Al Cook, thank you so much for joining us during your first indaba.
Of course. You know, I want to start here with this
news that we got this week about De Beers' MOU
signed with Angola. You said partially the reason was
because the supply of new diamond mines was running out.
I mean, are you anticipating a further contraction in the diamond sector in
2024? What's your outlook?
Look, we're really excited about the deal that we signed with the Angolan
government yesterday. And you're absolutely right.
The there's only really been one diamond discovery in the entire of the 21st
century. So there is a growing shortage of
natural diamond. We are past peak supplies of natural
diamonds. And we believe that Angola is the best
place in the world to go exploring for diamonds.
What does that mean then for 2024? I mean, what are you anticipating?
Well in 2024 we'll be investing for the long term.
So in South Africa that means ramping up the Venetia mine that we started up the
underground mine there that we started up just last year in Botswana.
That means ploughing ahead with our plans for this widening underground mine
and building on that. In Namibia, that means building up
production from our new vessel, the Benguela Gem in Angola.
That means moving forward at pace with exploration.
So 2024 is about investing for the long term in our African producer countries.
Well, let's talk about at pace what is what's the next step really, with this
MOU? Now that it's signed, I mean, what would
at pace look like in 2024? So what we're doing in Angola is we're
working below the ground and we're working above the ground.
So below the ground we've got two exploration blocks.
We signed those in 2022 and we're actively exploring on those at the
moment. And that means airborne surveys followed
by drilling. But what's really important in Angola is
above the ground, and that starts with the reforms that President Lorenzo has
brought in driving transparency across Angola.
But what we're doing and on new agreement is we are supporting the
Angolan government, bringing the best of our gem fair technology from Sierra
Leone, bringing the best of our sorting technology from Botswana, and bringing
all those to bear in Angola so that we can really lift the standards of the
whole value chain and make sure that we're really proud to sell a diamond
from Angola. Dig into that a little bit more.
I mean, in terms of pricing and numbers, if you can.
So we are putting tens of millions of dollars into airborne exploration.
That will be followed up by a drilling program in any areas that we can that we
suspect there are kimberlite which are diamond bearing rocks.
So what we do, first of all, is we fly airplanes over using electromagnetic
devices that can look 300 meters under the ground and detect the presence of
kimberlite diamond bearing rocks. And then, of course, we have to drill
down through those rocks to find out if there really are diamonds below the
Earth's crust. Well, and I know part of this, Al, you
were mentioning the reforms of the government.
I mean, was there any stipulation in this new agreement to ensure that this
agreement continues, no matter what party is in power?
Because we've seen, you know, other agreements across the world crumble when
there are different parties, shifts in power.
I mean, how do you ensure that that this is here to stay for Angola?
So wherever we operate, it has to be, as we believe, we play a role in supporting
governments to raise their standards. We invest over the very long term where
our 136 years old this year. And that means that we can invest over
the decades. But that also means that we need to work
with governments to ensure stable frameworks and to invest in the people
of the country in order to ensure stability, in terms of employment, in
terms of the benefits we bring. A great example of that is what we've
done in Botswana, where we reached agreement with the government of
Botswana to start a fund called Diamonds for Development.
And what we're doing there is investing tens of millions of dollars every year,
not just cash, but also our resources, our muscle to help drive sustainable
development across the Botswana economy. Do you anticipate to increase that
investment over time, or are you sticking pretty closely to the books
here? So in Botswana, we will be putting
forward 1 billion pula of investment. That's around about 75 million USD of
investment this year into the Diamonds for Development Fund.
And then we'll be investing a steady proportion of our profits going forward
into that fund so that we keep that investment up over the next over the
next decade. In parallel, we're investing in mining
and we're moving forward with the billion first phase of the twinning
underground project. And that, of course, is on top of all
our ongoing operations. Then the same thing in Angola, or is it
slightly different in terms of investment?
Investment levels in Angola around exploration are lower than in mining.
But if we're successful in exploration and if we can discover the world class
diamond resources that we believe are there, then that would lead to huge new
mines and the creation of the kind of tens of thousands of jobs that we see in
Botswana. We believe we can recreate those in
Angola. And so then when do you see that?
Well, I mean, because a lot of this is dependent on what is found.
Of course, as you mentioned, with the exploration, I mean, what is what's your
expectation for when you'll actually be able to see some returns here?
So through our new digitalization, we're accelerating exploration in a way that
we never could before. But we also recognize that exploration
does take time. So the new agreement that we've signed
with the Government of Angola envisages us and sets out the way that we will
work with that local diamond company and Yamma to look at existing diamond
discoveries and to try to work out whether if we can apply De Beers
technology, the proprietary technology that we have, which is better than
anyone else's in the world, if we can apply that technology to existing
resources, can we accelerate the development of diamond resources there
rather than waiting on the traditional timescales of exploration so that we're
really excited about? Al.
I also wanted to ask about in terms of pricing and what we're seeing in the
diamond market right now and in particular for DeBeers.
I mean, do you see this potentially as the floor and it will only go up from
here or what are you looking at right now?
So when we look at diamond demand, I think the place to start with with is
our most recent sale. The first site of 2020, for the value of
that sale was as large as the value of the two previous sales, the two last
sales of 2023 combined. So we've definitely seen an uptick
there. As we look forward, we expect that
upturn in diamond demand to be gradual rather than sudden more of a you than a
V, if you know what I mean. Where do you see that demand coming
from? Predominantly?
So 2023 was a very challenging year for the diamond industry, and lower demand
in 2023 was driven by three things. First of all, it was falls in the global
economic growth rates. We certainly saw that.
The second thing we saw is long Covid, if you like, a lag in engagement rates
in both the United States and in China, because no one had met each other during
lockdowns. The third thing we saw undoubtedly was
encroachment by lab grown diamonds. All three of those factors we expect to
reverse in 2024. So we expect GDP to be cyclical, as it
always has been. We expect engagement rates to increase
in both the United States and in China. And we expect that lab grown prices will
continue to fall. They've fallen by more than 90% over the
last two years. And customers clearly see now that
natural diamonds and lab grown diamonds are two entirely different things.
But there's a certain level of uncertainty right now for the current
conditions right now. I mean, what's your expectation for for
whether or not you're actually be able to sustain that sort of demand that
you're talking about from the US and from China?
So we see 2024 as a year of recovery. We don't expect a short, sharp recovery.
We we expect more of a long, gradual recovery.
But we are very confident in the demand for diamonds in the long term.
They've been treasured by humanity for thousands of years.
They are the most precious, hottest, most beautiful
product of nature. They're incredible.
And and we believe that that demand that has been around for thousands of years
will continue for the next decades, hundreds and probably thousands of
years. Well, part of that, Al, I like that
optimism. But part of that part of something that
might get in the way of it is what we're hearing from the G-7, actually trying to
keep diamonds from Russia out of the West.
And we've heard De Beers comment on that a little bit.
I mean, what is what is your perspective on on that proposed rule?
Does it affect potentially your bottom line?
So we support the desire of the G7 to put sanctions on on Russian diamonds.
What we really want to ensure is that as the G7 does, that there are no
unintended consequences, unintended negative consequences for ethical
African producers. So what we want to ensure is the great
African producers of diamonds that employ thousands and thousands of jobs
across South Africa, across Namibia, across Botswana and other countries,
they are allowed to provide diamonds to customers across the G7 in the same way
that they always have been. That's really important to us.
So then what does that mean for negotiations right now?
And in regards to that in particular, because you just said you don't want to
see unintended consequences for African producers.
I mean, how are you talking then to the G-7 about this?
So over the years, South Africa, Botswana, Namibia, countries like that
have proven that they can certify their own diamonds in a very reliable, very
holistic way that customers can trust. And we as De Beers, have been at the
forefront of that because our customers need to know that when they buy a
diamond from De Beers, it is exactly the diamond that we say it is.
And that is at the forefront of everything that we do.
What we are talking to the G7 about is building on those processes to ensure
that every African nation that is trusted to certify its diamonds.
Those certifications can be used to give confidence to the G seven as to where
the diamonds that they import really come from.
And we believe there's every reason for the G7 to work with ethical African
producers to create a win win here for both our customers and for the countries
that rely so much on the income from natural diamonds.
Are you confident, though, that, you know, the outcome is actually going to
be a win win? As you mention.
I am confident that we can work with the G7, with African producers, with the
consumers of natural diamonds, with our clients around the world to get to an
outcome here that works for all sides, that encourages more production of
ethical African diamonds, and allows customers to know exactly where their
diamonds have come from and also to know the good that has been done ever since
that diamond was recovered from the ground.
We believe it's incredibly important that customers around the world know the
source of their diamonds in the way they care about where their food is from,
where their coffee is from, where everything is from.
Provenance is the absolute key to great marketing in the 21st century.
Could potentially the proposal to have Belgium then a part of the screening
process help with that or do you do you see something else?
Is there another alternative that you're maybe looking at?
We believe that the right solution for ensuring that G7 nations know where the
diamonds come from is to allow trusted ethical African producers to certify
their own diamonds. The government of Namibia knows whether
a diamond is from Namibia or not. The government of Botswana knows whether
a diamond is from Botswana or not. Let's work with those governments to
certify their diamonds in a way that brings confidence to the people who buy
the diamonds in America or the United Kingdom or Belgium or anywhere else of
the two celebrate the most special moments of their lives.
So that sounds like a no out, is that correct?
We certainly believe that we should avoid a single node, a single place of
certification, and instead we should allow African countries that have
produced ethical diamonds for decades to have the freedom to export those
diamonds where they want in the world. And finally, when are you anticipating a
decision on this? Do you think it will come in the next
few months? We're expecting decisions on sanctions,
on diamonds to be phased in over the course of 2024.
And we are committed to working with the G7 nations to ensure that they achieve
their aims and they avoid unintended consequences.
All right. Great to have you out.
Al Cook. CEO De Beers in Cape Town for us.
Al, great to talk to you.