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Speech IDMA President Maxim Shkadov to opening session the 37th World Diamond Congress, as read by IDMA Secretary General Ronnie VanderLinden

Welcome to the 37th World Diamond Congress.

Apologies are offered by IDMA President Maxim Shkadov who had to cancel at the very last moment. My name is Ronnie VanderLinden, IDMA Secretary General.

I will be reading Maxim Shkadov's address, so bear with me. I am happy and proud to be reading his speech to you.

Allow me first to thank our hosts for a most gracious welcome extended to the delegates of the two leading organizations of the international diamond industry and trade, the World Federation of Diamond Bourses and the International Diamond Manufacturing Association.

A special word of thanks the DMCC and Ahmed Bin Sulayim, Executive Chairman, his CEO Gautam Sashittal and Peter Meeus, Chairman of the Dubai Diamond Exchange, who once again have made it so easy and pleasant for us to gather, in this unique hub of the diamond trade, here in Dubai.

I also wish to acknowledge the honorable ministers, deputy ministers of mining, and government officials and representatives of Angola, Botswana, Congo, Lesotho, South Africa and Zimbabwe, and other African nations. Your presence here offers proof of the importance of our industry to your countries’ economies and of your understanding that you need to keep your fingers on our industry’s pulse.

So let’s talk about our industry’s pulse.

As many of you are aware, I have been known not to skirt sensitive issues and to come out straight with the truth.

So maybe it is a good thing that I did not choose to become a medical doctor…….  I do not relish bringing bad tidings to good people.

Fact is that the pulse of the manufacturers remains weak.

Why?

Because we’re undernourished and anemic and while we’re working our fingers to the bone, after a day’s work, we are not making enough to keep our strength up.

True enough, the diamond manufacturing business is not dead yet, but we’re very unhealthy.

A few months ago, it was somewhat strange to hear some industry analysts — and diamond professionals as well —  declare the year 2015 an annus horribilis.

While some may feel it was so, in my view, it rather was an anno veritatis, a Year of the Truth.

Indeed, never before have the deficiencies of the diamond supply pipeline been laid bare so clearly -- and yes, so painfully.

The arguments for profitability in diamond manufacturing that were made time and again by our organization in the past years, which were summarily dismissed by producers and industry commentators alike, not only gained traction but were parroted by those same industry analysts and reporters who only a short while earlier ridiculed the cause of the diamond manufacturers.

Of course, neither the analysts, nor the overwhelming majority of management of the diamond producers had an inkling about what it takes to be a diamond manufacturer.

However, there now seems to be across-the-board consensus in our industry that stability in the diamond manufacturing sector can only be achieved through profit.

Recognizing this shift, a few months ago, IDMA engaged independent industry analyst Edahn Golan to conduct a study that would determine the current level of margins in the diamond industry and the manufacturing centers in a range of popular rough diamond assortments.

The purpose and goal of this study was to determine the level of margins in the diamond industry and the manufacturing centers in a range of popular rough diamond assortments.

These goods mostly result in +1 carat, G-J color, VVS-SI clarity polished rounds. The report goes beyond these 4Cs to also include two instances of smaller goods, one instance of lower color I-M goods, and one of I clarity goods.

In terms of geography, the sample data represent diverse locales and the different cost of manufacturing associated with labor and other costs associated with particular locations. The data relates to January-July 2015.

In his introduction, Golan writes: "As suspected, the rough diamond assortments checked for this report have either proven to be borderline economical, on a gross margin basis, or uneconomical. Because many of the polished diamonds manufactured from the tested goods are later certified, especially those weighing one carat or more, we also examined the gross margin profitability after adding the cost of GIA certification. Under those circumstances, all of the tested polished diamonds were rated as uneconomical with only one exception."

Of course, the diamond sector cannot and will not return to profitability without a healthy and reliable financing structure.  As the players in the supply pipeline will become positively aligned, it is our hope that the banks' will become confident enough with our industry to reinstate and strengthen financing structures to our sector.

And then there is the market’s future potential.

To the honorable African mining ministers and representatives present here I can only say this: the past decades have proven, time and again, that the various beneficiation models that have required manufacturers to establish cutting plants in your countries have not brought the desired results, for either side.

IDMA, I can assure you, would like to enter into dialogue with you, to find and implement business models that will bring your countries the highest possible revenues for your mined diamonds, and at the same time allow for an infrastructure that will ensure profitability for the manufacturers.

It is not easy, but then, in our business, what is?

In closing, I would like to address the synthetic or lab-grown diamond industry. We continue to ask that those producing and those marketing lab-grown diamonds, take responsibility for their supply pipeline.

We ask that they create a protocol that controls the entire route of synthetic rough - from the machine to the seller of polished.

Bottom line, we ask the synthetic diamond business community to act responsibly and help protect the diamond, gem and jewelry industry and trade.

And last but not least, I call on our all of industry members to come down from the sidelines and actively support the World Diamond Mark’s in its work, together with the retail jewelry industry, in advancing generic diamond promotion and advertising projects, aimed at the consumer.

Working hand in hand with the producers, and with the Diamond Producers Association, we must all contribute, cooperate and do all we can to maintain and strengthen consumer confidence in natural diamonds, for the benefit of the entire diamond supply pipeline.

After all, the consumers' desire and confidence in diamonds and diamond jewelry form the backbone of our industry.

THANK YOU