Market NewsCommentUnder Pricing?

Under Pricing?

By Charles Wyndham.

If I were Transhex, the South African diamond mining company, I would be getting a bit frustrated.

As the seminal debate in Parliament is taking place in Cape Town and we all watch from afar as to what could be one of the most significant defining moments in the structure of the diamond industry, poor old Transhex must feel like they are on the most uphill of tasks.

Transhex clearly have a vested interest in trying to persuade Government that its amendments to the Diamond Amendment Act, designed to force local beneficiation of rough, will be counter productive because the inevitably lower prices for rough will threaten its mining operations.

They certainly have a point and you would have thought that the other company with an even greater vested interest, De Beers with 95% of South African production would also have a point, a 95% greater point.

I have consistently argued that the government approach is flawed however laudable the intention, if you agree that local beneficiation is a must. I am not so sure. I suppose that soon Sweden will demand that all the paper made from its soft wood exports means that all newspapers using it should be written and produced in Sweden?

Anyway, when as a government you feel that you have had the mickey taken from you for a hell of a long time, inevitably the reaction is going to be based more on emotion than reason.

However, the government must get as confused as I do when I read in detail just what De Beers says.

Here I am reading an article in today's Business Day about the concerns about being forced to sell below market price.

Yet, “You know and we know that today we could charge much higher prices than we do, and you know that over the past three or four years we could consistently have charged higher prices than we did. But as a strategic policy we are not doing that.”

This is what Gareth Penny, managing director designate, said this year to the Israeli diamond industry in Tel Aviv on June 22nd .

Transhex sell by tender and I have never heard anyone accuse them of selling below market or forcing bids.

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