Natural Diamond Vs Synthetic Diamond

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by Raul Sapora

From a scientific perspective, a synthetic diamond has the same chemical composition, the same crystal structure, the same optical and physical properties of a natural diamond. As synthetic diamonds are conceptually identical to natural diamonds, they need to be analyzed and spotted by a gemological laboratory. Synthetic diamond screening is nowadays a major concern of the Jewelry Industry.

Unexpectedly, as far as I am concerned, Ada Diamonds[i], a synthetic diamond distributor, after discovering a few natural diamonds mixed in a synthetic diamonds melee lot, has implemented enhanced screening procedures to further inspect all parcels of melee diamonds to ensure that all diamonds sold are in fact synthetic, not mined and therefore not illicit mined diamonds. Despite it is based on the same principle (synthetic vs natural diamond screening), a whole new and extremely dangerous variable has been imported into the Diamond Trade: protecting synthetic from natural. I believe most of you who read this will smile at this – I did too at a first glance – but it is also easy to realize that a new powerful weapon has been forged and consigned to marketing experts, and if the synthetic diamond industry will have consumers perceive that synthetic diamonds are a better alternative, people will buy them.

The situation is becoming more and more complex. Retailers are in a constant state of great distress: they are uncertain whether they should sell synthetic diamonds or not. On the other end, mining companies are addressing the problem with considerable delay and most probably caught inside the conceptual circle of the same marketing campaign which had decreed their triumph in the past. When Martin Rapaport in his world renowned educated reprimand[ii] to Leonardo di Caprio says that ‘false claims and misleading marketing surrounding the sale of synthetics is having an impact’, I am afraid he forgets to say that diamond itself owes its success to the unrivalled advertising slogan created by Mary Frances Gerety for De Beers in 1948 ‘a Diamond is Forever’, and that claim is disingenuous anyway. De Beers was successful in making diamonds appear rarer than they are, by aggressively restricting the supply of diamonds on the market, and moreover nothing is going to be forever, not even diamonds.

I am a gemologist and Responsible Sourcing Auditor, and those who know me quite well are prepared to hear me pronounce the sentence: “The ethical nature of a gemstone has today as much to do with its social context and its environmental provenance as it has with its optical and chemical properties.” In fact, in my opinion, gemology without Responsible Sourcing is merely a scientific understanding of gemstones, and the world needs much more than this. Gemology, as a matter of fact, is evolving through ethics. Therefore, as a gemologist I have to protect truth, even if truth sometimes can be multifaceted.

Diamond Foundry, a Synthetic Diamond producer who raised a capital of over $100 million from 12 billionaires[iii], including Twitter founder Evan Williams and actor and environmentalist Leonardo DiCaprio, was launched in late 2015, after two years of research and development.” A diamond is a diamond,” says Martin Roscheisen, Diamond Foundry’s founder. “Scientifically it is a tetrahedral carbon allotrope, and it is the same thing whether mined or man-made.”

“Proud to invest in Diamond Foundry, a Company reducing human & environmental toll by sustainably culturing diamonds,” Leonardo di Caprio tweeted.

Apparently, the arguments embraced by synthetic (or lab grown as they like to say) diamonds manufacturers are mainly ethical: to some consumers they seem to be conflict free and socially responsible. That is because synthetic diamond marketers are touting their product to be “conflict-free”, which misleadingly associates all real diamonds with conflict diamonds.

Accusations of exploitation and inhumane working conditions in mines cast a dark shadow over the diamond industry. Mining is also said to be devastating to the environment, due to the amount of energy it requires, the potential for chemical leaks, and the harmful effects that removing large amounts of earth has on local ecosystems[iv]. Some of those arguments are highly deceptive: the world of diamonds, gemstones and jewellery is changing. The legislative landscape, consumer awareness of the problems in the jewellery supply chain and broader civil society groups demanding transparency and disclosure have impacted dramatically on this scenario: nowadays, thanks to Kimberley Process, Responsible Jewelry Council and other initiatives, just a very small fraction of diamonds production is being used to finance wars. Also, it is extremely important to understand that the diamond industry employs an estimated 10 million people around the world directly and indirectly, and also has become the almost entire economy of some specific, otherwise isolated locations, like Botswana and Northern Canada[v]. Another commonly repeated misconception is that diamond mining harms local ecosystems and wildlife. However, diamond mining is perhaps one of the least environmentally destructive forms of mining there is today. Diamond mining uses very few, if any, chemicals, and diamond mines leave a small footprint on local environments compared to other forms of mineral extraction. Most people are unaware of the role diamonds play in bringing real benefits to people in the countries around the world where diamonds are sourced. Nowhere is this more evident than in Africa.

A few facts:

·        An estimated 5 million people have access to appropriate healthcare globally thanks to revenues from diamonds.

·        Diamond revenues enable every child in Botswana to receive free education up to the age of 13.

·        An estimated 10 million people globally are directly or indirectly supported by the diamond industry.

·        The diamond mining industry generates over 40% of Namibia’s annual export earnings.

·        Approximately one million people are employed by the diamond industry in India.

·        The revenue from diamonds is instrumental in the fight against the HIV/AIDS pandemic.

·        An estimated 65% of the world’s diamonds come from African countries.

It is quite evident that synthetic diamonds pose a firm and serious threat to this huge network, while so much has been done and is being done to eradicate unethical implications from the complex jewelry world. As I said already, reactions have been slightly late and perhaps, at least in the early stage, not commensurate to the actual danger.

After almost one century and a half after diamond discovery in South Africa – happened in 1867, when fifteen year old Erasmus Stephanus Jacobs found the Eureka diamond on his father’s farm, on the south bank of the Orange River – and after the end of the De Beers monopoly, seven of the world’s leading diamond companies (De Beers, Alrosa, Dominion Diamond Corporation, Petra Diamonds, Gem Diamonds, Lucara Diamond Corporation, Rio Tinto Diamonds), founded in May 2015, the Diamond Producers Association (DPA): its mission is ‘to protect and promote the integrity and reputation of diamonds, thereby ensuring the sustainability of the diamond industry[vi].

DPA launched an advertising campaign called “Real is Rare,” that adopts a new verbiage on diamond marketing, in which the abracadabra claim “A Diamond is Forever” has been replaced by a narrative that is totally different from the past. The Diamond Producers Association (DPA) announced at the JCK, Las Vegas a few days ago that their 2017 marketing budget will total US$ 57 million. DPA’s Chairman Stephen Lussier commented: “The Board’s decision is a major turning point for the Diamond Producers Association and the diamond industry. All Board Members are aligned behind the goals and plans of the DPA, which is now fully equipped to fulfil its mission of communicating to next generation consumers about the timeless beauty and emotional value of diamonds. We look forward to working closely with the diamond and jewellery trade and with other industry organisations to build a stronger future for our sector” [vii].

The words pronounced from Lussier sound so far away from the place and time in which De Beers was the guardian of the trade and could steadily increase the price of diamonds, thus ensuring that diamonds were a good investment over time.

Is such a potentially huge advertising campaign enough to react to synthetic diamonds? In my opinion the necessary game changer in this dangerous situation are ethics and Responsible Sourcing practices. The only way is ethics, quoting Stacey Hailes’s speech at Birmingham a few weeks ago. It is of paramount importance for consumers to consider what the Kimberley Process Certification Scheme for Rough Diamonds, the Responsible Jewelry Council, the Signet Responsible Sourcing Program are among others doing. Although we are all working towards the full enforcement of these practices, they already had a significant impact on illicit trade in rough diamonds.

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[i] As reported in ‘Is This Lab-Grown Diamond Company Trolling the Trade?’ by Rob Bates, on JCKonline (June 1, 2017)

[ii] Rapaport, ‘Synthetic Diamond Scam’ April 2016

[iii] ‘Why Leonardo DiCaprio is backing man-made diamonds’ by Sophie Morlin-Yron, CNN money ( August 30, 2016)

[iv] ‘A Lab-Grown Diamond Is Forever’, by Chavie Lieber (June 14, 2016)

[v] ‘The History of Lab Grown Diamonds: Value Proposition’, by Ehud Arye Laniado (June 14, 2017)

[vi] Diamond Producers Association mission statement (www.diamondproducers.com)

[vii] DPA ups its Marketing Budget for 2017 – Allocates US$ 57 Million for the Purpose, TJM (June 6, 2017)

 

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Buying and Crying, the Longest Diamond Recession

  
  
Source: Edahn Golan

Author: Edahn Golan

Sometimes, when talking with Sightholders, they have a strong, even passionate opinion about their Sight supplies, prices and the state of the market. This happens at times of instability. At other times, their views are quite moderate, yielding to the market and everything that is happening in it at the moment. However, during a turbulent period, it is very rare when Sightholders remain subdued or accepting of the situation, as it is now.
Currently, it is difficult to assess the size of De Beers’ Sights. The consensus among brokers is that De Beers offered about $600 million worth of rough diamonds, and another $50 million were requested as ex-plan. There was no clear trend to the prices, although many changes were made – both up and down.
Read more at: Edahn Golan website

Diamond Cutters Approaching Era of Disruption

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Source: Rapaport
Author: Ronen Schnidman

RAPAPORT… Diamond manufacturers are entering an era of fierce competition as the looming decline in rough diamond supply is expected to place additional pressure on their already razor-thin profit margins.

“A manufacturer always operates with a benchmark margin, which is the minimum he needs to make a reasonable return on equity,” explains Vishal Doshi, the executive director of the manufacturer Shrenuj & Co. “In spite of all the efficiencies, we have reached the border between the business being either sustainable or unsustainable.”

Some manufacturers are already adapting their business models to cope with this problem, in ways that industry observers believe will alter how the entire diamond pipeline operates in the coming years.

Differentiate or Disappear

However, Dinesh Navadiya, the president of the Surat Diamond Association (SDA), notes that manufacturers have limited options to cut costs and improve margins. While they tend to expand their labor force when rough supplies grow, cutters avoid retrenchments when the profits run dry, he explains.

“Employers never lay off workers,” Navadiya says. “There is a scarcity of artisans in the industry so the question of layoffs does not arise.”

Even during the 2008 financial crisis, factory owners in Surat tried to avoid layoffs, preferring to retain their workers by instituting temporary salary cuts.

Navadiya further dismisses the likelihood that factory owners will increase profits by absorbing smaller or weaker companies to reduce competition. He states that no notable consolidations have occurred in Surat in recent years and that he does not expect significant consolidation to occur in the future.

Consequently, the only way that manufacturers will be able to contend with tightening profit margins is through product differentiation and factory closures, concludes Mike Aggett, the managing director of H. Goldie & Company, a De Beers accredited broker.

Aggett notes that the diamond manufacturing sector is undergoing some consolidation, but this is occurring at a slow pace and largely through companies exiting the industry. He attributes this to the fact that the industry is predominantly made up of family-run businesses that find consolidation more difficult than would purely corporate entities.

“Certainly in India a number of smaller operations have disappeared,” he says. “It will be a slow, ongoing process but the less sustainable businesses will disappear.”

Aggett stresses that manufacturers who wish to remain in the industry will have to focus their efforts on design and branding as a means to improve their profit margins. Consumers are becoming increasingly price conscious, and the only way to make price secondary in their buying decisions is by presenting them with a differentiated product, he explains.

Emanuel Namdar, the general manager of S.N. Asia, a diamond manufacturer, agrees with Aggett and adds that branding is essential because the jewelry marketplace is already crowded and intensely competitive even in emerging markets.

“When you head out to the Far East and pass the jewelry displays on the street, you can see that every consumer interested in buying a diamond ring has hundreds to choose from within a 10-minute walk,” Namdar says. “You must add value through branding. Otherwise, the competition at the consumer level is too fierce.”

Doshi notes that many diamond manufacturers are integrating downstream to achieve that added value and differentiate their product and services.

“The more you can sell diamonds in jewelry, the more your gross margins will go up,” he explained in an interview with Rapaport News earlier this year. “But not everyone can execute it because it’s a different business with a different mindset and a different business model.”

Declining Rough Supply

Most manufacturers who spoke with Rapaport News agreed that manufacturing rough into polished alone is not sufficient to cope with high rough prices and the further forecasted increases.

According to industry consultants at Bain & Company, diamond prices are expected to rise in the long term as supply is forecast to decline from 2018 onward, while demand continues to grow.

De Beers expects that global rough diamond supply will peak at slightly over 160 million carats in 2018 but will plummet to 120 million carats around 2025. This constitutes a 25 percent drop from peak production in less than a decade. De Beers estimates that approximately 146 million carats were recovered in 2013.

De Beers attributes this drop in production to a lack of new mining projects expected to come on stream after 2025 that have potential production volume large enough to impact the overall market. Even if new, large mines are discovered, De Beers noted in its recently published Diamond Insight Report that these would not be developed fast enough to prevent the contraction in supply. The company estimates that the latest generation of large diamond mines have taken on average 22 years to reach production from their initial discovery.

Rough Financing Impacting Pipeline

Bain expects that the demand-supply gap will further squeeze manufacturers’ profit margins at a time when it is becoming increasingly difficult to obtain financing for the working capital needed to reap efficiency gains.

Des Kilalea, a diamond mining analyst for RBC Capital Markets, suggests that it is this lack of financing for rough purchases that will be the final nail in the coffin for smaller, family-owned manufacturing operations.

Kilalea cautions that the entire diamond pipeline has entered an unhealthy situation whereby manufacturers are financing the profitability of the miners and retailers with their bank credit. He predicts that the diamond pipeline will address the problem by evolving toward simpler supply lines with fewer, larger players.

“The longer-term issue is that the miners are not really going to be able to dictate any price to the market because the banks aren’t going to continue financing it,” he says. “Manufacturers will [then] become more reticent to pay high rough prices [in cash] and they will stop extending such crazy credit terms to their own buyers. Why should the guy in the middle be the bankers for the guys on the ends?”

Kilalea expects that the larger manufacturers will address the finance issue by increasingly raising funding from the stock and bond markets to finance their working capital.

Moreover, Kilalea forecasts that as banks reduce their credit lines for rough purchases, the mining and retail segments will be forced to ensure that their profits are not affected if manufacturers go bankrupt.

“The big retailers with financial muscle want to secure the rough and ensure that there are no financial interruptions,” Kilalea says. He explains that retailers are worried that their diamond suppliers may go bankrupt and leave them in the lurch without merchandise. Moreover, the retailers have an easier time of financing their working capital, often paying lower interest rates than their own suppliers.

As a result, Kilalea expects that more large-scale retailers will pursue arrangements similar to those of Tiffany & Co. The New York-based retailer has its own polishing division that procures rough through sight contracts with De Beers and ALROSA and also holds off-take agreements with junior miners Kimberley Diamonds and DiamondCorp to fulfill some of its specific rough requirements.

Bain said in its 2013 industry report that the trend of retailers integrating upstream along the diamond value chain is likely to continue, creating additional pressure on manufacturers as retailers compete for rough with their own polished suppliers.

Survival Not Guaranteed

The consulting company therefore expects further consolidation and integration in the middle of the diamond pipeline as manufacturers seek to maximize their profit margins through efficiencies of scale and scope.

Some manufacturers already predict that there will be consolidation in the cutting and polishing industry even if polished prices rise in the coming decade.

Namdar expects that polished prices will rise significantly in the next decade but diamantaires will need to continually find ways to add value along the pipeline in order to survive and benefit from these higher prices.

“There will be an industry and people will work hard because the ones that won’t work hard won’t be around in 10 years’ time,” he says. “I can’t even guarantee that I will be there, but I know that many good companies that are here today have a roadmap to get there.”

Laurence Graff awarded an OBE for his services to jewellery

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Source: The Jewellery Editor
Author: Maria Doulton

Laurence Graff, Chairman of Graff Diamonds, has been named in the Queen’s Birthday Honours List to receive an OBE for his services to jewellery as he celebrates his 60th anniversary in the jewellery industry.

Graff, who began his career at age 15 as a jeweller’s apprentice in Hatton Garden, says: “From humble beginnings and a lifetime working in the industry, I am extremely proud to receive such an honour.”

“I came from a background where diamonds meant something because so many Jewish people came out of East Europe and suffered and lived off their diamonds,” says the man behind the sparkle of some of the most fabulous diamonds of our times. From a family of Russian immigrants, he arrived in London’s East End with little more than a keen eye for business and a love of valuable things.
His first insight into business came from his childhood Sunday visits to the jewellers in Black Lion’s Yard in Whitechapel, East London. “They were small people doing small business, thinking they were big business, out there in the market, counting out the cash. That was all I knew,” recalls Graff in an earlier interview.

Following a jewellery apprenticeship, in 1962 Graff opened “La Petite Bijouterie” Ltd in London’s Lancaster Gate. Today, Graff Diamonds purchases around 60% of the world supply of yellow diamonds, which are highly visible in his Bond Street shop window. He is also known for his interest in larger diamonds, which would explain why the typical price for a Graff jewel is in the six-figure range.

Everyone knows Graff as he is one of a handful of buyers of big stones in the world. It is often said that he has handled more diamonds of notable rarity and beauty than any other jeweller, including the Wittelsbach- Graff, the Idol’s Eye, the Imperial Blue, the Blue Ice, the Magnificence, the Graff Pink, the Delaire Sunrise, the Graff Constellation, the Flame and the Graff Sweethearts.

A fully integrated operation, Graff Diamonds is involved in all the processes, from rough stone to final ring, employs 700 people around the world and owns 20 boutiques. Safdico, based in Johannesburg, is the house’s cutting and polishing company, and the first stop for rough diamonds, where 300 craftsmen sort, cut and polish 10,000 carats a year. The stones will then either be used by Graff Diamonds or sent to Antwerp, New York or Mauritius. Depending on the size and colour, they will be cut, polished and made into jewellery or simply sold on.

With 95% of all its works exported, Graff Diamonds has won the Queen’s Award for Enterprise four times, most recently in 2006. All Graff jewels are made by 70 jewellers in the workrooms below Graff’s office on Albermarle Street in Mayfair, London.

Christie’s Incredibly Magnificent Jewels Of 2014

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We publish courtesy of Leibish & Co.
Images are reproduced courtesy of Leibish & Co.

Christie’s has been able to give us quite a year for fancy color diamond news. In May 2014, it sold the largest Flawless Blue diamond, the 13.22 carat diamond now renamed the Winston Blue. They also broke the jewelry world auction record when they made over $150 million in sales, they broke the world record price for a red diamond in HK in November, and now last but not least they are giving us the last Magnificent Jewels show in NY. Will they break any more records? Nothing in the auction lists stands out as phenomenal, but as we all know, anything is possible!

We have quite a few items to focus on, including two stones that are from past Argyle tender events – one recent (from 2013), and one from the not too far past, 2003.

This time I will also be presenting the stones in the order of estimation of price by Christie’s.

The star of the evening for us is a rare 21.30 carat Fancy Light Pink diamond of exceptional quality and color as it is a Golconda Type IIa diamond with VS1 clarity. It is estimated to sell at a price between $4 million and $6 million. Since the price spread is quite significant, I am sure we will see quite the bidding war here.

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21.30 carat Fancy Light Pink Golconda diamond

My next choice is pure art in jewelry form. Various color diamonds are combined to create a masterpiece, while allowing quite the display of value creation. This collection is valued at between $3.5 million – $5 million.

A total of over 100 carats in these earrings, this pair features a 52.88 carats VS1 diamond and a 51.46 carats VS2 diamond, both pear shaped and both Fancy Light Yellow. Large enough to get attention yet a subtle color, they are valued between $2.5 million and $3.5 million.

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52.88 carat Fancy Light Yellow VS1 diamond and 51.46 carat Fancy Light Yellow.VS2 diamond earrings

This item may or may not break a record, but will surely grab attention. This 1.42 carat Fancy Red is a previous Argyle tender stone. Lot #11 from the 2013 tender, it used to be a 1.66 carat Fancy Deep Pink, but it was re-polished to realize the potential of the stone. This practice is common when there is recognizable potential there, but only a handful of experts globally can do it properly. This stone is valued between $1.5 million and $2.5 million. In order to break the world record, this stone would have to sell for $3.47 million total or more. We shall see!

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1.42 carat Fancy Red diamond (Argyle tender stone Lot #11 from 2013)

Up to now I have concentrated on both Fancy Intense and Fancy Vivid Blue diamonds. It seems that I may need to add Fancy Blue to my research as we see great importance given to this depth of color as it is also quite rare. This stone, a rarely seen weight of 5.70 carats and VS1 quality, is valued between $1.5 million and $2.5 million.

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5.70 carat Fancy Blue VS1 diamond

I like this diamond. Other than the certificate, where else do we see a brown tint here? A great looking Fancy Brownish Pink diamond weighing in at 14.28 carats, this diamond is special also due to its IF clarity. A real value can be shared here. Estimated between $1 million and $2 million, it may actually surprise us.

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14.28 carat Fancy Brownish Pink diamond ring

Every auction must have some special Fancy Intense or Fancy Vivid Yellow diamond, and this one is no exception. Coming in at 25.16 carat Fancy Intense Yellow with a VS1 clarity, this one is expected to be sold for anywhere between $500k and $700k.

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25.16 carat Fancy Intense Yellow VS1 diamond ring

Lots 198, 199, 200, and 201 had to be displayed as a group – it was just stunning the way they are displayed together. Lot 198 is a 0.73 carats Fancy Blue diamond valued at $90k – $120k. Lot 199 is a 0.51 carat Fancy Vivid Pink with 2 flattering Fancy Blue diamonds coming in at 0.28 and 0.27 carats on the shoulders and valued at a total of $140k – $200k. Lot 200 is a 4.06 carat Fancy Grey Green valued at $100k – $150k. Finally, Lot 201 is a special one – a 0.76 carat Fancy Deep Pink, Argyle tender stone #18 from the 2003 tender and valued at $100k – $150k.

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Christie’s Magnificent Jewels Lots 198-201

by Yaniv Marcus

Please visit Leibish & Co. Site

Famous Diamonds: the Blue Heart Diamond

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The name “Blue Heart” seems to have been inspired by the rare deep blue color of the diamond and it’s extraordinarily beautiful heart-shaped cut, that makes it perhaps the world’s prettiest blue diamond. The “Blue Heart” diamond is sometimes known as the “Unzue” diamond, after the Argentinean woman Mrs. Unzue who owned the diamond for 43 years, having purchased it from Cartier’s in 1910, two years after it’s discovery. The diamond is also mistakenly referred to as the “Eugenie Blue,” after Empress Eugenie of France, the empress consort of Napoleon III (1852-1870), but she could never have owned this diamond because it was discovered only in 1908.

The Blue Heart diamond is a 30.62-carat, heart-shaped, brilliant-cut blue diamond. According to the Gemological Institute of America, the Blue Heart Diamond is a natural fancy deep-blue diamond, with a clarity grade of VS-2.

The “Blue Heart Diamond” enjoys the rare distinction of being the largest heart-shaped blue diamond in the world

The “Blue Heart” diamond belonging to the National Gem Collection of the Smithsonian Institution, is the 11th largest blue diamond in the world, according to our list of known famous blue diamonds in the world, arranged in descending order of carat weights. However, this blue diamond with a rare heart-shaped cut, enjoys the rare distinction of being the largest heart-shaped blue diamond in the world, a position which it had held since its cutting in Paris in 1909/1910, a position which may not change in the forseeable future, given the extreme rarity of large blue diamonds, and the rarity of the heart-shaped cut, seldom employed in blue diamonds. Apart from the 30.82-carat Blue Heart diamond, there are only three other heart-shaped blue diamonds in the table given below, an indication of the rarity of this shape. These are the 27.64-carat, “Heart of Eternity” diamond, the largest of 10 extremely rare blue diamonds exhibited at the Millennium Dome in London in the year 2,000 together with the 203.04-carat Millennium Star, the centerpiece of the exhibition; the 13.78-carat heart-shaped Begum-blue diamond; and the 5.46-carat heart-shaped Marie Antoinette blue diamond.

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The Blue heart diamond is a rare Type IIb diamond, and all naturally colored blue diamonds belong to this group. However, the occurrence of these diamonds is much less than 0.1 % of all natural diamonds. Type II diamonds are nitrogen-free or contain undetectable quantities of nitrogen.

If the diamonds are not only nitrogen-free but free of all other chemical impurities, they are known as Type IIa, which constitute about 1-2 % of all naturally occurring diamonds. However, instead of nitrogen, if they contain trace quantities of another impurity boron, the diamonds are known as Type IIb. Boron atoms incorporated in the crystal structure of the diamond, changes it’s absorption spectrum imparting the blue color to the diamonds. The diamonds also become semi-conducting, unlike other diamonds which are non-conductors of electricity.

Previously the origin of the Blue Heart diamond was uncertain, and thought to be either India or South Africa, even though by the beginning of the 20th century, most of the historical diamond mines of the Eastern Deccan Plateau in India were already abandoned.

However, this mystery has been solved and more information about the diamond has been unearthed, thanks to the untiring efforts of the dedicated scientists of the Natural History Museum of the Smithsonian Institution, the present owners of the diamond. The researches went into the archives of De Beers, and unearthed evidence to show that the diamond was discovered in the Premier diamond mines of South Africa, in November, 1908, and the rough stone weighed 100.5 carats.

Mistaken reference to “Blue Heart Diamond” as “Eugenie Blue Diamond” corrected after the Smithsonian research

The “Blue Heart” diamond was earlier mistakenly referred to as the “Eugenie Blue” diamond, because of the misconceived notion, that the diamond once belonged, to Empress Eugenie of France, the Empress consort of Napoleon III (1852-1870). However,we now know for certain that Empress Eugenie, who reigned between 1852 and 1870, could never have owned this diamond, because it was discovered only in 1908.

The French Connection to the Blue Heart Diamond

The Blue Heart diamond certainly did not belong to Empress Eugenie of France, but undoubtedly there is a French connection to this diamond, as the rough diamond was cut and polished, and transformed into it’s modern heart-shaped form by the renowned French diamond cutting firm, Atanik Ekyanan of Neuilly, Paris between 1909 and 1910. The cut and polished diamond was sold in 1910 to Cartier’s, who set the diamond in a “Lily of the Valley” corsage and sold it to an Argentinean woman Mrs. Unzue in 1911.

The Blue Heart Diamond is sometimes referred to as the “Unzue Diamond” as the Unzue family owned the diamond, until 1953

The diamond remained in the Unzue family for 42 years and hence the diamond is sometimes referred to as the “Unzue Diamond.” In 1953, it was purchased by the jewelry firm Van Cleef & Arpels, who dismantled the corsage setting, and re-set the diamond in a pendant, surrounded by 25 colorless or white diamonds. The pendant and the accompanying necklace was priced at US$ 300,000, and was sold to an unnamed European titled family.

In 1959, Harry Winston acquired the diamond, and re-set it again in a platinum ring, surrounded by 25 colorless/white, round brilliant-cut diamonds and sold it to Marjorie Merriweather Post, the American socialite and founder of General Foods Inc., in 1960.

Marjorie Merriweather Post generously donates the Blue Heart Diamond in 1964 to National Museum of Natural History of the Smithsonian Institution

The diamond remained with Mrs. Post until the year 1964, when she finally decided to generously donate the rare blue diamond to the National Museum of Natural History of the Smithsonian Institution, at Washington DC, where it is on display in the Janet Annenberg Hooker Hall of Geology, Gems and Minerals.

Diamonds: Driven by market forces for the first time in 100 years

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Ce: Resource Investor

Author: Paul Zimnisky

Up until recently the diamond industry had a structural flaw — just one player controlled it. De Beers was the diamond industry, and diamonds were synonymous with De Beers. However, over the last 25 years, a series of events led to the dismantling of the De Beers monopoly. Today, De Beers no longer has complete control of the diamond industry, and for the first time in a century, market forces, not the De Beers monopoly, drive the diamond market.

In the late 1800s after a massive diamond discovery in South Africa, a diamond rush was born, and businessman Cecil Rhodes bought as many diamond mining claims as he could, including farmland owned by the De Beer family. By the turn of the century, Rhodes had accumulated enough properties that his company accounted for the majority of the world’s supply of rough diamonds. He called his company De Beers Consolidated Mines Limited.

As De Beers maintained a hold on the worlds rough diamond supply through the first quarter of the 20th century, financer Ernest Oppenheimer began accumulating shares of De Beers whenever available, and reached a controlling stake of the company by the mid-1920s. Under Oppenheimer’s control, De Beers further expanded into every facet of the diamond industry, intent on monopolizing distribution. De Beers successfully influenced just about all of the world’s rough suppliers to sell production through the De Beers channel, gaining control of the global supply not produced by De Beers mines. The cartel was born, giving Oppenheimer the power to influence diamond supply and thus diamond prices.

The De Beers distribution channel, named the Central Selling Organization or CSO, (later changed to Diamond Trading Co. or DTC), had the power to sell what, when, and where they wanted to. In order to buy from CSO, membership as a “Sightholder” was required, which was completely the discretion of De Beers, as was the quality and price of the product being sold. No negotiation between the CSO and Sightholder occurred, all transactions were take-it-or-leave-it. In order to maintain a stable but rising diamond price, De Beers had the power to stockpile inventory in a weak market or raise the prices charged to Sightholders, and then in an excessively strong price environment (with the potential to damage demand), De Beers had the excess supply on hand to release to the market when needed, repressing disorderly price increases.

To keep the system intact, it was necessary for De Beers to maintain control of the world’s rough diamond supply via purchases through CSO. In the second half of the 20th century, as new world class mines were discovered in Russia, Australia and Canada, it became more and more difficult for De Beers to purchase all global production. The biggest risk to the survival of the cartel was for mines to begin selling directly to the market, thus bypassing De Beers.

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Source: WWW International Diamond Consultants Ltd, Economic Times of India, and Authors analysis.

Russia (present day the world’s largest diamond producer by value) began producing diamonds in the mid-twentieth century. At first, the Russians agreed to sell production to De Beers keeping the cartel intact. However, this quickly became extremely costly to De Beers as the Russian mines produced greater quantity and lower quality stones than anticipated. This prompted De Beers to commence the ”Diamond is forever” marketing campaign, transforming the image of diamonds to a proxy for love, expanding demand of lower quality stones to a new middle class American market, in an effort to absorb the new supply. Another challenge emerged in 1963 when Anti-Apartheid legislation restrained the Soviet Union from dealing with a South African company. But the final blow to the arrangement came during the Soviet Union collapse in the 1990s, when political chaos and a weak ruble further separated Russia’s production from De Beers.

Shortly after losing control of Russian supply, the Argyle Mine in Australia, at the time the largest diamond producing mine in the world by volume, broke away from the DeBeers supply chain. Over the next few years, other mines followed suit, as new world-class mines in Canada sold supply independent of De Beers.

The emergence of new supply distributed outside of CSO meant that De Beers, was forced to hold back from selling large portions of its own inventory and to purchase excess supply from its new competitors in the open market, in an effort to maintain control of the market. By the end of the 1990s, De Beers’s market share had fallen from as high as 90% in the 1980s to less than 60%. De Beers no longer had control of the market in 2000, when the company announced a shift in strategic initiative to focus on independent marketing and branding, rather than generic diamond price control.

However, the monopoly officially ended in 2001, when several lawsuits were filed in U.S. courts alleging that De Beers “unlawfully monopolized the supply of diamonds, conspired to fix, raise, and control diamond prices, and issued false and misleading advertising.” After multiple appeals, in 2012 the U.S. Supreme Court denied final petition for review, and a settlement in the amount of $295 million with an agreement to “refrain from engaging in certain conduct that violates federal and state antitrust laws” was approved.

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Source: WWW International Diamond Consultants Ltd, Gem Certification & Assurance Lab, Price Scope, and Authors analysis. Price constitutes various qualities of rough and polished diamonds, and shows diamond price deviation from starting basis of 100 beginning in 1987.

Shortly after losing control of Russian supply, the Argyle Mine in Australia, at the time the largest diamond producing mine in the world by volume, broke away from the DeBeers supply chain. Over the next few years, other mines followed suit, as new world-class mines in Canada sold supply independent of De Beers.

The emergence of new supply distributed outside of CSO meant that De Beers, was forced to hold back from selling large portions of its own inventory and to purchase excess supply from its new competitors in the open market, in an effort to maintain control of the market. By the end of the 1990s, De Beers’s market share had fallen from as high as 90% in the 1980s to less than 60%. De Beers no longer had control of the market in 2000, when the company announced a shift in strategic initiative to focus on independent marketing and branding, rather than generic diamond price control.

However, the monopoly officially ended in 2001, when several lawsuits were filed in U.S. courts alleging that De Beers “unlawfully monopolized the supply of diamonds, conspired to fix, raise, and control diamond prices, and issued false and misleading advertising.” After multiple appeals, in 2012 the U.S. Supreme Court denied final petition for review, and a settlement in the amount of $295 million with an agreement to “refrain from engaging in certain conduct that violates federal and state antitrust laws” was approved.

Source: WWW International Diamond Consultants Ltd, Gem Certification & Assurance Lab, Price Scope, and Authors analysis. Price constitutes various qualities of rough and polished diamonds, and shows diamond price deviation from starting basis of 100 beginning in 1987.

The way De Beers did business, which revolved around the central concept of controlling supply in the market, was simply not viable in a more competitive environment, and De Beers could not maintain the monopoly. From 2000 to 2004 diamond prices modestly declined, as the De Beers stockpile was liquidated into new demand coming out of Asia. By 2005, the inventory overhang had been lifted allowing market forces to drive diamond prices for the first time in a century, resulting in unprecedented price volatility. Diamond prices made a new high in 2007, followed by a violent sell off in 2008 and 2009 before rebounding to another new high in the summer of 2011.

With a market share of less than 40%, in 2011 the Oppenheimer family announced a complete exit from De Beers, ending almost a century-long ownership of perhaps the greatest monopoly in history.

About the Author: Paul Zimnisky

Paul Zimnisky, has worked in the financial industry for almost 10 years, primarily as a buy-side equity analyst focused on the metals and mining space, and as an ETF arbitrage trader. Paul currently creates and develops new exchange-traded products. Paul has a finance degree from the University of Maryland.