De Beers sets sights on diamond peace

De Beers will tomorrow attempt to reassure its key customers that its grip on the world's diamond remains intact, as 160 gem buyers from all over the world gather at its City of London headquarters for one of the year's most important "sights".

De Beers soothing noises will seek to calm nerves after the revelation last week that diamond leaks from Russia are on the increase, following the failure to sign a new marketing deal.

De Beer's declined to comment on the likely outcome of Monday's sight.

Prices for smaller stones, however, may fall again, the market believes, as De Beers seeks to match lower prices from Australia's Argyle mine.

Argyle also sent the jitters through the industry in June, by pulling out of De Beers world cartel by marketing its production of mainly smaller gems on its own.

The move, and subsequent fall of 20 per cent in the price of stones of up to one third of a carat has left the Indian cutting industry in turmoil.

India is one of the world's four main cutting centres, after Israel, New York and Antwerp, where most of the larger gem diamonds have been traditionally worked.

"We would like to reassure our clients that all is well in our industry on Monday, particularly our Indian clients, who have expressed concern," a De Beers spokesman said.

"The whole modus operandi of the CSO is to create stability. We certainly wouldn't sell them goods they can't manufacture properly at a profit."

Last week De Beers announced an 18 per cent rise in half year earnings to $482m after record diamond sales of $2.75bn in the first half.

Gary Ralfe, managing director of the De Beers' Central Selling Organisation (CSO) also said there was no reason to believe a deal with the Russians would not be finalised.

The group reached a framework agreement with Moscow and the Siberian diamond producing area of Yakutia in February to replace a previous five- year deal. That initially plugged the Russian leaks, which escalated to around $1bn last year, but they have since crept back up to $40-60m in June.

Despite an emergency meeting in Moscow a fortnight ago no final deal has been reached and no further summits with Mr Ralfe and CSO chairman Nicky Oppenheimer are scheduled.

The CSO's tradition of "sights" at its Charterhouse Street headquarters dates back to the inception of the cartel earlier this century. Selected clients are escorted to private viewing rooms where they are offered selections of stones at fixed prices.

By this system and its private intelligence network, the CSO intends to retain control over its 60 per cent of the market, despite problems with Russia and Argyle.