Debeers Assignment (qualitative) Questions

...

- Do you expect the upward trend in diamond prices to continue? Explain your reasons.

Depends on market forces…generally economic conditions (consumer spending) and changing demand (e.g., China) and supply (e.g., lower or greater than expected mine output). Also depends on technological innovations in the industry and continued preference for natural vs. other types of diamonds.

- What information could you use in order to begin forecasting the market price of synthetic diamonds? Do you expect them to sell at higher or lower discounts to natural diamonds in the future?

Macroeconomic factors discussed above…if shifting to or in bull market then more demand for natural diamonds and higher discount for synthetic diamonds…if shifting or in a bear market then more demand for synthetic diamonds (lower priced product) and lower discount. Anything reasonable here.

- Do you expect that natural diamonds will continue to dominate synthetic diamonds in the future in terms of market share? Explain your reasons.

Could argue yes - given sustained demand for natural diamonds coupled with release of monopolistic power over natural diamonds. Could discuss economic forces above as well – sustained good economy should lead to consumer preference for natural.

Could argue no – advancing technology makes differentiation between natural and synthetic diamonds indistinguishable and given concerns over conflict diamonds new generation may prefer synthetic. Could also discuss economic forces above – sustained poor economy should lead to preference for synthetic.

Use these articles below to help you respond to the questions. Note that the WSJ article is from this year while the Forbes article is 2013…industry conditions have changed!

WSJ: Diamonds aren’t an investor’s best friend (2016)

http://www.wsj.com/articles/SB10001424052748704337004575059723597630174

Forbes: Diamonds could soon be an investor’s best friend as demand rises and supply falls (2013)

http://www.forbes.com/sites/timtreadgold/2013/10/24/diamonds-could-soon-be-an-investors-best-friend-as-demand-rises-and-supply-falls/#2715e4857a0b6851a835386f