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New BHP market strategy

Finished, branded diamonds sold in Vancouver

Norm Poole
Northern News Services

Yellowknife (July 02/03) - BHP has put a North American spin on the industry's traditional diamond marketing strategy.

The company has begun selling cut and polished diamonds through a new distribution centre in Vancouver.

BHP is the first major mine to sell its own finished diamonds.

That will send ripples through an industry already in the throes of major change.

"What we are telling the industry is that we can provide up to about $150 million worth of polished diamonds a year through this program," said BHP brand manager Graham Nicholls.

"That's the high end. At the low end, if we don't see several tens of millions in business it won't be worth pursuing."

The diamonds will be marketed through a North American distribution network of selected `diamontaires' or wholesalers.

They in turn sell to jewelery manufacturers and retailers.

Each stone sold by BHP will carry an invisibly etched CanadaMark logo.

BHP unveiled the new `umbrella' brand earlier this month at a major industry show in Las Vegas.

CanadaMark is seen as an integrity guarantee that will leave no question where a diamond originated.

The intent is to support rather than compete with jewelery manufacturers or retailers selling Canadian diamonds under their own brands.

Canadian diamonds enjoy a market premium, reported in some quarters as up to 20 per cent.

Nicholls said that is high but wouldn't put a number on how much more a Canadian diamond might be worth.

BHP is in discussions with Rio Tinto about adopting the CanadaMark brand.

Rio Tinto owns 60 per cent of the Diavik mine.

Industry leader De Beers has urged an industry move to competing brands as a way to spur consumer interest.

During the 1990s, the global sale of diamonds fell behind growth in the luxury goods industry.

De Beers is strongly opposed to country of origin branding, however.

Rough sales in Antwerp

Nicholls said BHP will continue to sort diamonds in Yellowknife and sell most of its rough production through its Antwerp office.

The Ekati mine produces about four million carats a year.

A small percentage of rough is sold to Yellowknife cutting and polishing plants under an arrangement with the GNWT.

The three plants market finished diamonds under their own brands.

Diamonds headed for BHP's Vancouver distribution centre are currently finished under contract by a plant in Israel.

BHP is exploring similar arrangements with other offshore plants, said Nicholls.

The company has developed a sophisticated tracking system to retain product integrity as the diamonds move through the system internationally.

Every diamond above one-fifth of a carat is numbered and individually tracked by bar coding, he said.

BHP move welcomed

The first two North American wholesalers buying finished BHP diamonds from Vancouver are Tundra Diamonds in New York and Regal Imports in Vancouver.

"At this point, we are just getting started," said Nicholls.

Regal Imports owner Mel Moss welcomed the BHP initiative.

"This is tremendous," he said.

"This makes eight per cent of the world rough diamond supply available. If Rio Tinto buys in it will be even better."

Moss said a larger and more consistent supply of finished diamonds opens new opportunities for wholesalers.

"Potentially I am looking at doubling my business," he said.

The company previously purchased rough diamonds from BHP in Antwerp.

They were cut and polished offshore and returned to North America for sale.

Moss said it has been cheaper to finish diamonds in Russia than buy polished diamonds from plants in Yellowknife.

The GNWT and Sirius Diamonds have challenged Regal's right to sell diamonds finished offshore as a Canadian product.

The Competition Bureau of Canada has sided with Regal in three different rulings.

A diamontaire for 26 years, Moss said his firm buys and sells "several million dollars" worth of diamonds a year.