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 Perth o India o United States o Hong Kong

Rio Tinto ● High health and safety standards ● Commits to develop and strengthen communities surrounding its operations

Industry Overview ● 4 Major Players o ALROSA - most profitable o De Beers - 2nd most profitable o Harry Winston Diamonds o Rio Tinto - 3rd 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 ● Demand Increase o : 2.0% annually o 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 Select Diamantaire o Natural color diamonds o Mine of origin o 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 3rd 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?