin doctors will have their time cut out trying to
persuade women all over the US that the company is no longer directly or
indirectly funding bloody wars the length and breadth of Africa. As if the
company, disparagingly described as being Africa’s most elegant thieves,
ever did or ever would …
Still, the highly-respected NGO Global Witness, whose questioning and
exposures helped embarrass De Beers into hurriedly establishing the Kimberley
Process, is graphically advertising the human cost of “natural” diamonds.
Pictures of severed ears with diamond studs are starting to grace the pages of
some of the world’s fashion magazines
Gemisis’s process is not new – it was first developed a quarter of a
century ago in the old Soviet Union and then bought and developed over the
past dozen years in the States. Of course, De Beers itself has for many years
been involved in producing synthetic diamonds at Springs east of Johannesburg
and at Shannon in Ireland. For many years De Beers has funded the development
of the technology used to produce its synthetics and, decades ago, one of its
senior scientists first produced deeply-coloured gem diamonds, not just the
industrial-grade rough that is the primary product.
Intellectual property can move quickly and quietly across borders. And a
company, Elementsix, the synthetic industrial diamond producer that was
previously named De Beers Industrial Diamonds, does not belong entirely to De
Beers. According to a De Beers spokesperson the Oppenheimer family, which is
deeply upset by the South African government’s tax and empowerment
strategies, “owns” or has a significant interest in Elementsix. Jonathan
Oppenheimer, the scion of the Oppenheimer family, is chairman of
Elementsix’s 16-strong board.
Elementsix is not administered by the Oppenheimer’s family trust E
Oppenheimer & Son according to the trust’s company secretary Nicky
Edmunds. According to a spokesperson for Elementsix itself, the company is
equally owned by De Beers and “foreign” shareholder interests. The
ownership information does not seem to be available on Elementsix’s website.
By the time this article was to be published, Elementsix had not responded to
enquiries as to its ownership.
While Elementsix, Gemisis, Apollo, the Russians and Japanese interests can all
use the new technology to produce cultured diamonds, De Beers is in a dilemma.
So, too, are the Oppenheimers. De Beers's gem production has peaked and the
company is being squeezed by Botswana, the country from which it sources most
of its production.
If Elementsix were to start putting the gems it can produce in quantity onto
the market, the whole advertising spin of the romance of diamonds formed deep
in the earth goes out of the window. How do you differentiate products that,
in reality, are identical. And though details are scanty, Elementsix almost
certainty has the technology and capacity to match or better any price, dollar
for dollar, than the much smaller Gemisis. Does Elementsix ride on the back of
Gemisis’s marketing with a message that could be interpreted as denigrating
the “natural” stones that De Beers produces?
Fact is that cultured diamonds are cheaper to produce by the likes of Gemisis
than those hauled by De Beers out of the bottom of Jwaneng – a quarter to
half the price per carat.
For the present, Gemisis’s production levels are low. McEwen is not saying
what his company, which is not listed on any stock exchange, produces. In
round figures, though, monthly production is in the region of 1,000 carats
though the stones produced are comparatively large – two to three carats
each on average. And, according to reports from the US, their retail selling
price is in the region of $12,000 a carat, around half that of the
“natural” equivalent. As it is, Gemisis is building its own machines to
produce the cultured gems, and that takes time. But, then, technology is not
going to be halted and will, in fact, accelerate.
The “natural” diamond producers have reacted initially to the advent of
“cultured” by legal action in Germany to block Gemisis using the German
word for cultured. They would prefer the word “synthetic” with all its
connotations. Still, a German judge ruled against Gemisis, but nasty rumours
about the impartiality of the judge have been circulating. Who knows where the
truth lies in that little matter?
The fact is that the German legal action simply highlights the height of the
stakes in this marketing war. De Beers has to decide, and to decide soon,
whether it will be the first or a subsequent mover in the cultured diamond
sector. Can it smash the likes of the far-smaller Gemisis? The world’s
largest diamond group is still smarting from its industrial diamond market
rigging brushes with the US anti-trust authorities – any relationship with
cultured gem diamond producers will be coloured by the earlier experience.
useful links: http://www.gemesis.com/
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