The joint venture partners in the Argyle diamond mine have endorsed an Argyle Diamonds management decision to quit the producer cartel established by De Beers through its Central Selling Organisation in favour of independently selling Argyle's production directly on the world market. As a result, all of Argyle's output - approximately 39.9 Met last year - will now be sold through Argyle's European sales office in Antwerp, Belgium, once the existing marketing contract with the CSO expires at the end of June this year. The decision, although not unexpected, has undoubtedly come as a blow to De Beers, particularly ahead of the likely development of Canada's first commercial diamond mine in the Northwest Territories. But De Beers can take some comfort from the fact that whilst Argyle is the world's largest diamond producer in terms of carats recovered, and between 75-78 percent of its rough diamond output is currently sold through the CSO, it only accounts for an estimated 6 percent, or around 4,000 million US dollars, of the CSO's annual intake in value terms. The relationship between Argyle and De Beers has become increasingly strained over the past three years after the CSO decided to defer the purchase of 25 percent of its contracted volumes. The deferred purchase level was reduced to 15 percent a year later, and remains in place, forcing Argyle to stockpile some of its production. Argyle's profitability has been further eroded by the CSO's imposition of an 11 percent price cut on smaller, low quality stones which make up the bulk of Argyle's rough output.
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