Diamond Story IV: War Years and After Page 406



	THE WAR YEARS AND AFTER 369 Throughout these years, in fact, Ernest Oppenheimer was at pains to let his shareholders realize the difficulties which might arise—not only from such relatively normal risks as a Stock Exchange recession in the United States, which had indeed affected the market for gem stones in 1946⁴⁰—but from the constant increase in the production of industrials and the hazards of the market.⁴¹

	♦ XXIII ♦ Experience had reinforced the lesson that there were three methods of dealing with the threat of increased outside production, actual or potential. So far as British territory was concerned—it was a policy which goes back to the days of C. J. Rhodes—there was the possibility of acquiring from the local government exclusive or preferent prospecting and mining rights, so far as diamonds were concerned. Otherwise it was possible, as in the case of outside producers in non-British ⁴⁰ At the eleventh annual meeting of the Anglo American Investment Trust, he said: 'Last year record sales of diamonds of nearly .£30,000,000 were effected, and all the companies in which we are interested had a very good year. These large sales were, however, almost all made in the first three-quarters of the year. . . . This falling off followed on the severe fall of prices on the New York Stock Exchange and undoubtedly found many diamond merchants with unduly high stocks. The diamond producers and the central selling organization had, however, foreseen the possibility of such a set-back and had prepared for it by following a conservative dividend policy and husbanding their cash resources. As a result the market remains fundamentally sound and the Diamond Trading Company is able to maintain its fixed prices and assortment.' ⁴¹ Thus in 1953, to the shareholders of De Beers: 'The industrial sales for 1951 and 1952 included very considerable quantities of diamonds which were purchased by the United States and other governments for stockpiling either from the industrial company direct, or second-hand from our customers. Purchases for stock-piling (with the exception of fragmented bort) practically ceased at the end of last year and this accounts to a considerable extent for the falling off in our sales. Our sales of one class of industrial diamonds, namely "diamonds suitable for drilling purposes", were adversely affected by the increase of the Gold Coast African chiefs' production. This output consists of small diamonds, and approximately 75 per cent of these are suitable only for drilling purposes. There is, for the time being, an over-supply of this material and the system of disposal by tender without regard to market needs has led perforce to even lower and now uneconomic prices for the West African output. As we have, up to now, abstained from following this downward spiral of prices, our sales have naturally suffered'. Again, reporting in the year 1955 : 'The long-term forecast of industrial diamond sales is, to a great extent, influenced by the stock-piling purchases by the United States authorities, and as these will continue anyhow during 1956, I therefore foresee satisfactory sales. But I must repeat once again that when stock-piling purchases cease we will be faced with over-production and additional outlets must be found. It is with this in view that your company continues to take the lead in the research field in its efforts to find additional outlets for industrial diamonds.'