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Gold/Mining/Energy : MPVIF Mountain Province Mining -- Ignore unavailable to you. Want to Upgrade?

To: Chas. who wrote (776)	4/17/1998 9:06:00 PM
From: Gabriela Neri	Read Replies (2) \| Respond to of 2577

Chuck, I read the post on the SUF thread to which you referred. Now, there is a certain ring to your logic such that you cant dismiss it as out of hand right off the bat. But, if you think it through a full five seconds more, then you may come to a different conclusion. DeBeers objective, as a cartel, is not so much to restrict the exploration of diamonds as it is to control the marketing of diamonds through the CSO. These are different objectives, even if you may not think so at first blush. Dont forget that we and Debeers live in a competitive world, and if Aber and Diamet dont bear that out to DeBeers, nothing will(at least as far as the North West Territories). Today, there are many juniors looking for diamonds, and they will continue to explore regardless of DeBeers. Diamond exploration is a cash intensive business when it comes to exploration and particularly, production. But, if DeBeers chooses not to seek new supplies, others will fill the void. As the political barriers to entry to most countries around the world are removed, as globalization runs its course, as free trade and open markets continue to dominate, then exploration of natural resources and diamonds will increase whether DeBeers likes it or not. They realize this. And if I were in their shoes, I would work towards controlling the diamond sources which are out there, because they will not be able to prevent others from searching for them and finding them. For any cartel, the important thing is to control price through the manipulation of supply to the market. The easiest method to do this is to control the source of diamonds. That does not mean that they will discontinue to explore for new sources of diamonds. Do you see the oil companies discontinuing exploration efforts in the midst of a surplus of oil. Quite the contrary. In fact, Venezuela, a founding member of OPEC, is looking to double their production capacity from 3.2 million barrels of oil daily to over 6 million barrels per day. Why? Because they have the goods, need the money, and realize that if they dont sell the stuff someone else will. They also realize that what may be a glut today will turn into a deficit tomorrow, due to their economic projections of global energy growth over the next ten years. All large world class companies look beyond the end of their phallice in order toplan for the long term and todays economic circumstances do not provide 100% guidance for their actions. They look forward and assess the long term. Control of production is more important to a cartel than anything else because through the control of production it is easy to control supply. Control of production does not equate to cessation of exploration efforts. It equates to being able to control as much of the sources of diamonds as possible. DeBeers knows that to be a successful company going forward, it must continue to explore for new economic deposits, expand existing markets for diamonds and create new markets in new places. This is what the idea is behind the concept of branding its own diamonds. It is attempting to differentiate themselves from other diamond sellers who sell outside the cartel. Economic deposits are hard to find and if they exist they will be developed. What Debeers wants to do is control the marketing of diamonds through the cartel. I dont think that they would ever load the market with anything unless they wanted to load the market. Finding and mining diamond depositsdoes not mean that they will load the market. It means that they have a source of potentially valuable diamonds which they control and not their competition. As such, they can control the rate at which they elect to distribute the diamonds to the markets. In fact, I would make the opposite arguement which you are making. That is, I suggest that DeBeers wants to control all economic diamond production such that they can then control all marketing of diamonds to customers around the world. As far as your comments regarding gem quality, it is amusing. If it were as obvious to DeBeers as it is to you that the diamonds are of industrial or poor quality, then why bother spending their own money to go through pulling out 200 tons of ore in order to conduct a mini bulk sample. The fact is that their exists a healthy percentage of gem quality diamonds in the initial samples they studied which intrigued them to go to the logical next step. And it is the gem quality diamonds which they are after. So, I disagree with the entire premise of your statement or treatise or whatever you want to call it. The smaller samples taken from Tuzo, Hearn and Tesla were quite impressive .