The millennial mindset and diamonds: Editorial

Born between 1981 and 2000, the millennial generation will reach their highest earning potential in another 10 years.

That makes them an important age group in terms of current and future diamond demand, and one that the diamond sector is actively courting.

De Beers’ 2016 Insight Report includes detailed research on millennials in the world’s largest diamond markets. Conducted over three years, the research includes insights generated from interviews with more than 75,000 women in the United States, China, India and Japan about their attitudes towards diamonds.

De Beers’ research indicates that contrary to popular perceptions, millennials are just as interested in diamonds as previous generations. In fact, the market share among 18-34 year olds in terms of diamond purchases has remained relatively stable since the late 1990s.

But it also acknowledges that millennials don’t consume luxury products the same way as previous generations and that they struggle with more financial challenges than previous generations did at the same age.

And while millennials place diamonds high on their gift wish lists, overseas holidays, weekend getaways and personal electronics are all more coveted than diamond jewelry.

To get diamonds higher up on the millennial wish list, the Diamond Producers’ Association (DPA) has launched a new marketing campaign. The “Real is Rare” campaign, seeks to associate diamonds in the minds of millennials with the cohort’s desire for authenticity in relationships and the value they place on individuality (See “Diamond Association targets millennials“).

If it can speak to and connect with millennials, maybe one day the campaign will have the same ring as De Beers’ famous line: “A diamond is forever.”

Canada’s newest diamond producers, the Gahcho Kué and Renard mines, in the Northwest Territories and Quebec, respectively, are coming online at a time when analysts see rough diamond prices likely to remain stagnant for several years (see “Q&A: Decoding the diamond market“).

But thanks to the high-margin nature of most diamond mines, the conservative assumptions used in the feasibility studies of both Gahcho Kué (owned by De Beers and Mountain Province Diamonds) and Renard (owned by Stornoway Diamond), and the quality of stones they are expected to produce, both mines are resilient to any weakening of rough prices.

Stornoway president and CEO Matt Manson explains that in its updated mine plan in March 2016, the company dropped modelled diamond prices by 19% from its last valuation in March 2014.

“We still had a 58% operating margin after tax, after stream, based upon those reduced prices,” Manson says. “If you look at the cost curve for the diamond mining business, it’s a higher margin business than most metals sectors — there are very few truly marginal diamond mines.”

Read more about Canada’s two newest diamond mines in “Renard & Gahcho Kué: Two new reasons to celebrate Canadian diamonds.”

— This editorial originally appeared in the November 2016 issue of Diamonds in Canada.