Demonstrated Demand and De Beers Auction Sales
A key objective of De Beers’ rough diamond distribution system is to ensure that the channels through which we distribute are efficient and effective.
In order to achieve this goal, in 2011 we introduced the dynamic distribution system which (for ITO re-planning and ex-plan allocation purposes) took account of the demand demonstrated by customers from both Sightholder Sales and Auction Sales. Within this system, the demand expressed via these two channels was used to assess Sightholders’, Accredited Buyers’ and Auction Sales customers’ relative requirements for particular goods.
We continue to have regular discussions with our rough diamond customers at Sightholder Sales and Auction Sales to hear their views on various aspects of our business, including the effectiveness of the current distribution system.
One of the key issues to emerge, and which has prompted discussion, including at the January GSS Sightholder Advisory Board, was the potential to change how Auction Sales purchases are taken into account for ITO re-planning purposes. We have since been reviewing this possibility and have also opened it up to consultation as part of the annual process ahead of the start of the 2018/2019 GSS Selling Period.
Following this period of consultation, we can now confirm that with effect from the 2018/2019 Selling Period (which commenced on 31 March 2018), purchases of De Beers rough diamonds from Auction Sales will not form part of the Demonstrated Demand calculation for the purpose of GSS annual ITO re-planning (and any mid-term allocations). Purchases of De Beers rough diamonds by Sightholders and Accredited Buyers from Auction Sales, up to and including 30 March 2018, will continue to be taken into account for the purpose of allocating ex-plan availability (as applicable) in accordance with the five Sight reference period. As such, ex-plan allocations in Sight 9 will be the first such allocations in respect of which the 5 Sight reference period will not include DBAS purchases (because such purchases have been made after 30 March 2018). While Auction Sales purchases will no longer be relevant to the Demonstrated Demand calculation, GSS will of course continue to have regard to purchases and bidding behaviour at De Beers auction events to better understand customer demand, and this is likely to be one of several factors relevant to GSS allocation decisions, such as for Strategic Supply and swaps, for the remainder of this Supply Agreement.
We are currently reviewing our approach for the next GSS Supply Agreement period, including how demonstrated demand may be taken into account by GSS in making allocation decisions after the end of the 2018/2019 Selling Period. However, prevailing demand for primary source De Beers rough diamonds is likely to remain an important factor in how GSS allocates goods. We would, as always, encourage all our rough diamond buying customers to focus on purchasing the goods that they require to meet their particular business needs.
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