Diamond Industry Rio Tinto Billy Pell Kelsey Zellner
Diamond Industry Rio Tinto Billy Pell Kelsey Zellner Christine Pope Meredith Woedl
Firm and Industry Overview
Rio Tinto ● Exploration, production, and sales of rough diamonds ● Mines: Australia, Canada, Zimbabwe, India ● Antwerp: sorting and valuation ● Operations o o Perth India United States Hong Kong
Rio Tinto ● High health and safety standards ● Commits to develop and strengthen communities surrounding its operations
Industry Overview ● 4 Major Players o o ALROSA - most profitable De Beers - 2 nd most profitable Harry Winston Diamonds Rio Tinto - 3 rd largest in rough diamond production ● 78% of production sector’s revenues ● Consolidation of firms
Belgian Diamond Industry ● Focus on high-value stones ● Technology research and development ● World leader in exceptional-stones o High quality stones of more than 20 carats ● Reinforce Antwerp as global diamond trading center and knowledge hub
2013 ● Huge growth in China and India now moderated ● Europe sales suffered from economic uncertainty ● Diamond sales rose in U. S. and Japan
Industry Outlook ● Projection: balanced market from 2013 -2017 ● Demand Increase o o 2013 -2017: 2. 0% annually 2018 onward: 5. 1% annually ● 2018: existing mines become depleted and no major deposits come online
Marketing Strategies
Marketing Initiatives ● “Marketing Initiatives: ” designed for retail consumers to use in their sales and marketing activities ● Communicate high-quality of diamonds ● 4 Marketing Initiatives o o Select Diamantaire Natural color diamonds Mine of origin Nazraana
Select Diamantaire Programme ● Promotes Rio Tinto’s Diamonds’ core customers who are considered experts ● Used as a “Mark” of formal recognition - promotes high quality of diamonds ● Those in program get their own tailored marketing materials and events
Natural Color Diamonds ● Founded the Natural Colour Diamond Association o raise awareness about color diamonds in 2003 ● Promotes Champagne, Pink, and Cognac diamonds ● Strategy o create retail programs for customers that promote the sales of color diamonds o host events to educate consumers about the diamonds
Mine of Origin ● Keeps track of which diamonds come from which mines ● Prevents issues over origin or quality of diamonds ● Program helps to attach human, geographical, and cultural stories to diamonds ● Focuses on adding meaning to end consumer’s purchase so retailers can use it as a marketing vehicle
Nazraana Initiative ● Developed more affordable jewelry under the name Nazraana ● Initiative used to o encourage customers sell this more affordable jewelry in India o facilitate development of a retailer network across country that would market Nazraana
SWOT Analysis
Strengths ● ● ● ● Global Leader - up to 90% of world’s pink diamonds Diversified Offerings - Color, Carat, Clarity, and Cut Industry leading technology Strong Partnerships Strong brand presence Rising Urbanization and Living Standards 20% of world’s diamond production o multiple mine projects o 3 rd largest in the world Ownership of 4 Mines o Argyle in Australia - 100% o Diavik in Canada - 60% o Murowa in Zimbabwe - 78% o Bunder project - 100%
Weaknesses ● High Debt - Alcan aluminum mine ● Iron Ore supply reliant on China ● Pink Diamonds ● o Argyle mine closing in 2020 o competitive advantage lost Diamond segment generates the least revenues for company
Opportunities ● ● Bunder Project - Madhya Pradesh, India o new diamond mine o could rank top 10 in volume and value o 7 times richer than Panna Mine - the only other one in India o expected to produce 27. 5 million carats o 20 times more production output expand into new markets when finances clear acquire new mines utilize strong aluminum mining and other minerals to diversify and cut costs o New CEO - Sam Walsh: cutting costs, increasing efficiencies
Threats ● Government regulations o strict laws bring high costs o environmentalist groups ● New Technologies - competitors become more efficient and lower costs ● Adverse Weather ● New Minerals o aluminum o other minerals may be advantageous o reduced need for coal as world becomes more “green”
Key Takeaways ● Firm and Industry o 4 Major Players: ALROSA, De Beers, Harry Winston Diamonds, Rio Tinto. o 78% of Production Sector’s Revenues o Belgian Diamond Industry focuses on high value stones and are the world leader in exceptional stones. o 6 major Diamond hubs in the world: NY, Antwerp, Tel Aviv, Dubai, Mumbai, & Hong Kong o In 2018, existing mines will be depleted
Key Takeaways ● Marketing Strategies o Communicate high-quality of diamonds o 4 Marketing Initiatives: Select Diamantaire, Natural color diamonds, mine of origin, & Nazraana. § Promotes Rio Tinto’s Diamonds’ core customers who are considered experts. § Promotes Champagne, Pink, and Cognac diamonds § Keeps track of the mines that diamonds come from to ensure quality of diamonds. § Developed more affordable jewelry under the name Nazraana.
Key Takeaways ● SWOT Analysis o Strengths § Global Leader, diversified offerings, strong brand presence. o Weaknesses § Pink Diamonds, iron ore supply dependency o Opportunities § Bunder Project, expansion, new CEO o Threats § Gov’t regulations, least revenue for company
Rio Tinto - Diamonds Questions?
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