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  • Gstempler Gstempler Jan 4, 2003 10:35 PM Flag

    AU finances the diamond monopoly

    During Sir Ernest's lifetime, De Beers never discovered a diamond mine itself. Oppenheimer saw little point to investing profits in exploring for diamonds, since De Beers made its profits from a scarcity, not an abundance, of diamonds. As he established it, one of the cardinal principles behind the diamond invention was that demand for diamonds was fixed each year and varied only with the number of engagements.

    Any sudden increases in the production of diamonds would therefore have to be added to De Beers' stockpile rather than its profit, and it made little sense for Oppenheimer to create new mines until the old ones were depleted. Instead, Oppenheimer reinvested the stream of profits into gold mines in the Orange Free State province of South Africa. The gold production would provide a reserve of capital for De Beers that would allow it to buy back diamonds if the retail market ever slackened.

    By the time Sir Ernest died in 1957, he had turned the diamond invention into a powerful instrument for preserving the price of diamonds. By merging the mines in South Africa with the syndicate in London, he created a double-edged sword, production and distribution, for maintaining his control over the diamond industry. Through secret arrangements that he patiently and meticulously made with independent mine owners, he managed to channel almost all of the world's uncut diamonds through this system.

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    • During Sir Ernest's lifetime, De Beers never discovered a diamond mine itself. Oppenheimer saw little point to investing profits in exploring for diamonds, since De Beers made its profits from a scarcity, not an abundance, of diamonds. As he established it, one of the cardinal principles behind the diamond invention was that demand for diamonds was fixed each year and varied only with the number of engagements.

      Any sudden increases in the production of diamonds would therefore have to be added to De Beers' stockpile rather than its profit, and it made little sense for Oppenheimer to create new mines until the old ones were depleted. Instead, Oppenheimer reinvested the stream of profits into gold mines in the Orange Free State province of South Africa. The gold production would provide a reserve of capital for De Beers that would allow it to buy back diamonds if the retail market ever slackened.

      By the time Sir Ernest died in 1957, he had turned the diamond invention into a powerful instrument for preserving the price of diamonds. By merging the mines in South Africa with the syndicate in London, he created a double-edged sword, production and distribution, for maintaining his control over the diamond industry. Through secret arrangements that he patiently and meticulously made with independent mine owners, he managed to channel almost all of the world's uncut diamonds through this system.

 
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