Diamonds and Joy

With Cecil Rhodes looking on approvingly from a portrait on the wall, Sir Ernest Oppenheimer, cool, cultivated chairman of De Beers Consolidated Mines, Ltd., reported on the state of the world's diamond-mining industry one day last week in the company's famed board room in Kimberley, South Africa. Occasion was the 49th annual meeting of the company which, for all practical purposes, is the world's diamond industry. Founded by the young imperialist who established the Rhodes Scholarship Trust, originally chartered with powers not only to engage in commercial exploitation but also to raise armies and make war, annex and govern territory, De Beers through its affiliates now accounts for about 95% of the world's uncut diamonds. Not all these diamonds come from its own mines. Indeed, the great African "pipe" mines were closed down tight throughout most of Depression.* But De Beers controls Diamond Corp.. haughty successor to the old monopolistic Diamond Syndicate, marketing agency for the Belgian Congo and other alluvial producers. Except for an unimportant dribble from miscellaneous fields, all the world's diamonds pass through No. 8 Charterhouse Street, London, headquarters of Diamond Corp. In bad times Diamond Corp. buys more than it sells, in good times it sells more than it buys, annual turnover varying from as low as $15,000,000 to as high as $90,000,000. Commercially, even great De Beers is subordinate to its potent subsidiary. During the darkest Depression days De Beers ceased selling diamonds entirely so that Diamond Corp. might have more resources to throw to the support of uncut diamond prices. Even then Diamond Corp. could not afford to buy all the diamonds offered by the alluvial producers, and the industry resorted to a strict quota system.

In Kimberley last week, Sir Ernest Oppenheimer, who is also chairman of Diamond Corp., was as optimistic about diamonds as his fellow South African, General Jan Christiaan .Smuts was pessimistic about gold. Operations were resumed last year at the Dutoitspan mine. With the world once more buying diamonds, said Sir Ernest, two other mines would soon be reopened: Bultfontein and Wesselton. Jagersfontein and Premier, where the great Cullinan diamond, world's largest (3,106 carats-- 1 2/5 lb.), was found, would have to await larger quotas to permit profitable operation.

Just how De Beers managed to make nearly $15,000,000 profits last year with only one mine in full operation was not elucidated by Sir Ernest. Stockholders merely accepted the fact with a rousing "Hear! Hear!" The company inventories its diamonds on hand at -L-1, and presumably a large part of the earnings, aside from some $4,200,000 derived from investments in such enterprises as African Explosives & Industries, Ltd., were realized on diamonds mined in previous years.

As Sir Ernest pointed out, the diamond industry was emerging from the worst depression in its history. Hard times for diamonds set in in 1927 when the U. S.--by all odds the world's biggest diamond buyer--started to put its surplus funds into the stockmarket instead of jewelry. The volume of imported polished stones dropped from 555,000 carats in 1926 to a 1933 low of 180,000 carats. Last year the figure was back to 445,000. Another 97,000 carats were imported rough for cutting in the U. S. Average price for cut stones was $50 per carat, for rough stones $63. These were wholesale prices and are deceptive because big, flawless gems are worth much more per carat than small or imperfect ones. Retail, a good one-carat diamond is worth perhaps $650 (1929 price: about $750). Even in 1933 the price got down only to $500. For this relative stability the diamond trade can thank Diamond Corp.

While fear of inflation undoubtedly stimulates diamond buying, the actual volume of business thus generated bulks larger in print than in fact. How much diamonds would be worth if Diamond Corp. collapsed is a matter of endless debate. At the moment it has some $60,000,000 worth of rough stones on hand, about two years' supply at the 1936 rate of demand.

It is the studied policy of Diamond Corp. to make its customers feel they are intruding when they go to No. 8 Charterhouse Street to buy. A faint aroma of fine Havana cigars pervades the dull, grey building. On an upper floor the lords of Britain's diamond monopoly linger over rich luncheons washed down with rare hock. Occasionally they notify the diamond brokers that a shipment is to be shown. The broker then formally applies for a "sight" of the shipment. The "sight" may or may not be granted, depending on the mood of the diamond lords. If a sight is granted the broker gets a look at a parcel of assorted stones, good and bad. He has to take the entire parcel or none at all. Over price there is no haggling, the diamond lords always appearing somewhat relieved if no sale is made. But when it comes to buying diamonds even Sir Ernest Oppenheimer is not above lending his presence for appropriate publicity. Few years ago in London he was snapped buying the Jonker diamond, fourth largest ever found (726 carats). While old Jacobus Jonker handed the stone to Sir Ernest, Jacobus Jr., who picked it up on his father's claim, counted his -L-70,000 (about $350,000) in Bank of England notes. For jewelers, for diamond cutters, for the merchants and the brokers, for De Beers and Diamond Corp. and Sir Ernest in his vast estate in Johannesburg, the high and guiding principle of business is to cultivate the idea that diamonds are hard to get. Actually, though alluvial fields are soon played out, the pipe mines of South Africa are almost inexhaustible.

*Diamonds are mined in geologic formations of blue rock that extend like cores deep into the earth's crust--hence the name "pipes." The other source of diamonds is alluvial deposits.

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