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10 posts from November 2007

Diavik Diamond Mine Development Plan

This week Harry Winston Diamond Corporation announced a new mine development plan for the Diavik Diamond Mine own jointly by Harry Winston (40% ownership) and Rio Tinto (60% ownership).  The plan involves a $218 million investment by Harry Winston and $327 million by Rio Tinto, both over the next two years.

Since the Diavik Diamond Mine started production in 2003, operations have been open pit mining and have produced 35 million carats of diamonds.  The new development plan will facilitate the start of underground operations starting in 2009, which would extend the life of the mine to beyond 2020.  The total estimated reserves for the mine were about 110 million carats, meaning that there are about 80 million carats yet to be mined.

The Diavik Diamond Mine is located 300 kilometers northeast of Yellowknife, capital of Northwest Territories in Canada.  Situated on a 20 square kilometer island in Lac de Gras, the mine employs approximately 725 workers.  The mine extracts ore from three kimberlite pipes, designated A154 North, A154 South, and A418, which contain higher than average content of readily marketable diamonds.  The three pipes are all located beneath the waters of Lac de Gras so operations required construction of a dike to surround each pipe so the water could be removed before mining could begin.  The lake freezes from October to June with an average thickness of 1.5 meters.

Diavik_mine_physical_plant The physical plant (processing, maintenance, powerhouse, workers accommodations, etc.) are located on the island with enclosed walkways connecting the major buildings.  All supplies to keep the mine operating must be trucked in over a 600 kilometer long ice road constructed each winter from February to April.  The Diavik Mine requires about 4,500 truckloads a year to maintain the operations year around.


Forced to Take Store Credit

BuyerbewareThis week a subscriber of our newsletter emailed asking for advice.  He put $1600 down payment on a ring at a jewelry store but the specifications of the ring provided were not what he had requested.   The jeweler refused to change the ring or refund the money.  Instead, the jeweler is forcing the consumer to take a store credit towards jewelry items that are “outrageously priced.”  There was no signed contract and the consumer does not know what to do that will help get his money back.

Here is my response.  I welcome other suggestions or similar stories that might be helpful to other shoppers.

I am sorry to hear about your situation with the jewelry store.  Unfortunately, this happens many times a day all over the country because we hear stories like yours on a regular basis.  There is nothing more frustrating than to be forced to spend money at a retailer who has lied to you and taken advantage of you.

I am a diamond retailer, not an attorney, so I do not profess to know all the options available to you but here are some suggestions you might want to consider.

  1. Based on the stories we hear clients tell, jewelry stores take the toughest stand against young customers and women.  A good first step is to have someone who the jeweler might not feel they can bully (parent, attorney, etc.) accompany you so you have a witness to what is transpiring.  The earlier you do this the better to help document what is happening.
  2. Be sure you are dealing with the storeowner.  Employees are often only following store policies. They can be more concerned about losing a sale than hurting the store’s reputation.  The storeowner can change the rules and could be more sensitive to public relations than a store clerk might.
  3. If the jewelry store is a member of the Better Business Bureau, they are obligated to handle disputes through their dispute resolution services.  You can check out www.us.bbb.org for more details.  If the store is a member and is not ethical in their business dealing, the Better Business Bureau provides a complaint forum that gives you equal opportunity to voice your position.
  4. Many cities have local television stations that have investigative reporters who check into consumer complaints.  The fear of bad publicity often allows them to find quicker and more satisfying remedies to problems than you can as a wronged citizen.
  5. While not has powerful as a media reporter, you can increase the power of your complaint by voicing your concerns when the store is filled with other customers.  Storeowners know that negative word-of-mouth is much more powerful than positive word-of-mouth so you have more advantage if you have an audience.
  6. Going to court should always be the last resort, but if you have tried alternative dispute actions and not succeeded, small claims court might be the answer.  If someone owes you money and you cannot settle things in any other way, you may decide to issue a claim through the county court.  Laws and procedures vary by state but if you do an online search for “small claims court” in your state, you will probably find the information you need to get started.  However, if you do not have any witnesses or written contracts, you might find that “buyer beware” is their finding, but you never know until you try. 

Beware of Jeweler's Lifetime Guarantee

Caution_signHardly a day goes by that some client asks us if we have a lifetime guarantee.  We immediately know they have been pitched the lifetime guarantee gimmick at some jewelry store.  We ask them what kind of guarantee and the answer always has something to do with getting their jewelry item every six months and the jeweler providing fee cleaning but gets a little fuzzy about what the guarantee actually provides.  They think it protects them against loss and damage but they are not sure on the specifics.

Of all the shoppers who have mentioned a lifetime guarantee, not one had the guarantee in writing.

The jeweler’s requirement that every item be inspected every 6 months gets customers into the store on a regular basis with the hope they will purchase something else.  It is also common for these regular inspections to discover a mounting needs replacement, repair, or an upgrade, at the consumer’s expense.  If the consumer has his or her jewelry maintained or repaired by anyone other than the jeweler, the action voids the warranty.  This marketing gimmick keeps the customer not only coming back on a regular schedule to the jeweler; it keeps them out of other stores.

The danger with these lifetime guarantees is that shoppers assume they are covered for all problems and therefore do not purchase jewelry insurance.  The fine print in most of these guarantees stipulates the warranty does not apply to lost, stolen or abused merchandise, but who ever sees the fine print. 

We found one guarantee with the following wording:

Your diamond is warranted against loss from the original mounting for the lifetime of the purchaser, providing it is examined at least every six months by a (jeweler’s name) authorized inspector and documented on this certificate.  This warranty covers only loss, which is incurred through normal wear, and any unusual damage or accidental mishap will nullify this protection.  Prongs must be intact and not separated, and any necessary repairs found during inspection must be made by (jeweler’s name) at the consumer’s expense.  In the event of loss, (jeweler’s name) will replace your diamond with another of equal value. ($5,000 maximum merchandise liability)

Take a close look at this warranty from the consumer’s perspective.

  • The consumer must pay for regular maintenance found at the six-month inspections or they void the warranty.  The jeweler decides what is required, even if it is new mounting, or they can void the warranty.
  • The jeweler defines “normal wear” so any “unusual” wear voids the warranty.
  • An accident voids the warranty so any event the consumer did not intend to do will void the warranty.  Can you think of what could happen to damage an item of jewelry that does not include “unusual damage or accidental mishap?”
  • If the prongs are not intact or are separated (bent), the warranty is not valid.  The real question is how can the diamond be lost if the prongs are intact and not bent?  The language of the warranty excludes everything that could happen to cause the loss of the diamond if the prongs have to be intact and unbent.
  • The warranty implicitly excludes loss, theft, or damage, which are covered by jewelry insurance.
  • It is obvious that the lifetime warranty is a valuable marketing gimmick for the jeweler, but what value is this warranty to the consumer?

In other words, the only thing they “might” cover is the jeweler’s negligence.  Jewelry insurance covers all the things that typically happen to jewelry (loss, theft or damage) and the jeweler’s “warranty” covers none of it.  The biggest loser is the shopper who does not get insurance because they believed they were covered by the guarantee.  They are in for a rude awakening if anything ever happens to their jewelry item.


Aber Diamond Is Now Harry Winston Corporation

Harry_winston_logoAber Diamond Corp. changed its name to Harry Winston Diamond Corp. November 19.  The company, trading on the New York Stock Exchange, is the largest publicly traded diamond company.

The company is a major player at both ends of the diamond supply chain.  The mining operation, with revenues of about $400 million per year, owns 40 percent of the Diavik Diamond Mine in the Northwest Territories of Canada.  This equates to roughly three percent of the world’s rough diamond production.  At the other end of the diamond supply chain, the retail operation with annual revenues of about $300 million, owns 18 Harry Winston stores worldwide including New York, Beverly Hills, Paris, Tokyo, and Hong Kong.  Plans are ongoing for new stores in Beijing and possibly Shanghai and Mumbai to take advantage of the two fastest-growing economies, China and India.

On first look, Harry Winston Diamond Corp. appears to cover the vertical spectrum in the diamond industry but the company still must outsource the cutting and polishing process that is required to transform the mined rough diamonds into the finished gems sold at the retail level.

With the rapidly growing demand for diamonds and the decreasing production from many of the larger, older mines, the quest for diamond mines is very dynamic.  There are many mining companies investing in new exploration and enhanced production techniques in older mines.  Diamond mines have become a scarce and valuable resource drawing the attention of big dollars.  Since developing new diamond-producing mines is a long, expensive process, growth for the Harry Winston mining operation will most likely come from acquisitions of producing facilities or mines close to production.  The most likely scenario for growth would be purchasing the other 60 percent interest in the Diavik Diamond Mine, currently owned by Rio Tinto.


Graff Jewellers Purchases 493-Carat Letseng Legacy Diamond

Letseng_legacy_493_caratGem Diamonds and its partner, the Lesotho government sold the Letseng Legacy 493-carat diamond to Graff Jewelers for $10.4 million.  This rough diamond, the 18th-largest diamond every found, was discovered September 7th at the Letseng-la-Terai Mine in the Kingdom of Lesotho.  Graff’s production company, Safdico, acquired the Letseng Legacy diamond and will be responsible for cutting the stone in Antwerp.

Graff Jewellers was also successful a year ago when it purchased the Lesotho Promise 603-carat diamond for $12.4 million from the same diamond mining company.  The Letseng diamond mine is famous for production of large, valuable diamonds.

Gem Diamonds recently announced that they are doubling the size of the Lesotho mining operations and expects to discover more large (over 100 carats) diamonds.  Three of the twenty largest diamonds every found were discovered at the Letseng-la-Terai Mine.

The market is hot for large, expensive diamonds and the two-year-old Gems Diamonds Company has already made quite a name for itself with the Lesotho operations as well as mines in southern and central Africa and developing operations in Indonesia.


84.37-Carat Choloe Diamond

Sothebys_8437_ct_choloe When you spend $16.2 million for a diamond, you can name it whatever you want.  Guess Jeans founder, Georges Marciano, purchased an 84.37-carat, flawless white diamond last week and named it the “Chloe Diamond” after his twelve-year-old daughter.

The largest while brilliant-cut diamond ever sold at auction was sold at the Sotheyby's auction in Geneva, Switzerland after taking two years to cut and polish.  The diamond is exceptional because of it size, white color, high clarity, exquisite cut.  Colored diamonds are usually the big money making stones, selling for as high as $1.0 million per carat but the sale of this white diamond was the second highest priced diamond ever sold.

Prior to the sale, the diamond was displayed in New York, Los Angeles, London, Paris, Dubai, United Arab Emirates, and other cities.

The seller of the diamond, Ron Cohen, is the owner of Clean Diamonds based in Los Angeles.  He purchased the rough diamond from Angola’s national company in 2005 and through the Kimberley Process to ensure it was sourced from a conflict-free zone.


4.38-Carat Discovered in Arkansas

Craterchad_johnson_438_ctChad Johnson moved to Murfreesboro, Arkansas from Iowa in February.  Unlike most visitors to Crater of Diamonds State Park who are tourist, Chad has been trying to support himself based on the diamonds he finds at the park.  He has found about 80 diamonds thus far but Monday’s discovery of a 4.38-carat tea-colored diamond was his biggest find.

As is common practice at Crater of Diamonds, visitors sift through dirt to separate out the collectable gemstones and minerals, always with the hope of finding a big diamond.  Chad had put his sifting equipment in a locker when he finished digging Saturday but discovered the cube-shaped diamond stuck in his sifter when he started his dig on Monday.

While diamonds are mined every day in countries around the world, Crater of Diamonds State Park as the only location open to the public.  Since 1972, visitors have been able to keep the gems they discover in the park.  The park officials make every effort to help the visitors by plowing up fields to expose fresh soil but it still takes a hard work, patience and considerable luck to find diamonds, especially as big as the 4.38-carat.


493-Carat Diamond Named “Letseng Legacy”

Letseng_mineThe world’s 18th largest diamond, weighing 493 carats, was discovered in at the Letseng-la-Terai Mine in the Kingdom of Lesotho on September 7.  Letseng Diamonds recently named the diamond “Letseng Legacy.”  The Letseng Diamonds Company is 70% owned by mining company Gem Diamonds and 30% owned by the government of Lesotho.

The Letseng Mine is famous for its large diamond discoveries and has now produced three of the world’s top 20 diamonds, most recently the 603-carat Lesotho Promise in August 2006 and now the 493-carat Letseng Legacy in September 2007.  Production at the mine this year has price per carats yields of about 15 times higher than world average diamond prices, which reflects the larger size and higher quality of the stone recovered.  The Letseng-la-Terai Mine also has the distinction as being the highest diamond mine in the world, located over 10,000 feet above sea level.

The Letseng Legacy will be sold on tender in Antwerp on November 14.  The Lesotho Promise was sold at a similar tender in October 2006 for $12.4 million to Graff Jewelers, who then produced a collection of polished stones valued as high as $30 million.  The Lesotho Brown, a 601-carat, discovered in 1961 and the 16th largest stone, was cut into 18 finished diamonds by Harry Winston jewelers who recently re-acquired the largest stone.  While not a top twenty stone in terms of size, Letseng Diamonds also produced a 215-carat D-color flawless diamond in January 2007, which sold for $8.3 million.


Jacob the Jeweler Pleads Guilty

JacobthejewelerstoreJacob Arabov, better known as “Jacob the Jeweler,” pleaded guilty in federal court this past week to falsification of records and making a false statement to a federal agent.  Arabov was arrested in New York on June 15, 2006 as part of an indictment along with 41 other people for charges including money laundering and conspiracy to distribute cocaine.  Arabov, who pleaded not guilty to those charges, will go to trail later this year on that case.

The plea agreement for the false records and false statements, have attached potential penalties of up to 46 months in prison and up to $2 million in fines.  The agreement also included Detroit federal dropping all money-laundering charges against the famous jeweler.

Arabov gained fame as “Jacob the Jeweler” when hip-hop and rhythm and blues artists became his clients.  Some of his famous clients include Sir Elton John, Faith Hill, Madonna, Jay-Z, Beyoncé, Victoria Beckham, Sean “Diddy” Combs, and 50 Cent. 

In a news release from Arabov’s attorney, Benjamin Brafman, the celebrity jeweler said "I realize I have made a terrible mistake and I accept the consequences of my actions."

Learn more about June 15, 2006 indictment....


Avoid the Marketing Hype and Get More Diamond for Your Dollars

HeartsonfireAfter spending millions of dollars on advertising, Hearts On Fire is becoming one of the most recognized names in the retail diamond industry.  To kick off this holiday season, the Boston-based Hearts On Fire Company has purchased $1 million in national television advertising to persuade shoppers that their diamond is the only one to buy.

This year’s marketing campaign (MONOGAMY)100, combines the themes of intense relationships and the 100 times magnification claimed to be used in their diamond cutting process.

The Hearts On Fire Company was one of the earliest and most successful companies to jump on the diamond branding bandwagon.  Like many other diamond companies, they launched a marketing brand based on the Hearts & Arrows pattern seen in diamonds with optical symmetry with the aid of a special colored scope.  The marketing slogan World’s Most Perfectly Cut Diamond® is now promoted worldwide with the implication that buying any other diamond means you do not love the person enough.

Apparently, many diamond shoppers are buying the hype because the company has a 30% annual growth in sales for the past eleven years and will reach $350 million in sales this year.  The power of romantic expectations has always been a strong marketing motivator and it seems to be true for diamonds too.

Thankfully, most diamond shoppers would rather put there money into the diamond and not be paying more than double the price just for the brand.  With increased information available to consumer about round diamond cut grades and Hearts & Arrows (optical symmetry) plus tools like the Holloway Cut Adviser, Ideal Scope and AGS ASET Scope, exceptional diamonds are now available to any shopper willing to take the time to gain knowledge about diamonds and find the retailers who can provide those diamonds at reasonable prices.

Heartsarrows_pattern_2Since we are always seeking the best cut for round diamonds for our clients, the majority of the round diamonds we sell have Hearts & Arrows patterns.  This is the case even if our clients did not request them or even know about Hearts & Arrows.  Round diamonds are always available for the clients who have that requirement and there is little if any price premium for Hearts and Arrows compared to the typical round diamond we sell.

So why would a diamond shopper be willing to pay more than 100% higher prices for a Hearts On Fire diamond than a Hearts & Arrows diamond at Diamond Source of Virginia?  The reasons are simple and usually one or more of the following:

  1. They believe the hype and are susceptible to luxury marketing tactics
  2. They do not realize Hearts & Arrows are available from other companies
  3. They have not discovered Diamond Source of Virginia

Most diamond shoppers who want exceptionally beautiful diamonds realize that there are better alternatives than buying branded Hearts On Fire diamonds. They feel it is better to spend less than half the dollars for their diamond or get more than double the diamond for the same dollars with a Hearts & Arrows diamond from Diamond Source of Virginia than to pay for all those media ads when they buy at a jewelry store selling Hearts On Fire branded diamonds.