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World Federation Of Diamond Bourses

Interview with Varda Shine, Chair of the Board of Directors, Petra Diamonds

Q. In addition to your role as Chair of Petra Diamonds, you serve on other corporate boards. What are your current positions in the diamond industry?                                       

My current portfolio in the diamond industry includes holding the position of Chair at Petra Diamonds PLC and being a Lead Director (and Remuneration Committee chair) at Sarine Technologies.

    I also serve as Senior independent director at Ecora Resources PLC and a Trustee with Teenage Cancer Trust.   

    Beyond my responsibilities on various boards, I am deeply committed to my role as an executive business coach. In this capacity, I have the privilege of working with CEOs, CFOs and other C-suite executives from publicly listed companies. My association with Merryck & Co over the past decade coupled with my MSC in Executive Coaching obtained five years ago, has significantly enriched my ability to support and understand today’s leaders across various industries. It is genuinely rewarding to engage with such remarkable individuals, helping them to realise their utmost potential.

    Q. You have a perspective of more than 30 years in the diamond industry. What are the most important changes that have taken place in the industry?                                                  

      Numerous changes took place in the diamond industry over the last two decades. I believe that two pivotal changes are significantly influencing the current market dynamics. The first one is Generic Marketing. Following the financial crisis of 2008 the quantum of money spent on generic marketing campaigns has been significantly reduced. Although the Natural Diamond Council (NDC) is making commendable efforts to promote natural diamonds, its efforts are constrained by very limited funding. That means that the younger generation have been less exposed over the last 15 years to the uniqueness and the magic of the natural diamond. This reduction in marketing has occurred simultaneously with increased social media and other marketing budgets influencing a cultural shift towards prioritizing experiences. Consequently, the younger generation are less connected to diamonds.

      Secondly, the advent and legitimization of LGD presents a notable change. LGD has not only introduced new business opportunities for the industry but also brought challenges in the consumers perception. It creates confusion with the consumers, especially since both are marketed as ‘Diamonds’ and often sold by the same vendors. It is important to note that while LGD is a significant topic of discussion, it is fundamentally a product of technology. Similar to other technological products such as smart phones and computers, LGD is likely to become vastly available (and much cheaper) in a relatively short timeframe, typically within 12-18 months.

      Q. Tell us about your journey in the diamond industry, how you began and where you are now.

        I joined the diamond industry, in Israel, in the 80’s, thinking it would be a very short-term job on route to my planned future career… The market was just coming out of the Asian crisis, and I found that the energy, the people, the dynamic environment and, of course, the mesmerizing diamonds quickly won me over. What was meant to be a brief detour turned into a long-term passion. In 1997, I got an exciting opportunity to move to De Beers HQ in London for a couple of years. It sounded like an amazing experience, and it was!  The end of my two years coincided with the Strategic Review DB ran and I was asked to stay for longer. I ended up leading a major project with a couple of colleagues. Our goal was to integrate the information systems across the whole business. While never fully completed, it helped to streamline the operation and release a few hundred million stones for sale. In 2003 I became the Sales Director, introducing (what was then called) “Value Added Services”. In 2006 I stepped up as CEO of the DTC, a role I enjoyed until 2014. Part of my legacy was moving the DTC business to Gaborone, Botswana. After leaving DB, I worked for the Botswana Government as a director in a company (MDCB) aiming to diversify beyond diamonds into other natural resources and enhance commercial skills in Botswana.  

        Diamonds have a way of keeping you hooked, so my portfolio always included diamond advisory roles. I work with Channel Capital, a company that delivers receivable and inventory-securitization programs to the industry midstream, I joined the Petra Diamonds and Sarine Technology boards, and as part of my coaching portfolio, I work with small retail chains’ CEOs.

        Q. As Chair of a producing company, and previously with De Beers, can you give us your perspective on the challenges of a diamond producer today?      

          Mining is a high capital business looking at long term horizons. The greatest challenge faced by a diamond producer today is in accurately matching its cost base to an uncertain pricing environment, while ensuring sufficient cash is generated to reinvest in the business and provide a return to investors. Kimberlites are very rare and are often huge orebodies.  Most mines in production today have been operating for decades and need to keep investing in the operation to stay in business. In addition, several mines are investing heavily as they transition from open pit to underground operations and weak pricing occurring at the wrong point in the capital cycle can make things particularly difficult. As such, diamond producers need to ensure their cost base is optimized to ensure free cash flow generation throughout the cycle or, for those undertaking large capex projects, ready access to external capital if needed.  Differentiating mined diamonds from lab-grown diamonds to the consumer through marketing and the adoption of traceability technologies currently presents a challenge but also a huge opportunity.

          Q. How will the G7 sanctions affect the producing companies and specifically Petra?

            At present, the G7 ban only applies to imports of polished diamonds above 1 carat. From 1 September 2024, the EU will expand this to imports of rough diamonds above 0.5 carats, including watches and jewellery. From a mining company’s perspective, the key change will be the EU requirement for certification of origin from 1 September 2024 since this will necessitate traceability technologies to be put in place on that timescale.

            Petra’s diamonds are mined in South Africa and Tanzania and are certified as conflict free through the Kimberley Process. In addition, we enable buyers to identify the origin of the stones they buy from us at a mine level. To assist our customers with the certification of origin requirements by 1 September 2024, Petra is trialing Sarine technology to physically map diamonds above a certain size and blockchain technology provided by TracrTM in the expectation that these technologies, in combination, will enable Petra’s product to meet the G7 requirements for certification.

            Certification will only apply to a small portion of Petra’s product mix, which attracts the highest value. We believe any additional process (or cost) will be more than offset by the benefits that traceability will bring. This includes meeting consumer expectations around provenance, a potential premium with the ability to follow the diamond from mine to finger and being able to demonstrate the positive social impact of our mines.

            Q. Please give us your perspective on the issues that lab-grown diamonds raise for the natural diamond sector.                                                                        

              As I already said, I truly believe that LGD and natural diamonds can co-exist, much like we’ve seen with other products across various industries. However, this coexistence hinges on handling a few key issues appropriately:

              • Lack of differentiation
              • Limited marketing for Natural Diamonds – Natural Diamonds have a fascinating, unique story that isn’t being told as loudly as it could be.  
              • Confusion in the marketplace – Both products are being sold by the same suppliers (retailers, midstream players)
              • Risk of fraud – Diamonds, representing the highest value for lowest volume, have always attracted some unsavory actions. Currently, we are witnessing sales of LGD products as natural or jewellery containing mix of both without clear disclosure to the buyer (as some examples)

              I’ve mentioned before that LGD is a product of technology. As technology advances, we will find unlimited quantities of LGD at much lower prices. Over time, this should position LGD as a separate category, assuming the industry works together to deal with some of the concerns mentioned above.

              Q. What is your forecast for the diamond industry in 2024?

              There is a saying in Hebrew: “Prophecy was given to the fools”….

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