RAPAPORT... The Diamond Bourse of Canada, the country’s first diamond exchange, commenced operations in March, naming Bhushan Vora president. Vora, the co-owner of diamond manufacturer and dealer Gem Star Inc., was one of the founding members of the Diamond Manufacturers Association of Canada (DMAC) in 2005 and has served as its president since 2007. In an exclusive interview with RDR, Vora discusses the bourse’s objectives and offers an insider’s take on the Canadian diamond market.
Rapaport Diamond Report: With diamond production declining and the world economy in turmoil, why did you decide to open a new bourse now?
Bhushan Vora: I think that this is the right time, as we need to set ourselves up for the eventual upturn in the economy. But we’ve been working toward setting up a diamond bourse in Canada for the past few years. As the world’s third-largest supplier of diamonds, this industry needs an organization that can represent it to governments and the trade.
RDR: What are the bourse’s goals?
BV: In the short term, we are looking for a location in Toronto to house the bourse and then we will start providing basic services. Our membership drive is in progress now.
We see a very young diamond market in Canada, with a lot of room for growth. In the long term, we are planning to provide services such as banking, shipping, insurance, security, etc., at better rates for our members, under one roof.
We are also considering the installation of equipment to measure, identify and test diamonds. At some point, we would like to have a customs-bonded area at the bourse and maybe the ability to request and receive Kimberley Process (KP) certificates. We are looking into possibly developing an online trade model for our members, as well.
RDR: Does the bourse plan on joining the World Federation of Diamond Bourses (WFDB)?
BV: Yes, provided that the cost is reasonable, a consideration especially in the present economic climate. We have already received an invitation to join.
RDR: What is the biggest cause for concern for Canadian diamantaires today?
BV: I think the biggest fear is lack of disposable income among consumers. Businesses must preserve cash to survive.
RDR: What are the major opportunities for the diamond business in Canada?
BV: The biggest opportunity will be to expand the sales and marketing of Canadian diamonds within Canada, south of its border and overseas. There is also the possibility of a number of new mines opening in Canada: the Renard Project in Quebec, the Gahcho Kué Project in the Northwest Territories, the Fort à la Corne Joint Venture (FALC-JV) project in Saskatchewan and, within FALC-JV, there is the Star-Orion South Diamond Project.
RDR: How is exploration progressing in Canada?
BV: Last year, more than $225 million was spent in diamond exploration in Canada. This year, exploration is expected to slow down, as companies will have some difficulty raising funds.
RDR: Do you anticipate a lasting production slowdown?
BV: No. The production slowdown will correct itself when the forecasted diamond shortage happens, and I hope diamond producers will keep supply-demand ratios in mind.
RDR: How is liquidity in the Canadian market?
BV: The liquidity situation in the Canadian market is not as critical as in the U.S. because the banking regulations in Canada prevented a mortgage crisis. The housing market in Canada is still moving moderately.
RDR: How is retail in Canada?
BV: The average consumer here was not affected by the subprime mortgage crisis. Retail sales in Canada increased by 2 percent in January compared to December 2008.
RDR: So how has the global economy affected Canadian diamantaires?
BV: The market was definitely very soft in the last quarter of 2008 and the first quarter of 2009. I think Canadian consumers were waiting on the sidelines to see what was happening with the economy.
RDR: How large is the Canadian retail diamond market?
BV: It is estimated that Canadians represent approximately 1.8 percent of the world diamond jewelry market, despite the fact that they represent only 0.5 percent of the world’s population.
RDR: Are Canadian diamantaires and retailers sourcing most of their diamonds from Canada?
BV: Yes. They look here first and then go to the overseas markets.
RDR: What type of goods are Canadian diamantaires selling?
BV: They sell everything from VVS to I1 goods in D to J colors. Carat weight varies a lot.
RDR: How is business credit within the industry?
BV: It has been sluggish and maybe a little delinquent, but it has not completely stopped. New credit in our business is hard to obtain, as our banks are very cautious in their lending practices. But the credit that is in place is not being recalled in most cases.
RDR: What about prices?
BV: Diamond prices are starting to firm up for goods that are in demand. I
think a stabilized pricing structure will arise in the next few months.
RDR: What alternate markets are developing to compensate for slowing U.S. demand?
BV: India, China and other Asian countries that are not so used to buying diamonds are starting to warm up to the idea of diamonds.
RDR: How have concerns about conflict diamonds affected demand for Canadian diamonds?
BV: Those concerns have raised the profile of Canadian diamonds. I think that the marketing and branding of Canadian diamonds years ago as conflict-free was a smart move.
RDR: Will the bourse be involved in environmental issues?
BV: Canadian diamonds are mined with the highest environmental standards in the world and they have benefited neighboring Aboriginal communities. We will continue to observe and support this approach.
RDR: What are your thoughts on international generic diamond marketing?
BV: I think it is a very good idea. Jointly — from the miners to the retailers and everybody in between — a funding system should be put in place in which a small percentage from all transactions goes into a pool.
RDR: What advice do you have for diamond dealers?
BV: I would advise all dealers to keep a lean inventory and keep credit and the supply chain tight. If money flows faster, we reduce the risk of price increases.
Also, no dealer should stockpile goods in anticipation of higher prices. We dealers send a signal up the supply chain. If we keep buying, they think business is good.
Article from the Rapaport Magazine - May 2009. To subscribe click here.