OUTLOOK OF THE INDUSTRY | Paul Rowley | Forevermark Forum 2020

Colleagues, friends, let me add my very own warm welcome to this, the ninth annual Forevermark Forum. I'd usually open by saying how great it is to be back in India and to see you all in person, but sadly that's not possible on this occasion. But that doesn't mean I'm not delighted to virtually see so many of you in attendance. I'm sure you will agree that we've kicked off this year's forum with some really exciting contributions from Sachin, Nancy, and Stephen, and I hope you have found them as informative and insightful as I have, and that you've been encouraged and reassured by all the work we have and continue to do across the industry in response to this awful and truly global pandemic. It is, I think, an absolute testament to our industry that in a relatively short space of time, the team have been able to organize such a fantastic virtual forum and that so many of you are participating. These truly are remarkable times, not only full of challenges but also full of opportunities. By participating today, it's clear that you also see the benefits of true collaboration. Stephen has already talked about all the work we've done to support our people, our communities, and the countries in which we operate, and Nancy about how uniquely well placed the diamond industry is to help people adapt to the new normal, to celebrate new and renewed relationships, rewards, and those very special moments. And it's clear that the campaigns and collections that the Forevermark team have presented today are really tailored to meet that desire. With this in mind, I would like to take a little time to step back and reflect on the journey so far and outline why I personally remain incredibly optimistic for our industry's future.

When the magnitude of COVID-19 first became clear several months ago, our immediate priority, quite rightly, was to do everything within our power to ensure that our workforce and host communities were kept safe. And along with everyone at De Beers, I am hugely proud of not only all the work that has already been done but also the efforts that continue today. Our colleagues across the business and industry have adapted quickly and effectively, and I have no doubt our collective efforts have helped reduce the level of potential disruption. Beyond this, and in response to the restrictions that were placed on movements both in countries and across borders, we have been focusing on adapting our approach to how we engage with our customers. One of our early interventions was the launch of the Stronger Together series, which I believe provided much needed reassurance and stability right from the onset. It is my sincere view that the ten Stronger Together sessions have helped build confidence not only in our business but also in our brands, our customers, and the broader industry. But it was important not only to engage but to ensure we followed through on our leadership commitments. Arguably the most important of which, the one we made some five months ago now, was to provide our customers with unprecedented flexibility that would not only support them but also build confidence in the broader market by only selling into true manufacturing demand. The impact of this has been clearly demonstrated initially through the stabilizing of polished prices. It's important there was no crash, no panic selling, and consequently more recently we started to see some early signs of recovery in certain areas. But equally important was creating sufficient time and flexibility for the manufacturing centers themselves to organize themselves to be able to operate in the COVID world in a safe and responsible manner.

I want to reassure you today that we are fully committed to maintaining that support and ensuring a diamond world today and tomorrow. And we are confident in that commitment because we are also of the view that our industry will not only bounce back but bounce back even stronger than before. Firstly, as consumer markets have reopened, we've already seen several encouraging reports about better than expected sales figures from retail across both the US and China. A clear affirmation that the desire for our product remains as robust as ever. And with the corresponding reductions in downstream and subsequent midstream stocks, we are now seeing the first real signs of tangible pull for rough. As I mentioned at the recent Stronger Together series, the recovery train is in the station, and it's important that we are all aboard if we are to arrive at our chosen destination. However, let's be careful not to get ahead of ourselves. There are also continuing challenges. With events in India continuing to evolve, manufacturing activity remains stop-start, and we will have to adapt to this new normal. All this will take patience and resilience. And along with many of the world's commentators, we are not expecting this recovery to be a V-shaped recovery. There'll be no massive, immediate bounce back, but we do expect it to be sustained and sustainable, but only if we remain focused. This is no time for complacency. We will need to continue to innovate and explore technological responses to these challenges, very much like we are here today in this virtual Forevermark Forum. So colleagues, I would like to conclude by again remarking on how far as an industry we have come over the last few months.

I don't think the way we have stood together during this time should be taken for granted or underestimated. It has been not only unusually impressive but it has saved us from facing a potentially existential crisis. As I mentioned a moment ago, the train of recovery is very much now fueled and preparing for departure, and for the journey ahead will undoubtedly be hard. Together we will achieve a sustainable recovery. The future shines bright, just like every Forevermark diamond. Once again, thank you for your time. Please enjoy the next two days and the best of luck to everyone. Thank you.

Well, first of all, Sachin, let me again congratulate you. It's been a fabulous forum from the start, truly a virtual experience. I was watching that clip there, and I think we'd even managed to virtually create the humidity of India in the monsoon season to make it a little bit more realistic. But certainly, when we talk about economies, the question at the time I posed was which is the most growing economy, and people tend to think it's China, India, the US, but as I said, it's all about women. That's a real dynamic for the future. What's so encouraging for us is that 98 percent of our products are purchased by women. It's a great opportunity, and not just buying but self-purchase, that ability in that growing economy. Ultimately, there is more disposable income, the desire remains, and we've got to make sure we tap into that. My comment at the time, and you've just reminded me, was really around driving that. You've seen our real commitment to HeForShe, we believe tremendously in gender diversity. We're seeing the benefits of that not just in the way we operate but also in the fact that we get such better decisions, such richer outputs coming out of that real inclusion and diversity within our business.

Thanks, Sachin. You've got a good memory, and you're picking up on things that are quite passionate to me personally. When we look at that picture, it's an important question because there are many different answers. At the time, we had our chairman of De Beers and CEO of Anglo American, Mark Cutifani, in the room. When Mark looks at this, he doesn't just see a big hole; he sees a feat of fabulous engineering, an incredibly safe and well-structured pit that has taken tremendous skill to extract. To others, it's a hole in the ground. Some may say, what about the impact on the environment? But the impact on the environment has been tremendous in creating sustainability. For Botswana, a truly different life. At the start of independence in the mid-60s, the economy was one of the poorest in the world. Through diamonds, through that hole, along with Jwaneng and Orapa, it has been able to build its entire economy. It went from no tarmac roads to over 4,000 kilometers, from one or two small schools to free education with 70% literacy. It's an incredible achievement. When they look back at that hole, they see a new life, a difference made to them, their economy, and their future. That's what we have to understand. As each diamond moves along the supply chain, it touches someone in a different way, whether it's finding the diamond, going through the sorting houses, or unlocking value. It releases incredible brilliance and value, and changes people's lives. That value is reinvested in countries like Botswana, where we see tremendous benefits for an entire nation. So it's a great story. Every diamond is unique, a great story.

Can I interrupt? I think I've told that story about where diamonds are found and formed, and those stories are so important. When I'm in India, I often say we don't tell the stories enough. There are fabulous stories within India, within manufacturing communities that have really grown and prospered. If I look at Surat as a city and how it has developed over my visits, those are the things we need to celebrate. We don't always tell that story in the right way. It goes beyond that. I look at the CSR projects, what's happened during COVID, how the industry has stepped up and lived up to diamonds, providing meals and safety for staff. We have a great example of how this industry pulls together and can stand to the mark and make a difference. Let's tell the story as well.

Well, unfortunately I don't have a crystal ball. It'd be great if I did and could benefit from that foresight. But we talk about unprecedented times, and we often use that far too easily. When I think of COVID, we truly are facing an unprecedented period in our lifetimes. It truly is a world pandemic that has impacted everyone across the entire diamond value chain, from mines through to consumers. What I would say is that if we look at consumer markets, I look at China first. We saw China close down very quickly in late January, early February, and we've seen the recovery coming out of China. It's bounced back strongly, probably better than our expectations. That shows the enduring demand for our product. The desire remains so relevant, particularly in these times of relationships, when we're trying to reconnect and establish new relationships. There's no better symbol. Likewise, what we're seeing in the US in these early days, the US closed down, an important market, and it has also started to bounce back with better than expected sales. More recently, data from the last poll in July showed another positive year-on-year comparison in sales generally and within our industry. So I think encouraging times.

Now, as I said at the end of that speech, that's not to say that there aren't times of uncertainty. We shouldn't get ahead of ourselves. We have to be adaptable, agile, and respond to change in demands. I don't think COVID is going away quickly, so the more we can react across the pipeline, and I think you mentioned kindly in your opening remarks, a strong part of what I really feel for this business is that we are stronger together. There's a reason we called our series Stronger Together. We firmly believe that the whole is greater than the sum of the parts. No single part of that pipeline will have the final answer, but if we pull together and work together as we have done, then we can come out of this in a stronger position with much better foundations to build into the future. That future is starting to look a bit better. We are seeing true demand pulling through and some improvement in rough sales. It's still very early days, but we've committed to only selling to true demand, and we're just starting to see that as this pipeline reopens. I think we should remain cautiously positive, but at the same time remain agile, flexible, keeping our eyes open to change and being able to stop-start because it's not going to go away.

Look, I think I should say from the onset that we're totally committed to the sightholder system. Our business is about long-term investment, long-term relationships, and continuity of supply. There's no doubt we should rest assured that our contracts and our operations selling out of Botswana are our long-term ambition. However, we shouldn't underestimate that there are tremendous learnings available. We've had to be agile and create tremendous flexibility to ensure we gave our clients the ability to defer products, to look at products in different locations. We worked closely with our partners in Botswana to show diamonds in other centers, specifically Antwerp, Dubai, Hong Kong, Singapore. But still, we are selling out of Botswana, our home as a diamond trading center and our mining focus in Southern Africa. But we are not losing the opportunity to learn from the ability to interact so easily with technology. I will personally be constantly traveling, but I suspect I will reduce that. I'll certainly feel that I've got more time for other things, but it doesn't replace the fact that we need to engage physically. The innovation side is fabulous, but on the other part, we spark innovation in those spontaneous conversations. So it's about the beauty of the blend. How do we get the best of both worlds? How do we not lose those great opportunities of technology?

So it's about the beauty of the blend in my perspective. How do we get the best of both worlds? How do we not lose those great opportunities of technology? I think certainly selling to consumers, millennials, we know at a consumer level we'll see much greater online selling and participation. I'm doing it myself - I spend a lot more time buying things online, but that doesn't mean I'm not going to stores. I'm doing that and seeing things differently. Omni channels will become very important. When we look at selling rough, we'll look at the same opportunities. Different products move at different times. We paused our contract applications for a period to give people space to concentrate on their businesses, then reignited that process. That process will see different contracts starting in the new year. Those contracts will be variations - it won't be one contract for all. We will look at manufacturing, dealing, product segmentation, and how we can enhance and streamline the pipeline to put everyone in a stronger, better place. That's an exciting place. We want to put the right diamonds in the right hands to drive long-term sustainable value. That's not changing; we're just enhancing the ability to do it by integrating our relationships and account plans. We collectively will succeed together. It'll be a mixture.

We will still be selling our sight goods out of Botswana. We've also looked at auction platforms and online buying platforms that give people different opportunities with technology. Imaging technology has allowed us to do what we call remote buy backs, remote viewing of products. All of these things will continue to evolve, but at the same time we must remember that we're a relationship business. We want to touch, just like we want to touch the product, we want to touch each other in a memorable way that symbolizes the passion and love that we have for our product and our industry. So, changing yes, but in a measured way that adds sustainable value into the future. That's what I'm sure we'll see more of as we establish those new contracts with our sightholders.

Look, it's been bizarre, to be quite honest. You're right. I was talking to a colleague early on, sharing communications, and someone said they spent seven weeks working from home. I said I rarely spent seven days in the same country, let alone seven weeks in one place. So fully agreed. I've been back here in the UK for the last five months, very much looking forward to getting home to Botswana. I'm starting to see the first flights reopening, and I'm looking forward to getting on that plane. I opened my talk by saying normally I'd be saying how great it is to be back in India. I normally visit five or six times a year, in a bad market maybe ten or eleven times in the past. To understand the market dynamics, because India is such an important part of our industry, particularly from a rough manufacturing perspective. I miss that ability to connect. However, I've been on Teams calls, Zoom calls, talking to clients in Surat, Mumbai, Antwerp. It shows what a global business we are. It's worked, but it doesn't replace that ability to see each other, to talk offline, to share a meal. Those are things that are in the moment and can't be replaced perfectly with technology. You're doing a fabulous effort here today, but I would still like to be there in person. The beauty of the and the flying, yes, but will I fly as much in the future? I suspect not, because we can maximize our time and do things differently. That's a world over. We have to be innovative, looking to the future. COVID has probably accelerated some thought processes. The world is on a change platform, and it's given us the opportunity to reflect. Some things we thought we couldn't do, we can, and we'll push ahead. Others, we recognize the value of them. I come back to relationships - they are very important to us.

Look, I think I concluded at the end of my talk. It can be difficult when we've gone through such a tough period, but I'd encourage everyone to believe in our product. I mentioned the foundations. I actually think what has happened and the actions we've taken collectively have really allowed the industry to see a good polished pull through. It's enabled stocks to come down downstream and midstream, and at retail, finances have improved as people have been able to pay down debt. Those foundations of the industry are actually a lot firmer coming out of COVID. We should maximize, be ready for it, be prepared. As I said, the train is in the station, fueled and ready to go for recovery. We know that journey is not going to be easy, I'll reiterate that again. But be sure to be on the train because now is the time not to miss those opportunities. So I think measured, controlled, sensible, but that train is leaving. Let's make sure we're on it and be positive about what our product can do for the future. I certainly am very optimistic for the medium to long term, and the short term maybe a little better than we anticipated after this difficult time. So for myself, thank you very much.