Mining, ethical issues and UK demand for Canadian diamond jewellery.
Canada has become the third-largest diamond mining nation, producing about 15% of the world’s diamonds by value. Kathryn Bishop discusses mining, ethical issues and product demand with Canadian diamond brands, mining operators and retailers positioning the stones to a UK audience.
Looking back to 1998 what do you think of? The early days of the New Labour government, the introduction of the £2 coin, or maybe the demise of the Spice Girls?
That year, on the other side of the world, an event was taking place that 15 years later is transforming diamond production, branding and retail: the first diamonds were mined at Ekati, a site in the North Western territories of Canada.
While production of Canadian diamonds is still very young, its product is billions of years old and touches the lives of countless people across the world, a number that is only set to increase as the popularity of Canadian diamonds mushrooms in the UK market.
ORIGINS OF CANADIAN DIAMOND MINING
Initial Canadian diamond exploration in the North Western territories dates back to the early 1980s when exploration and development began at the Ekati mine.
The Ekati source is known for its high-quality stones used for jewellery and has produced some large examples of premium diamonds, including the Ekati Spirit, a 78ct stone discovered in 2010. In 2011 Ekati’s production hit 50 million carats.
Ekati was formerly owned by mining giant BHP Billiton but was sold to Harry Winston’s mining arm in late 2012 for £314 million. Harry Winston and its mining operations then separated when its jewellery and timepiece division was sold to Swatch Group in early 2013 and today the mining business operates under the name Dominion Diamond Corporation (DDC), which owns an 80% controlling interest in Ekati.
Alongside Ekati, DDC also own a 40% interest in Diavik, the largest diamond mine in Canada. The other 60% of the mine is owned by Diavik Diamonds Inc, a subsidiary of London-based mining business Rio Tinto, which also operates the mine. Diavik is similarly located in the northwest territory of the country and operates from a 20km² island among an archipelago of remote lakes and land.
Diavik began producing diamonds commercially in January 2003 after the discovery of diamond bearing kimberlite pipes – extinct volcanoes that brought the diamonds to surface – in the mid 1990s. It moved all operations from open pit mines to underground mines in 2012.
Both mines are expected to produce diamonds until at least 2019, with ongoing research and development in the northwestern territories to locate further diamond reserves.
FROM MINE TO MARKET
Canadian diamond production is largely focused on gem quality product used for jewellery. As more stones have come to market, either as rough or polished, there has been resulting growth in the outreach of Canadian diamonds at a commercial level.
Rio Tinto’s general manager for marketing Bruno Sane explains: "The Canadian diamond market continues to be dominated by high-end gem quality diamonds, suitable for the bridal markets of the world and Rio Tinto’s Diavik Diamond Mine in Canada is a significant supplier in this regard."
Sane notes that Canadian diamonds are in demand in established markets such as the US and Japan but also emerging markets for contemporary bridal jewellery such as India and China, where white metals and the sense of purity in a piece of jewellery are becoming ever-more important for consumers.
The global reach of Canadian diamonds has been built largely through branded diamond jewellery collections such as JSN’s Canadian Ice and Martin Ross Group’s Canadian Rocks.
In the UK, jewellery group Alfred Terry launched its Canadia range of diamond and bridal jewellery earlier this summer, showcasing the collection for the first time at the Jewellery Show London, positioning it at independent retailers. Alfred Terry chief executive Steve Wright explains the appeal of Canadian diamonds within the European market and why the UK has become ripe for the picking. "We are finding that the demand for Canadian diamond jewellery is strongest in the UK in comparison to Spain, Italy, France, Switzerland and Germany, where price and design criteria are paramount," he says. "When you consider that Canada only started to produce diamonds in 1998, it is astonishing that it is now one of the world’s top diamond producers. Consumers like to know exactly where their diamond has come from, and any history you can shed on the stone not only adds to the romance of the product but also gives the retailer a straightforward story to help them to differentiate the piece."
Arguably it is the USPs of Canadian diamonds that give the stones an instant narrative, whether being sold at a multiple retailer in a shopping mall or being presented as a loose stone to a client seeking a bespoke design.
Stuart Laing, chief executive of the Houlden buying group and owner of retail store Laings of Glasgow, believes Canadian diamonds offer retailers a unique sales proposition because the diamonds can be traced to their very source, something rarely – if ever – possible for African- or Russian-mined diamonds. "We have found that on occasions our Scottish customers have a great affinity with Canada through family connections which adds something special to have a Canadian diamond," Laing explains. He first recognised that Canadian diamonds were a growing area of the bridal market some years ago and so, as part of the Houlden Group’s efforts to drive its members’ businesses forward, the group teamed with Toronto-based jewellery firm JSN to create a Canadian diamond brand exclusively for the Houlden Group called Canada Star.
"This is a brand with its own story and strap line – Diamonds of Excellence," Laing explains. "We wanted to give our members an edge in this growing area [of the bridal market] to try and head them keep ahead of the game."
Retail chain F. Hinds operates more than 100 jewellery shops in the UK and sells Martin Ross Group’s Canadian Rocks as part of its bridal jewellery offer. It has been stocking Canadian Rocks for a year, offering the product exclusively online and in larger F. Hinds stores. The retail chain’s director Andrew Hinds recognises that branding is an important part of what has driven Canadian diamonds in the UK. "The Canadian diamond market has expanded significantly and several suppliers have produced strong brands," he states.
Beyond the novelty of a diamond being mined in Canada, further selling points for Canadian diamonds include laser marking of the stones with identification codes that allow them to be traced back to either Ekati, Diavik or other smaller mines. At Canadian Rocks the diamonds are laser etched with an identification number on the girdle along with the iconic maple leaf shape representative of Canada. Both Canadian Ice and Canadia diamonds are sold with independent diamond reports and authenticity Birth Certificates that outline the background of each stone.
"Being able to prove a product’s origin increases its value and it makes the purchasing decision easier," states Wright. "We see examples of this in the UK every day, for example in the case of Swiss watches or German engineering. Every one of our Canadia diamonds is laser inscribed with a Diamond Identification Number and comes with a Canadia certificate of origin. The unique number provides a mine-to-consumer tracking history as well as being helpful to the buyer for insurance purposes."
Aurum Group multiple retailer Goldsmiths has exclusivity of JSN’s Canadian Ice brand in the UK and the collection of bridal rings, diamond earrings and pendants proved a hit during Christmas 2012 following the launch of a large Canadian Ice shop-in-shop in Goldsmiths’ Westfield White City location. Aurum’s festive results were up 9% in 2012 and Canadian Ice was name checked as an influential factor with Aurum describing the brand’s “outstanding performance” in its results review.
As an extension of the main line, Canadian Ice Silver has also launched at Goldsmiths offering the diamonds set into fashion-led silver designs such as chunky charm bracelets and heart-shaped studs but with accessible price points. This move also aligns Canadian stones with a whole new audience of shopper who might, as a result, be more likely to seek Canadian diamonds for their future wedding or fine jewellery.
AN ETHICAL EDGE?
Behind the romance and USPs bestowed upon Canadian stones at a retail level there are of course the real stories of the local communities and miners based in the northwestern territories. The stones are often described as ethical because of their traceability and the safe, Westernised way in which they are mined. But how far does this notion of ethics go?
Firstly, Canada subscribes to the Kimberley Process and DDC is also a certified member of the Responsible Jewellery Council.
At the Diavik mine, Diavik Diamonds Inc says that its operations are "a guest in a land where Aboriginal people assert a centuries-old presence". Indeed the impact of the mines on local communities in undeniable and so, as far back as the 1990s when the research and development at the mines was in its infancy, agreements were signed with local Aboriginal groups to protect and support the area and its people.
The Diavik Socio-Economic Monitoring Agreement was formed in 1999 between Diavik Diamond Mines Inc and the Government of Northwest Territories. The agreement was also ratified by local Aboriginal communities with the promise that Diavik would provide training, employment and business opportunities to northerners and, more specifically, indigenous northerners.
Stats show that some 44% of Diavik’s mine construction workforce was from the local region, while local purchasing during construction totalled CAD$900 million (£570m), of which approximately CAD$600 million (£380m) was from Aboriginal companies.
The Diavik mine’s work within the local communities also helps young people to find work within the diamond mining industry, provides scholarships, living allowances and transportation services.
At Ekati, DDC says that following its acquisition of an 80% controlling interest, it intends to maintain "high standards in health and safety and responsible mineral resource development, minimising environmental impacts, participating in the local communities and sharing the benefits of mineral production with our business partners, local communities and the people of the North".
The support of the local communities is obviously a front-of-mind issue for the mine operators, but what happens to the rough diamonds once they have been mined is also important. After Canadian diamonds have been sorted and valued on site they can either be cut at the mine – thereby fitting with the Government of the Northwest Territories of Canada program to certify selected diamonds as mined, cut and polished in the Northwest Territories – or they are sold as rough directly to manufacturers for cutting and polishing in locations such as Antwerp, Belgium and Mumbai.
At Rio Tinto’s Diavik Diamond Inc a great deal of importance is placed on each stone’s traceability. "From mining to sales, Diavik’s production is kept separate to maintain its national identity of each mine," explains Sane. "This allows us to specify the country and mine of origin when selling to our customers."
Brands and independent jewellery designers working with Canadian stones also recognise the ethical edge that Canadian stones offer. London-based ethical jeweller Ingle & Rhode uses Canadian diamonds throughout its bridal and fine jewellery collections. The company’s co-director David Rhode says that Canadian stones have become a hit among customers. "We’re very happy to do anything we can to raise awareness of the ethical issues in the diamond business, but increasingly clients are already very well informed when they come to us," he says. "We’ve seen year-on-year growth in demand, with no signs of any slowdown. It seems that consumers are increasingly aware of the ethical problems within the diamond business, and are concerned to know where their diamond is from."
Rhode adds that the standards of care and health and safety associated with the mining of Canadian stones, plus their traceability, enables Ingle & Rhode to describe the stones as ethical "with confidence".
Rio Tinto’s Sane states that the ethical aspect of Canadian diamonds is increasingly important, especially for Rio Tinto which strives to be at the vanguard of sustainable business practices in the jewellery industry. "Our market research has revealed just how important the issue of sustainability is in the eyes of jewellery consumers," he explains. "Today’s consumer is looking for assurance that the jewellery they buy has been produced to the highest ethical, social and environmental standards."
With consumers ever-more interested in the provenance of diamonds, precious metals and, more so today, gemstones, Laing believes that Canadian diamonds are an important if not essential product for today’s jewellery retailers. "The Canadian diamond market has come from general obscurity to being a must-have for any top-end jeweller," he states. "With customers becoming more concerned with human rights and environmental impact of diamond production, having a first world country producing top-quality diamonds is a really important development. While Canadian diamonds don’t represent the majority of diamond sales, it is an area which is continuing to grow."
For Hinds, the ethical aspect of Canadian stones is alluring but not always the most important aspect when buying a diamond. "Some customers such as those buying engagement rings like to know exactly where their stone came from," he says. "Some of them may be doing this for ethical reasons but, in our experience, for many it is just a nice thing to know."
But, Hinds warns, the emphasis placed on Canadian diamonds’ ethical offer should not detract from the continuous and inescapable issues of diamond mining in Africa. "I believe Canadian diamonds have an ethical edge but only up to a point," he states. "Most of the trade is working very hard to ensure that we have high ethical standards across all [jewellery]. I wouldn’t want to stock only diamonds from a developed country and exclude the developing world just because there were more sophisticated chain-of-custody systems in place. The developing world desperately needs the income from responsibly-produced diamonds, gemstones and metals and I believe it’s actually unethical to be protectionist."
GETTING THE RIGHT RETAIL MESSAGE
Bridal jewellery marketing is all about targeting a brand’s preferred customer with a fitting message; the story, imagery and product should be something consumers can identify with. When it comes to Canadian diamonds, as mentioned there is a ready-made marketing story to hand, playing on the origins of the stone, the icy Canadian location, the intrigue of the stones being mined outside of Africa and Russia and of course the ethical message.
While Diavik Diamonds Inc does not operate at the retail level it still endeavours to provide its rough diamond customers with downstream marketing support. "Our Diamonds with a Story platform has been very successful in adding meaning and significance to the end consumer’s purchase, providing a point of differentiation," says Sane. "It recognises the uniqueness of the Canadian diamonds and the human, geological and cultural stories that are intrinsic to them."
Retailers such as Laings of Glasgow ensure that Canadian diamonds are prominently positioned in store to catch consumers’ attention. "As well as increasing their prominence in our windows, we have trained the staff to introduce Canadian diamonds into every diamond sale," explains Laing. "[By] focusing on the unique selling points we can add even more romance into the sale. We also try and pick designs which stand out in their own right in the window, which when backed up with the Canadian diamonds story makes it easier for customers to differentiate it from what they get elsewhere."
For brands such as Alfred Terry’s Canadia it is the storytelling that makes the diamonds memorable. Two campaigns have been launched by Canadia to raise the brand’s profile in what Wright describes as an already competitive market. "We have to offer the consumer a clear reason to buy our diamonds [so] our campaigns are built around two distinct messages: It waited three billion years for the right girl and Love is one of life’s great mysteries – Buying a diamond should not be."
Alfred Terry is positioning Canadia exclusively at independent retailers in the UK, working on focused marketing campaigns with Canadia stockists. "Whether that’s through an online presence, co-op advertising, in-store events or social media," says Wright. "We have also developed some striking point-of-sale display and publicity material which really enhances the brand in store."
Diavik Diamonds Inc also works closely with the trade to boost awareness of Canadian stones through projects such as design competitions, created to raise awareness of Canadian diamonds. "We are working with jewellery designers to build awareness for Canadian diamonds and indeed in our most recent global design competition there was a lot of excitement amongst designers for the beautiful aesthetic that our Canadian diamonds offer," Sane states. "For example the winner of the Canadian Master Craftsman category designed canoe necklace inspired by the image of a Canadian landscape. The canoe is known as a carrier of Canadian myths, a symbol that represents voyage, discovery, harmony with nature and courage."
At a time when jewellers are seeking to add a point of difference to their product offer, Canadian diamonds certainly emulate this sense of courage and discovery. They are exciting and exotic, at least for retailers themselves, and for the time being the stones are still a niche enough concept in the UK to catch consumer attention.
Beyond the ethical characteristics of Canadian stones, being able to trace the diamonds’ origins right back to the mine while providing a Birth Certificate is a slick, modern USP suited to both brands and bespoke jewellers.
The solid set of market-ready Canadian diamond brands allows retailers to cherry pick which will best suit their business. As many of today’s multiple and independent retailers understand, brand is still king for many consumers and while bridal jewellery will never go out of fashion, as Canadian Ice has proved with the introduction of a silver collection, these stones offer a lifetime of purchasing potential.
This feature was taken from the August issue of Professional Jeweller. To read the issue in full online, click here.