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Israel Rough Diamond Conference

Israel Rough Diamond Conference. Diamond Industry Overview Financing and Valuating the Diamond Pipeline Martin Rapaport February 12, 2008 – Tel Aviv Martin @ Diamonds. Net www . Diamonds. Net . 1. Changing Markets.

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Israel Rough Diamond Conference

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  1. Israel Rough Diamond Conference Diamond Industry Overview Financing and Valuating the Diamond Pipeline Martin Rapaport February 12, 2008 – Tel Aviv Martin @ Diamonds. Net www . Diamonds. Net 1

  2. Changing Markets The diamond industry is undergoing fundamental, unprecedented, changes that are creating complex interactions throughout the entire diamond distribution system. Everyone is affected.

  3. Changes External Forces Internal Outlook Corporate Responsibility Beneficiation One Tough Question 3

  4. 4

  5. Fundamental External Change Globalization Hundreds of millions, new consumers Economic warfare over resources Record $100 oil, copper, steel, rubber Currencies the weapons of choice U.S. dominance declines New socio-economic-political order Uncertainty & Volatility, the new order 5

  6. Euro, Israeli Shekel, Indian Rupee Vs Dollar (index 2006=100)

  7. S&P 500

  8. Lessons – Take Away The diamond industry does not control diamond markets or prices De Beers is not your daddy The not longer control supply Diamond prices are not as important as diamond profits Get ready to rock and roll 8

  9. Rapaport Diamond Index – 1 ct. 1978-1982

  10. Internal Issues Long Term Demand > Supply Production Overcapacity Diamond cutting is not a profit center American party is over Inventory & credit are out of control Wealth effect is booming Technology is great 10

  11. Demand Greater Than Supply

  12. U.S Diamond Account is Flat $ Million * Extrapolation based on First 3 months of 2007

  13. U.S Net Diamond Account $ Million

  14. Diamond Industry Bank Debt $12.0 $10.9 $8.7 $6.1 $ Billion $6.9 $6.2 $6.1

  15. Global Jewelry Sales Growth - 2006

  16. Global Wealth - 2006 9.5 million millionaires, + 8.3%, India +20.5% Total Worth $37.2 Trillion, Assets up 11.4% 1.8% Net Worth on Luxury = $670 billion 18% of Luxury on Jewelry = $120 billion All Diamond Jewelry = $72 billion 16

  17. Diamond Prices Will diamond prices go up or down? 17

  18. Diamond Prices What kind of diamonds? Stop seeing things black and white What 18

  19. The Diamond Dream The diamond business is not about diamonds. When a man gives a woman a diamond he is not just giving her a diamond. The retail diamond business is about making people feel good. 19

  20. Diamond Industry Responsibility

  21. Diamond Dream What about the diamond dream of the woman in Sierra Leone ? . Is our dream her nightmare? How do diamonds benefit artasinal diggers? 21

  22. Ethical Issues Artisanal Diggers 1.5 million in West Africa 7.5 million live off diamonds 70% unemployment 28% of children die before age 5 You are responsible for what you buy And responsible for what you don’t buy 22

  23. Kimberley Process The Kimberley Process (KP) Works to Eliminate Conflict Diamonds KP Does not deal with development Issues 23

  24. Corporate Responsibility Corporate Responsibility is an obligation that extends beyond law. Corporate Responsibility extends beyond the Kimberley Process. 24

  25. Development Issues Why did G-d give diamonds to the poorest people in the world and make them desired by richest people in the world. What is the role of the diamond industry? 25

  26. Development Issues The Road to Hell is Paved With Good Intentions No good deed ever goes unpunished Poverty Alleviation Sustainable Economic Development 26

  27. Fair Trade Jewelry Fair Compensation Community Benefit Do No Harm Monitoring & Branding fairtrade@diamonds.net 27

  28. Fair Trade Jewelry Fair Trade Jewelry is sustainable because socially conscious consumers will spend more for diamonds and jewelry that makes the world a better place. Fair Trade Jewelry is not charity it is sustainable economic activity. 28

  29. Take Away Our diamonds are only as good as we are. Martin Rapaport 29

  30. The Tough Question Who needs Israel? No mines. No consumers. How do we add value to diamonds? 30

  31. Distribution Non-mining profit in the diamond business comes from: finding the right buyer for the right diamond at the right time at the right price (added value) Free, fair, open, competitive markets 31

  32. Distribution Governments can and should create an enabling environment for beneficiation. But they cannot legislate development and sustainable job creation which can only be done by the private sector. in a free market. 32

  33. Distribution Governments must be extremely careful not to use their regulatory power to eliminate the competitive distribution of diamonds or they will destroy their diamond business There must be room for everyone and every idea in a free market. 33

  34. Distribution All competition is legitimate & good. Companies should be able to sell their diamonds any way they want as long as they do not dominate the market Selective distribution can and should compete with tenders or any other distribution system 34

  35. Distribution If adding value through downstream marketing initiatives is a good idea then it should not have to be enforced by selective restrictive distribution. 35

  36. Beneficiation With all due respect to Africa why shouldn’t buying countries also demand their fair share of beneficiation? Over-regulating diamond distribution can be a double edged sword. 36

  37. Take Away Free Fair Competitive Markets is the only way forward. Governments should create an enabling environment and encourage but not enforce beneficiation over the long term. 37

  38. Markets Chief Linchwe II – Head of the Bakgatla tribe, one of the founders of Botswana “As children we learned the meaning of life from the elders of the village as we sat in the circle of the fire.” 38

  39. Markets “My grandmother liked to tell the story of two men. One was blind and one could not walk. They were working together, you see. The blind man carried the crippled man on his back. One had the feet; the other had the eyes.” 39

  40. Markets “One day, they met a lion. The blind man just through the crippled man away and ran. The crippled one was killed by the lion because he couldn’t run; the blind one was killed because he couldn’t see.” 40

  41. Markets “As people, you must live together, especially in an unhappy situation. This is the main purpose of the African in traditional life: to live with his community, to protect others. There are lions everywhere, you know.” Chief Linchwe II – a Founder of Botswana 41

  42. Conclusion The greater the lion the greater the need to cooperate. Everyone in the diamond industry is dependent on everyone else. Everyone can and should add value in their own way. 42

  43. Mahatma Gandhi Man becomes great exactly in the degree in which he works for the welfare of his fellow man. Mahatma Gandhi - 1930 43

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