• Business and Finance
• Family
• Computers and Internet
• Auto and Trucks
• Education
• Health
• Hobbies
• Home Improvement
• Legal
• Marketing

• Home
• Arthur's Articles Home
• Browse Categories
• Browse Authors
• Submit an Article
• Search for Articles

Home » Business And Finance Articles » Diamond Flashes

Diamond Flashes

Beyond magnificence and splendor, the world of diamonds evolves on stirred grounds. When the stake is so important, interests collide. But technology develops following its onward course. Here are some interesting off-stage events in the diamond industry and innovations in technology.

De Beers sued by head of the Diamond Bourse

Derek Parsons, the president of the Diamond Bourse of the Southeast United States has filed a lawsuit against De Beers, on the charge of the company's disregard of American competition law. Their Supplier of Choice policy puts the American dealers at a disadvantage.

The suit was not launched on behalf of the Miami bourse but on behalf of diamond dealers in America, condemning the criteria on which De Beers makes the sales â€" they would sell only to their sightholders, discouraging the non-sightholders and keeping prices artificially high at a non-competitive level.

Diamond mining expands

De Beers holds control of only 50% of the roughs market

Diamond rising prices have stimulated the exploration and mining in more countries such as Canada, Russia, Angola, India, Brazil. Nevertheless, about 40% of diamonds still come from Botswana and South Africa. De Beers' control on the rough diamond market was declared to have decreased from 70% to about 50%.

Canada, Russia and West and Central Africa are considered by specialists an important potential diamond source. India and Brazil are prospected by geologists also due to the fact that they are known to have been a diamond source in the past.

The largest diamond reserve of Africa lives in extreme poverty

Although the fourth largest producer in the world by value and the holder of the largest diamond reserves in Africa. Angola's per capita gross national income GNI is estimated at $650 per annum. People' s main means of subsistence is agriculture.

The diamond sector has been seriously affected by the long war and by gem smuggling. Yet it still represents a very important potential driver of economic development. Since 2002, when the conflict between the government and the UNITA rebel movement ended, developing the sector has become a national priority and the government has already made changes to the diamond sector regulations. Serious redevelopment and investment is needed in this area. At present, artisanal mining operates in Angola and it brings very little economic benefit to local communities.

Increasing conflict in Russia between diamond cutters and miners

The Russian company Alrosa is the largest diamond miner in the world outside De Beers. Diamond cutters accuse Alrosa of favoring exports and providing larger stones for the foreign market and offering only small-sized diamonds to the internal market. On the other hand, Alrosa says that cutters cannot be allowed to pick the assortment of size they want.

The result is that Russian cutters are buying million dollars in rough stones from South Africa each month. Russian manufacturers had a production of $1.1 billion in 2003, and Alrosa is estimated to produce around $2 billion worth rough diamonds this year.

Find-diamonds computer program

Partition Enterprises has been working together with the De Beers company and the University of Queensland to develop a program that calibrates the density separator x-ray sorting machines more accurately, thus maximize the diamond yield. Partition will showcase their products at the Electra Mining 2004 Exhibition in Johannesburg.

De Beers sightholders

Sightholder firms have to satisfy various criteria such as a high degree of expertise in valuing rough diamonds, high experience in cutting and polishing. De Beers has 125 sightholders to whom they assure a monthly direct supply of rough diamonds and from whom they collect around $ 600 million. The privilege of being a sightholder company is carefully preserved, as being a sightholder means being „on the cards", otherwise the supply of diamonds may become dangerously scarce for that company. That is why the offered diamonds will be eventually purchased regardless of their quality â€" the pack diamonds can be argued on but they are very rarely rejected, as the sightholder cannot afford to lose its status and break the relationship with De Beers Diamond Trading Company, relation that is essential for business.

In Japan, the only company appointed as sightholder is Tasaki.

Innovative complementary grading tool

A new feature will be added in grading reports: the light performance. Although the concept of measuring the light performance of diamonds has been introduced six years ago, this standard of diamond evaluation was never introduced into the grading reports of diamond grading laboratories. GemEx Systems, Inc. of Wisconsin and EGL USA of New York will provide a combined diamond grading report to diamond customers â€" besides the certification of the 4Cs, its light performance will be measured. The specific section in the report will contain the results of diamond analysis under six different lighting angles.

The GemEx Light Performance Report makes the difference between diamonds with similar 4C characteristics that can differ in brilliance, fire and sparkle. The analysis is the result of a patented spectrophotometer technology based on the computerized BrillianceScope that measures diamonds' brilliance, fire and sparkle, providing a powerful tool for the cutting, sales, buying and marketing of fine diamonds.

And here is another random article you might be interested in...

Why is the Macedonian Stock Exchange Unsuccessful?

The Macedonian Stock Exchange (MSE) is not operating successfully. True, some of the parameters which we use to measure the success of a stock exchange have lately improved in the MSE. For instance, the monthly money volume has increased together with the number of transactions. But this is a far cry from success.

Who is to blame? Is the current management of the MSE incompetent?

I do not think so. Actually, I think the MSE has an excellent management team, doing their best to incorporate new trading techniques and to list new firms. The problems lie elsewhere.

A stock exchange is a very important financial market. It is a highly efficient and visible instrument of financing. In the West, it is used to finance most of the needs of corporations, way above financing available from banks. Individuals and firms save some of their income and invest it. The stock exchange is meeting grounds for savers wishing to invest their savings - and firms looking for investments.

Another function of stock exchanges is to assist governments in financing their internal borrowing requirements. Governments sell obligations (called bonds) to investors through the stock exchanges in their countries. A stock exchange is, therefore, an indispensable tool for re-financing national debt.

But a few conditions must prevail before a stock exchange functions properly.

The most important condition is the existence of a healthy, growing economy in the stock exchange's country. Investors flock to robust economies and shy away from sickly ones.

On the face of it, the Macedonian economy belongs to the latter category. High unemployment, low savings, retarded growth, a gaping trade and payments deficits. But this is an optical illusion. The economy is in much better conditions that most Macedonians would care to admit. The unemployment figures are skewed. They reflect efforts to evade paying social taxes - not real unemployment. The economy is growing, even by official estimates. The black economy is growing even faster. The deficits are covered by enormous capital infusions from donor countries. Macedonia is receiving more international credits per capita than Russia. It is always convenient to blame the worsening economic climate - but the cold, objective figures do not bear this out.

When an economy is growing - the profits of companies (including those listed in the MSE) will grow with it. This makes the shares of these companies an interesting buy.

Since no one is buying - we must look for the problem elsewhere.

A prospering stock exchange is linked to the existence of the right micro and macro economic management. Macedonia has more than its share of problems in this respect.

The process of transformation of businesses with social capital had four basic flaws:

first, it introduced no new management, ideas or capital to the beleaguered firms which were "transformed". The market simply does not believe that they were transformed. The same people run the same shows under a different hat.

Second, such transformation violates the concept of Hierarchy, a chain of command.

It blurs the distinction between labour (workers) and capital (owners). What is wrong with that is that a ship must have a captain - and only one. Someone must have the authority and the responsibility. Collective management is no management at all.

Moreover, innovation change and revitalization are all prevented. What change could come from the same set of worn out managers? How can thousands of owners decide to worsen the conditions of the workforce - if owners and labourers are one and the same? So, management is polluted by irrelevant, non-economic considerations: power struggles amongst groups of workers, social considerations and political ones.

We identified one villain. The other one is high (real) interest rates. When interest rates are high, three effects prevent the resuscitation of the stock exchange:

First, firms have high financing expenses (interest payments) - which reduces their profits. Second, it is not worthwhile to borrow money and to invest in shares.

Third, it is more tempting to invest money in bank deposits, yielding high interest rates - than in shares. High interest rates are the poison of stock exchanges.

The same is true for low savings rates. If people and firms do not save - there is no capital available for investment in stocks.

This, exactly, is the current situation in Macedonia : impossibly high interest rates coupled with exceedingly low savings. There is basic mistrust between clients and their banks. They prefer other ways of keeping their money.

But all the above is far from exhausting the list of pre-conditions for the proper functioning of a stock exchange.

Investors must have timely, accurate and full information about the firms that they invest in. This will allow them to respond in real time to developments in the company and to prevent losses. This will also make it difficult to cheat them - which is were we come to the question of accounting standards. Only lately have the accounting rules in Macedonia been revised to conform to the Western systems of accounting. Even now, the similarity is very slight. Macedonian firms maintain a double accounting system. One set of books is tax-driven. It is intended to show losses or profits at the whim of the management. An elaborate scheme of hidden reserves lies at the heart of the typical financial statements of the Macedonian firm. Another set of books - if they are kept at all - reflects reality. This is an enormous barrier to foreign investment - and foreign investors are the driving force in every modern stock exchange.

The trust of investors in the stock exchange is based on legislation to protect their property rights against the firm's management' against the authorities and against other investors who might wish to rig the market or manipulate the prices of stocks.

But legislation without an effective judicial and law enforcement systems is like a stock exchange without money. To enforce property rights in Macedonia takes ages and even then the outcome is not certain. Laws, regulations are in their embryonic stage and some of them seem to have had an abortion: they were hastily and unwisely copied verbatim from legal codices of other countries (Germany, Britain).

Last - but definitely not least - is the existence of a fair, transparent and non-corrupt marketplace. The stock exchange, the banks, the regulatory authorities, the police and the courts have to be above suspicion. For the market to be utterly efficient - it must be utterly free of any ulterior considerations and motives. Corruption distorts the market's allocative mechanisms and powers. It is easily discernible in dealings in the stock exchange for all to see. A stock exchange is, after all, the showcase of the local economy.

But there is a problem which towers above all other problems and it is almost endemic to Macedonia. It helps to explain much of the predicament of the stock exchange in Skopje. It is the fact that the market is missing its most important player: the Government.

Investors - both foreign and domestic - look for the Government to be active in the local stock exchange. Governments throughout the world use their stock exchanges to sell shares of state-owned enterprises to their populace. The stock exchange becomes a mechanism for the distribution of the national wealth - as embodied by the state owned enterprises - to all the citizens. As we said before, governments also use the stock exchange to borrow money from their citizens.

The Government of Macedonia does neither. It totally ignores the MSE. Not one company was privatized through the MSE. Not one Denar was borrowed from a Macedonian citizen through it. A government's activity in the stock exchange is proof that the government believes in it. Therefore, if it does not operate in the stock exchange - it proves that it does not believe in it. If the government does not believe in the stock exchange in its own country - why should the investors believe in it?

There are a few additional structural characteristics which are considered to be the hallmarks of a healthy stock exchange. But those are the by-products of all the above mentioned conditions.

A stock exchange must be liquid so that investors would be able to convert their shares into cash easily and expediently. It must include many investment options - professionally put, it must be diversified. This will allow the investors to choose from a variety of investments and also to reduce their risks by dividing their money among a few types of investments.

The management of the stock exchange can help it by introducing efficient trading techniques, computerized trading and settlement systems and so on. The faster investors meet their money when they sell their shares - the more they will be inclined to operate in the stock exchange that allows them that. The easier it is for them to liquidate their assets by meeting buyers - the more they will prefer to work in that stock exchange.

Investing in the stock exchanges in the markets of the emerging economies has been an unfortunate decision in the last three years. Stock exchanges from Russia to Hungary and from Lithuania to Poland have jeered wildly since the end of 1993.

They resembled a roller coaster in their performance, going up and down by tens of percents annually. There are exceptions to this rule. The Ljubljana Stock exchange, for instance. The trading volume there has gone up 10 times since December 1993 - and the market capitalization is up 30 times. But this is because of the performance of the general economy in Slovenia. In Croatia, the government is privatizing its holdings in state owned companies by auctioning shares to the public through the Zagreb Stock Exchange. This has helped it a lot.

Newly-established stock exchanges are highly volatile and very dangerous. Volatility goes hand in hand with risk. They are long term investments. Since 1988, they outperformed the more established stock exchanges in the world, like Wall Street.

But these stock exchanges are growing fast, they are cheap by any measure and they are the best investment that a country can make in its own future.