32 posts categorized "Diamond Prices"

Tennis ball-sized 'diamond in the rough' too big to sell

Lesidi La Roma-1TORONTO (Reuters) - In the mysterious world of diamond mining, it turns out that some stones are too big to sell.

Canada's Lucara Diamond Corp will have to cut its tennis ball-sized rough diamond to find a buyer, industry insiders say, following Sotheby's failed auction for the world's largest uncut stone last summer.

It's not the ending that William Lamb wanted for his 1,109-carat stone, named 'Lesedi La Rona', or 'Our Light' in the national language of Botswana where it was mined.

"It's only the second stone recovered in the history of humanity over 1,000 carats. Why would you want to polish it?," said Lucara's chief executive.

"The stone in the rough form contains untold potential...As soon as you polish it into one solution, everything else is gone."

Lamb had gambled that ultra-rich collectors, who buy and sell precious art works for record-breaking sums at auction, would do the same with a diamond in the raw.

The unprecedented bet failed.

Bidding for the 2.5 to 3 billion year old stone stalled at $61 million - short of the $70 million reserve.

Lesidi La Roma-2"When is a diamond too big? I think we have found that when you go above 1,000 carats, it is too big - certainly from the aspect of analyzing the stones with the technology available," said Panmure Gordon mining analyst Kieron Hodgson.

"At the end of the day, it's about understanding what the stone can produce. And the industry now doesn't work on hunches as much as it used to 20-30 years ago."

An arcane business, the diamond industry has no spot market trading, no guarantee that 'roughs' will yield any value, and a punishing grading system that can dramatically swing values.

Stones in the hundreds of carats come with additional risk, from the multi-million-dollar price tags and cutting process that can take months or years, to capricious customer demand.

There is a "very, very small universe" of companies with the skill, money and network to polish and sell the Lesedi, which will likely take two to four days for the first laser cut, said Lamb.

But after Lucara's public auction, potential buyers now know what the market is willing to pay, said Edahn Golan, of Edahn Golan Diamond Research & Data. "Maybe it's worth waiting a couple of years," he said.

While Lucara does not need the money, investors may not have that patience.

Lamb said the unsold stone "weighs heavily" on the stock, which is down more than 30 percent from late last year.

To be sure, Lucara has seen other benefits from the stone, said independent diamond analyst Paul Zimnisky.

"There's the value of a particular diamond, but then there's also a story behind the second-largest rough diamond ever recovered in modern time," he said.

"Just from a publicity standpoint, nobody knew what Lucara Diamond was when they recovered that stone ... now they're probably one of the most recognized names."

Lamb, a former De Beers executive, says it's unlikely Lucara can sell the stone for its desired price and polishing the Lesedi itself is risky.

Another option is for the Vancouver-based miner to partner with one or more companies to cut and sell the stone. "We've already done our homework," Lamb said. "You don't take a stone like this and give it to the second best."

Industry sources agree that high-profile British diamond dealer Laurence Graff makes the list of potential partners, but beyond that, opinions vary.

Lucara could work with a consortium, sources said, including Cora International, Diamcad, the so-called 'King of Diamonds' Lev Leviev, Mouawad, Tache Diamonds, Optimum Diamonds, the Angolan President's daughter Isobel dos Santos, Swissdiam International and Rare Diamond House (RDH).

It would be a mistake for Lucara to hold onto the Lesedi, said Oded Mansori, RDH managing director. "Maybe next week, there will be a larger stone."

Lesidi La Roma-3New technology means miners like Gem Diamonds, Lucapa Diamond, Petra Diamonds and Letseng Diamonds are unearthing more mega-stones intact rather than breaking the brittle crystals.

Lucara, which installed a Large Diamond Recovery machine, using X-ray transmission sensors (XRT), recovered the Lesedi, an 813-carat and 374-carat stone over two days.

A Dubai trading company paid a record $63 million for Lucara's 813-carat 'Constellation', while Graff bought the 374-carat stone for $17.5 million.

"Miners have more advanced technology, this is why we see these large stones coming up all of a sudden," said Mansori. "I think that Mother Nature has some more surprises waiting for us."

Lamb won't take that bet.

"Don't hold your breath. There's no guarantee that there's going to be a next one," he said.

Reporting by Susan Taylor

via www.reuters.com

Sotheby's 'perfect' 100-carat diamond could fetch $25m - CNN.com

100 carat D IF Emerald DiamondPaddles at the ready! One of the world's largest flawless diamonds is about to hit the auction block.

On April 21, Sotheby's New York will sell a 100-carat, emerald cut internally flawless diamond, the largest of its clarity and cut ever shown at auction. The auction house expects it to fetch up to $25 million.

"Simply put, it has everything you could ever want from a diamond: the classic shape begs to be worn, while the quality puts it in an asset class of its own," said Lisa Hubbard, Chairman of North and South America for Sotheby's International Jewellery Division, in a press release. 

100 carat D IF Emerald Diamond-2The massive gem will lead the house's Magnificent Jewels auction, culminating a six-city exhibition tour that included stops in Dubai, London and Hong Kong. (Other highlights include colored diamonds, a collection of Kashmir sapphire jewelery and several Art Deco pieces from Cartier.)

"People everywhere have been drawn to it from across the room and they are in awe of its size, particularly when they put it on their hand," says Gary Schuler, the head of Sotheby's jewelery department in New York. "They can't believe there's a diamond this pure of s

via edition.cnn.com

Colored Diamonds: Asia's New Fancy Best Friend

The popularity and price of fancy colored diamonds have been on the rise globally, driven by Asian investors.

From 2006 to 2014, fancy colored diamonds (pink, yellow, and blue diamonds) experienced an average total appreciation of 154.7%, according to the Fancy Color Research Foundation (FCRF), a non-profit colored diamond index that was established last year. In the same time period, the colorless, white diamond increased by 62.4%, according to the Diamond Prices Index.

China and Hong Kong now represent approximately 40% of sales of the fancy colored diamond market, according to FCRF. “Most increases in fancy colored diamond prices, particularly for pink diamonds, is driven by Asian customers,” says Tracey Greenstein, director of research at FCRF.

Green Diamond ring

The high demand and extreme rarity of the colored diamond are what keep pushing up its price: It’s formed when a non-carbon element—such as nitrogen and hydrogen— is accidentally trapped during the crystallization process of the diamond. The foreign element is what renders the diamond colorful.

Outside of Asia, colored diamonds are often considered assets with highly attractive investment potential whereas colorless diamonds are more suitable for gifting. But in Asia, they are seen as both.


Edward Alvarado, director of colored diamond dealer, Diamintel notes that he often sees Chinese couples coming to his office looking for a colored diamond ring “for her” but walk out with “her ring and his ring.”

“A lot of men liked colored diamonds in China,” says Alvarado. “With white diamonds they might think it looks girly or flashy but with colored diamonds, they can choose some of the more masculine colors.”

Red diamond ring

As a Venezuelan company that supplies clients globally, Diamintel now sees 80% of their revenue coming from Greater China. Three years ago, Europe and the United States took up 50% of their total revenue.

Major auction houses have been bringing some of the most valuable natural color diamonds to market through the Hong Kong sales, whereas Geneva and New York were the two main focal points before, according to the Natural Color Diamond Association (NCDIA).

Sotheby’s Hong Kong sold an 8.41-carat purple-pink diamond for a record $17.77 million U.S. dollars in last year’s Magnificent Jewels and Jadeite Autumn Sale. Just two months ago, a 13.88-carat yellow diamond ring and a pair of 6.30 and 6.15-carat diamond earrings sold for $466,667 and $312,821 U.S. dollar, respectively, in Hong Kong.

Pink diamonds

And the colored diamond phenomenon is not exclusive to Asia’s super rich. Many of the private buyers at the Hong Kong wholesale jewelry trade shows are part of the growing middle class nowadays.

“We live in a time of a democratisation of the diamond market,” says Diamintel’s Alvarado. “The market is getting a lot more educated and global- and it’s not just the traditional elites that are collecting but the savvy Asian investors as well.”

via www.forbes.com

Diamonds.net - Fancy Color Diamonds Identified as Stable, High Growth Alternative Asset Class

Fancy colored diamondsA new index by The Fancy Color Research Foundation (The FCRF) shows that fancy color diamonds have delivered strong and consistent price increases, outperforming key global asset indices  since 2005.
Fancy color diamonds, predominantly  yellow, pink and blue diamonds, have always been highly prized and rare assets. They are found randomly and unpredictably in diamond mines throughout the world and are enjoyed by sophisticated jewelry buyers and gem collectors alike. Consistent recent growth in values has reflected the changing dynamics of global wealth notably the fast paced growth of emerging markets and the appeal of fancy color diamonds as an investment product. 

The Fancy Color Diamond Index (The Index) has been developed by The FCRF from proprietary access to tens of thousands of fancy color diamond transactions since 2005 and will be updated on a quarterly basis. The Index provides greater knowledge and understanding of fancy color diamond pricing trends to jewelry retail, wholesale and mining industries.

Fancy color diamonds, across pinks, yellows and blues, have increased in value by 167 percent on average since January 2005, outperforming other leading assets in a similar period, for example, the Dow Jones industrial average has increased 58 percent,  Standard & Poor’s 500 has increased 63 percent and London house prices have increased 82.1 percent. 

Looking in more detail the Index shows that pink diamonds have shown the greatest growth in value, up by 360 percent in the last nine years, with blues showing less dramatic but equally consistent growth of a 161 percent by value. Crucially, both pink and blue diamonds were unaffected by the global financial crisis with blues keeping their value and pinks still increasing through 2008 to 2010. 

The publication of the Index marks the launch of The FCRF, which is an independent, non-profit organization formed to promote fair-trade, ethics and transparency in the fancy color diamond retail, wholesale and mining industry.

The FCRF activity will encompass:

• Developing innovative research and digital tools that will support the fancy color diamond retail selling process for consumers, retailers and collectors;

• Promoting fair trade in fancy color diamonds throughout the value chain underpinned by reliable data analysis to create a uniform knowledge base across all industry layers;

• Authoring publications to clarify the complex methodology for evaluating fancy color diamonds;

• Correcting common misconceptions about evaluating fancy color diamonds.

The FCRF expects that together these activities will enhance consumer demand and retail understanding of fancy color diamonds.

The FCRF was initiated by Eden Rachminov, author of "The Fancy Color Diamond Book" and winner of the NCDIA education award. Ambitions and activities of The FCRF will be guided and evaluated by an experienced board of advisors that work throughout the diamond pipeline.

Rachminov, a member of the board of advisors for The FCRF, commented, “The launch of The Fancy Color Research Foundation is in response to the growth in fancy color diamonds transactions and the resulting need for greater education, understanding and clarity in the industry.

“The process and skills for evaluating fancy color diamonds are unique to this exceptional product. As a result there is a need to clarify misconceptions and to highlight the differences to evaluating colorless diamonds. 

“In addition to publishing the Index, The FCRF is developing and publishing a series of practical tools, targeted at retailers. We are confident that The Fancy Color Research Foundation will be a significant influence on increasing demand within the fancy color diamond industry.”

Membership of the FCRF is open to retailers, auction houses, wholesale traders/manufacturers, financial institutions, insurance appraisers and mining companies. Organizations interested in membership of The FCRF should visit fcresearch.org to register details.

About the Fancy Color Diamond Index:
The Index is a first of its kind tracker of changes in the market prices of yellow, pink and blue fancy color diamonds, the three most commonly traded fancy color diamond categories (a market price is a wholesale transaction taking place in one or more of the global diamond trading centers). 

The Index is a composite representation of changes in price points gathered since 2005, based on a statistically significant sample size. It offers insight into variations in the appreciation of diamonds of different colors and sizes. 

The Fancy Color Research Foundation oversees proprietary prevalence and pricing data aggregation and production of the index. A third party New York-based audit firm reviews the development of The Index from the various data points gathered.

The Index can be used to understand and track the historical price behavior of different rare fancy color diamonds.

via www.diamonds.net

Diamonds are sparkling, but would you be a sucker to invest?| The Week UK

Polished diamonds-1SOMETHING slightly crazy is going on in China. In what seems to be a topsy-turvy assessment of values, Danone is giving away diamonds to boost sales of powdered milk.

Locals see the French dairy giant’s move as a none-too-subtle ruse to distract attention from the dirt thrown in recent food safety and pricing scandals, but even so, the campaign has sparked widespread interest. You’ve got to admit that, when it comes to choosing what to feed your Little Emperor, the lure of a shiny bauble beats a Mothercare voucher hands down.

Danone’s latest stunt is tapping into an ancient fetish. These sparkly rocks have fascinated humans for millennia, though no-one needs reminding that their cold beauty belies an often bloody past.

As late as the 1990s, 80 per cent of rough diamond sales were in the hands of one company, De Beers, which also controlled half of all production. When the company’s controlling dynasty, the Oppenheimers, sold out – and the discovery of new mines loosened De Beers’ grip on the industry – the market was thrown open. But that, in turn, paved the way for a new army of shysters and con-merchants. A BBC investigation in January uncovered a proliferation of diamond boiler-room scams, with vulnerable targets conned into dodgy schemes often involving non-existent gems.

In fact, investing in diamonds is never straightforward, even when the stones do exist – mainly because valuing them is so tricky. Unlike other precious commodities such as gold, the sheer variety of individual rocks rules out any simple cost-by-ounce pricing mechanism. The basic valuation template boils down to the four Cs – Carat (weight), Colour, Clarity and Cut. But there’s plenty of room for subjective interpretation.

The removal of the De Beers stranglehold has also made prices more volatile. “The industry has been on a rollercoaster ride since the global financial crisis of 2008,” notes the 2013 Global Diamond Report compiled by Bain & Co. Prices plummeted (in part due to distressed selling), “only to rebound to reach historically high levels in 2010 and 2011”. Cue, another mini-crash.

A measure of calm has now returned and, with consumer demand forecast to rebound in key territories like the US, China and India – and supply predicted to contract – the medium-term outlook for sparklers looks strong.

Aficionados will tell you that, for all the vicissitudes of the market cycle, diamonds really are forever. According to Vashi Dominguez of the trader Diamond Manufacturers (aka Vashi.com), “certain types, including coloured varieties [known in the trade as “fancies”] have held had their value over the past few years better than other more volatile equity investments.”

And size counts when it comes to building value. From 1990 to 2011, the value of three-carat diamonds increased by 145 per cent, while five-carat diamonds rose by 171 per cent on the Rapaport Diamond Trade Index (a carat is 0.2 grams).  

Colourless (or “white”) diamonds are measured on a sliding colour scale in which the rankings are D (the best blue white) and E (exceptional white). Avoid buying any gem that registers lower than grade H, as it will deemed too yellow. Clarity grades range from Flawless to Imperfect 3. But Dominguez reckons that the most important of the four Cs is “cut”, because it is the skill of the cutter that gives a diamond its brilliance.  

Given the level of knowledge involved, some reckon that buying diamonds is a sucker’s game unless you have real expertise – though it’s worth noting that the first rule of buying is to avoid getting shafted by jewellers’ mark-ups. If you want to get a feel for prices, check out the largest online dealer, Rapnet.com.

There are, though, othe

via www.theweek.co.uk

Why the Diamond Business Keeps Getting Slammed - JCK

Blog post by By Rob Bates, Senior Editor JCK Magazine

Rough diamonds-4jpgI have heard it said that if you really want to distrust the mass media, read articles on a subject you know a lot about. And so it is with diamonds. Every six months or so, I come across articles along the lines of “diamonds are a scam.” (See recent pieces in The Huffington Post, PolicyMic, and Bustle.) Now, JCK’s editor-in-chief Victoria Gomelsky, Trace Shelton at Instore, and Edahn Golan at IDEX have had their say on these articles, and their takes are all worth reading. But I’d also like to talk about some common assertions, look at where they came from, and why they keep popping up.

First, let’s start with something you hear a lot: “Diamonds are not rare.” Now, this is true, to an extent. You can buy diamonds at any mall in America. Any item that is available within a 10-mile radius of most Americans is not rare. But high-quality diamonds are not so easy to find. And the biggest, best-quality diamonds are rarest of all. Wealthy investors wouldn’t spend $30 million for a 118 ct. D Flawless if there were piles of them lying around somewhere.

When people say “diamonds aren’t rare” they generally mean the supply of diamonds has been artificially constrained. And yes, for decades, De Beers did stockpile diamonds in order to keep the prices high. Now, however, its market share is 35 to 40 percent, and it no longer makes sense to do that. In addition, De Beers’ agreement with European Union antitrust authorities forbids it from stockpiling. As does the American antitrust class-action suit that became final in 2012, which requires De Beers to:

…abide by state and federal antitrust laws, prohibits specific conduct that Plaintiffs believe has been anticompetitive in the past, limits De Beers’ purchase of rough diamonds from a third party to 40 percent of that third party’s production unless a regulatory agency gives express approval otherwise, prohibits stockpiling of rough diamonds, and prohibits resale price maintenance agreements by De Beers. 

(And really, think about it. If De Beers went through the trouble of paying $300 million to settle an antitrust class action regarding its anticompetitive conduct, it wouldn’t then go out and repeat the same behavior that led to the lawsuit. That would mean it would get sued again.) 

The diamond industry used to be run by a cartel. It isn’t anymore. You would think if these writers really cared about all this, they would be happy about that. Instead many just gloss over or ignore it, even though the information has been out there for years.  

The other thing you hear a lot is that “diamonds have no value,” that they are just shiny rocks. This is also true and false. Diamonds have value because we as humans give them value. Just like we do for an Andy Warhol print—which, after all, is just paint on a canvas, with no practical use. Or a piece of paper with Beatles lyrics on it. Or a gold bar, Rolex watch, Louis Vuitton handbag, or iPod. Marketing played a huge role in fueling desire for diamonds and diamond engagement rings in particular. But marketing also played a role in the rise of Andy Warhol. Not to mention the Beatles, Rolex, Louis Vuitton, and the iPod.

Some of the worst commentary out there relies heavily on a 1982 article in The Atlantic by Edward Jay Epstein titled “Have You Ever Tried to Sell a Diamond?”, adapted from his book of the same year. (One blogger for Priceonomics seems to have just rewrote Epstein and called it a day.) The thing about that Atlantic piece is, it’s 32 years old. It talks about standard 200 percent markups on diamonds. Those don’t exist anymore. And today, many jewelers buy off the street. If you Google “we buy diamonds,” you get 1.5 million results. According to one estimate, $1 billion in diamonds has been traded in the last few years. So Epstein may not have had luck selling his stone. But plenty more have. 

Will you get full retail value for your diamond the day after you bought it? Of course not. But a diamond holds its value a lot better than many other purchases. If someone wrote an article titled “Have You Ever Tried to Sell a Three-Year-Old Microwave Oven?” he wouldn’t have much luck either. 

Now, diamond prices are a lot more volatile than they have been in the past. That is one aftereffect of the decline of the cartel structure. But as countless consultant reports will tell you, the long-term picture is for diamond prices to rise, because demand is increasing while supply isn’t. And really, if anyone believes his diamonds have no value, please send them to me. I will be happy to take those worthless objects off anyone's hands.

(One aside: Epstein, who did uncover a lot of interesting information in 1982, just reemerged with an article: “Will the Diamond Cartel Survive?” In 2009, he wrote an article called “Can Diamonds Survive the Free Market?” You would think that after three decades of predicting the industry’s doom, he’d at least consider a more nuanced view on the subject. And while his original tome did feature some impressive shoe-leather reporting, he doesn’t seem to have done much work on the industry since then, and his recent article is isn't much different from his 2009 piece, which in turn rehashes his 30-year-old book. Even Epstein, it seems, is recycling Epstein.)

Now, some of these authors are just lazy, repeating facts that are “too good to check.” But in the end, I don’t blame these guys (and most of them are guys). Our industry is at fault. And not just because it’s had, at times, a genuinely ugly history. It’s because it doesn’t stick up for itself.

What kind of lame business lets people spread untruths about it and never responds or tries to correct them? The only people countering these articles are me and my colleagues in the trade press, and that really isn’t our role. Even De Beers never bothers to reply to these things, and it gets slammed worst of all. Considering it wants to establish itself as a consumer brand name, that is a little nuts. 

There is talk that the reconstituted World Diamond Council may represent the industry publicly. That would be welcome. Contrary to what you may have read pre-Valentine’s Day, diamonds are not worthless. But if this industry keeps ignoring its public image as well as the attitudes of younger consumers, and if it can’t get its act together to promote or defend itself, it may prove its worst critics right after all. 


via www.jckonline.com

De Beers Sees Diamond Demand Accelerating on U.S., China Sales - Businessweek

Rough diamonds-2Global diamond demand is set to accelerate this year, increasing by as much as 4.5 percent as Chinese and U.S. consumers buy more of the precious stones, according to De Beers, the biggest producer.

“Growth should be sustainable mainly because of the U.S. and China,” Chief Executive Officer Philippe Mellier said today in an interview with Francine Lacqua on Bloomberg Television’s “The Pulse.” Diamond consumption will climb by 4 percent to 4.5 percent, compared with about 3 percent in 2013, he said.

De Beers is betting that increased sales in the world’s two largest markets will counter weakness in India, where volatility in the rupee has reduced consumers’ buying power. De Beers, owned by Anglo American Plc (AAL), today reported a 12 percent increase in annual diamond production to 31.2 million carats.

Mellier said it was “too early” to say whether De Beers planned to increase rough diamond prices this year. The company will study demand before making a decision.

De Beers has been more aggressive in diamond pricing by cutting the discount between its selling prices and the secondary cash market since it broke with tradition in 2011 and appointed Mellier, a company outsider, as CEO.

Rough-diamond prices gained 10 percent last year as the U.S. economy recovered and Chinese shoppers bought more of the stones. Prices have more than doubled in the past five years, according to data compiled by WWW International Diamond Consultants Ltd.

via www.businessweek.com

Diamonds Could Soon Be An Investor's Best Friend As Demand Rises And Supply Falls - Forbes

Diamonds-round brilliantDiamonds might be a girl’s best friend but from next year they could also be an investor’s best friend thanks to a global decline in the production of quality gems from mines in Russia and Canada, and rising demand, particularly in China.

Not a recommended investment for everyone because of the difficulty in valuing individual stones there is evidence that the top end of the diamond business is starting to stabilize after a sharp fall in gem prices in 2011.

Like some other luxury goods, diamond prices were pushed higher in the wake of the 2008 Lehmann Brothers collapse as rich investors diverted a portion of their capital into non-monetary, and highly-portable, assets.

Between mid-2009 and early 2011 industry indices which track the value of the highest quality diamonds rose by 70%, but crashed by around 30% last year as fear faded.

Declining Production

The latest assessment of the diamond market, according to an analysis by Citigroup C Markets, is that improving economic conditions, structural social trends in China and a decline in the rate of newly-mined gem quality diamonds is setting the stage for a sustained price recovery.

Because diamonds are tricky to value, and the same stone can generate widely different opinions, they are a commodity best left to professionals, and even then only after receiving expert advice.

But, what analysts at Citigroup have detected is a change in the outlook for diamond demand, a significant decline in the rate at which kimberlites (the host rock for most diamonds) are being discovered, and the drying up of a diamond stockpile once kept by the industry leader, De Beers.

“Diamond prices are weaker than they were two years ago and demand does not yet appear to be strong enough for the limited mine supply to create a significant shortage,” Citigroup said in report titled Diamond Price Outlook which was circulated to clients this week.

Shortage Emerging

“It is therefore likely that prices will stabilize at the lower levels through 2013 and 2014, but that the mine supply trend, the structural shift in China, and a slowly recovering global economy should see diamond shortages making their mark on prices in 2015-to-2010.”

Of the major factors in the diamond market the three most important are the melting of the De Beers stockpile, the development of a diamond-ring buying habit by engaged couples in China, and the failure of the mining industry to discover big new deposits of gem-quality stones.

The De Beers stockpile was a critical factor in controlling prices for much of the 20th century when the London-based company drip-fed diamonds into the market via an arcane process that caused it to be viewed as a monopoly engaged in unacceptable trade practices.

A changed marketing policy by De Beers has seen it behave more as a conventional business, but the sell-down of its stockpile has reduced the buffer-effect so that when the next shortfall in mined diamond supply occurs there could be significant upward price pressure.

Catching The Engagement Ring Habit

In China, a growing middle-class has seen the development of a diamond-buying habit with Citigroup reporting that 62% of engaged coupled in Shanghai now buy a diamond ring, roughly double the 33% rate in the 1990s. In Beijing the gift of a diamond ring currently extends to only 40% of couples.

In the mining world, despite a worldwide search, there has been a very low rate of kimberlite discovery with mine production of diamonds peaking in 2006 at an annual rate of 175 million carats, and currently down to 130 million carats a year.

“New discoveries could see industry production reaching 160 million carats in 2018 but if economic growth has normalized by then, diamond demand should be far greater than that level at that time.”

via www.forbes.com

Fancy colored diamond prices are showing significant gains in 2013

Colored diamondsFancy colored diamond prices are showing significant gains in 2013 while other goods struggle along. As a result, the various auctions and tenders held in the past two weeks continued to set records, headlining the strength of the colored diamond market with both dealers and private buyers driving up prices.

With more buyers around and diminishing supply, prices have continued to increase. While there is no formal price list for colored goods, Rachminov, managing owner of Rachminov Diamonds estimates that prices for pink diamonds are up about 30 percent from a year ago, while fancy intense vivid yellow goods are up around 35 percent, with lower-quality yellow diamonds up approximately 10 percent. Prices of fancy blue diamonds have increased by about 35 percent in the past two years. Similar estimates were reported from Rio Tinto’s recent Argyle tender of pink diamonds. Leibish Polnauer, of Leibish & Co., who won seven of the 64 Argyle diamonds on offer at the tender, said prices were about 35 percent higher than last year. He similarly reasoned that there were more people bidding. As a result, Rio Tinto fetched record prices with its top lot, a 2.51-carat, fancy deep pink diamond, selling for more than $2 million, or at least $797,000 per carat.

Buyers were therefore spread geographically at the recent Christie’s New York Magnificent Jewels sale. Three of the top ten lots went to private Asian buyers, three to the international trade, two of the top buyers remained anonymous, and one lot sold to a member of the U.S. trade. The very top lot sold to UK-based Moussaieff Jewellers, which bought the rectangular cut, 8.77-carat, fancy intense pink, VVS1 diamond for $6.3 million, or $721,200 per carat.

via www.diamondworld.net

The state of 2013 global rough diamond supply | Resource Investor

Rough diamondRough diamonds achieved record prices in the summer of 2011, but prices have since slipped back to 2010 levels on global macroeconomic worries.  However, current prices are still higher than historic levels reached in the summer of 2008, and new supply is estimated to fall short of new demand over the next two decades, which could take prices back to new highs. According to a December Bain and Co. report, “The Global Diamond Industry: Portrait of Growth,” global diamond demand is expected to grow at 5.9% annually through 2020, while supply is only expected to grow at 2.7% over the same period of time.  (I think it is worth noting that when discussing diamond supply/demand, the demand is typically end user or purchaser demand of polished diamonds, while supply is typically rough diamond supply from mines.  There are sometimes divergences between rough and polished diamond prices, but generally speaking they are symbiotic.)

Modest-at-best new supply growth over the next 17 years can be attributed to mature mines approaching non-economic depths, and a lack of new projects to offset the diminishing production of the aging mines. Even with annual supply growth of 2.7% through 2020, the supply in 2020, estimated to be 157 million carats, will still not equal pre-financial crisis supply of 177 million carats produced in 2005.

Two of the largest diamond mines in the world, Canada’s Ekati and Diavik mines, have exhausted open pit resources and now are both underground mines. The need to convert a mine from an open pit operation to an underground operation typically results in curtailed production given the geology of kimberlite pipes (the geologic formation of the resource is shaped like a carrot, and gets narrower at depth). Ekati’s production declined 28% year-over-year (YOY) in 2012, and Davik’s production is estimated to decline 17% YOY in 2013.  Three more of the world’s largest mines are set to go underground over the next few years, as Russia’s Udachny mine is expected to be converted to an underground operation in the next two to four years, and Botswana’s Jwaneng and Orapa mines are expected to go underground shortly thereafter. 

Given that it can take more than a decade and $1billion to take a diamond project from discovery to production, there have been a very limited number of significant new projects in development since the mid-1990s.  Projects expected to come online in the next five years, with estimated annual production of 1 million carats or more are Canada’s Renard and Gahcho Kue projects, Botwana’s Ghagoo project, and Russia’s Grib, Lomonosov, Botuobinskaya, and Lomonosovsky projects.  Two other projects worth noting are Canada’s Chidliak and Star-Orion projects, which have the potential to be large mines, but are not likely to commence production any time soon.

The intention of this study is to focus solely on the new supply of gem-quality rough diamonds through mine production.  The mining of industrial grade (non-gem-quality) diamonds exclusively is not economic, thus, an estimated 98% of industrial grade diamond demand is supplied with synthetic (lab grown) diamonds.  However, mines do produce industrial grade diamonds, but only as a by-product.  On average, gem-quality diamonds only represent approximately 25% of a mines production, but account for 95% of the value of diamonds produced. It is important to understand that diamond mining is not just about the quantity of carats produced, but also the quality of diamonds produced. That said, for purposes of simplicity, this study is based on the assumption that the supply of rough diamonds is based on the quantity of carats produced, not the value of carats produced.

Global 2012 rough diamond production is estimated to have been 127 million carats, 2013 production is estimated to be 130 million carats.  The below chart details the production of the most significant diamond mines in the world, estimated to produce a combined 113 million carats in 2013 (or 87% of estimated 2013 supply). The balance of 2013 global rough diamond production (or 13% of estimated 2013 supply) not included below is composed of small-scale or informal mining operations, where production data is opaque or not available.  For example, the Democratic Republic of the Congo (DRC) is the third largest diamond producer in the world by volume, but there is only one commercial producer in the country, so the majority of DRC production data on a project basis is unreliable or not available at all. 

 via www.resourceinvestor.com

Denny's Comments

Like most industries, the price of diamonds is product of the balance between supply and demand.  This is especially true now that there are many diamond producers and no De Beers monopoly.  The lead time to bring on new diamond production is long and requires great investment so we can expect to see prices increase until this investment in new mines is justified.