Diamond Leader De Beers Will Be Sold If BHP Acquires Anglo American

BHP’s share-swap take over bid for arch-rival Anglo American to create a $185 billion mining giant will struggle to succeed, but if it does there is one arm of the target certain to be sold, the De Beers diamond business.

Despite its century-old reputation and claim to be the custodian of the diamond industry De Beers has become more trouble than it’s worth, under attack from two directions.
Demand for diamonds is being battered by global economic uncertainty while the problem of slowing sales is being supercharged by the increasing popularity of lab-grown gems which are indistinguishable from mined diamonds.

A third factor which could seal the fate of De Beers is that BHP quit the diamond industry a decade ago after struggling to mix mining, and its basic function of heavy-duty earthmoving, with the fine art of producing and marketing baubles for the rich and newlyweds.

It could get worse for the diamond mining business because prices for lab-grown gems are continuing to fall as a market split widens. High-value jewels remain of interest to a handful of wealthy people, while the lion’s share of the market shifts to lab-grown.

De Beers, which was a pioneer in the business of lab-grown gems via its Lightbox subsidiary, has consistently played down the threat to its traditional mined-diamond business but sustaining that argument became a little harder on Tuesday when it reported a big production fall in the March quarter.

The 23% drop in output caused Anglo American to lower its full year diamond production target from between 29 million and 32 million carats to between 26-and-29 million carats.

Management blamed the decline on the effect of a build-up of inventory of unsold stones with lab-grown gems cannibalising demand for mined stones.

Forbes Daily: Join over 1 million Forbes Daily subscribers and get our best stories, exclusive reporting and essential analysis of the day’s news in your inbox every weekday.It Could Get A Lot Worse
It could get a lot worse if a recent study of the diamond market by a specialist London jewelry firm is a guide.

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According to Hatton Jewels, which specialises in handling antique second-hand gems and does not sell lab-grown gems, some lab-grown diamonds are spectacular overpriced with retailers inflating their prices by as much as 1200%.

Rachel Smith, head valuer at Hatton said that in the current landscape, every business pays a similar wholesale price for lab-grown diamonds, regardless of disparities in their retail market value.

“The wholesale price of lab-grown diamonds can plummet to as low as 1% of their natural counterparts’ value,” Smith said in an emailed statement.

Smith cited three retail prices for a two-carat F VS1 (high quality) lab-grown diamond being offered for sale at $11,375, $2730 and $866. A gem of that size and quality costs between $500 and $759 to make.

“While some companies uphold integrity by selling lab-grown diamonds at fair market value, ensuring equitable competition, others exploit the situation for profit.

Diamond “growing” machines in India.
“Some retailers inflate prices by as much as 1200%, potentially driven by a desire to maintain the narrative that they are not different from natural diamonds, otherwise they may be considered too cheap and therefore undesirable, or to capitalize on trends at the expense of consumers.”

If Smith is right and lab-grown diamonds are currently being sold at inflated profit margins, the ease with which they are produced will ensure an increase in supply, resulting eventually in a price crash.

When that happens the value of the once-great De Beers business will fade, and the appeal to a mining company like BHP will disappear — if it succeeds in acquiring Anglo American.

Source: Forbes

Petra’s Prices Boosted $8.2m Blue

Petra Diamonds sold fewer carats but achieved higher prices earlier this month at its fifth tender of FY 2024, boosted by the sale of an $8.2m blue diamond.

The UK-based miner achieved an average $136 per carat on sales of 362,000 carats for $49m.

Like-for-like figures for its fourth tender, in February, were $112 per carat on sales of 429,000 carats for $48m.

Sales for the year to date are, however, lagging behind FY 2023, at $285m, down 10 per cent down on $316m.

The 14.76ct exceptional color and clarity blue diamond recovered from Cullinan, South Africa, sold for $8.2m, although it was not classified as an “exceptional stone” (over $15m).

Total revenue for Q3 FY 2024 was $66m, down 27 per cent on the previous quarter, due to the lower production and the timing of receipts from the fifth tender.

“Production for the quarter is consistent with the preceding quarter and in-line with expectations.,” said CEO Richard Duffy.

Production guidance for FY 2024 is 2.75m to 2.85m carats.

Earlier this month Petra announced the sale of its loss-making Koffiefontein mine, in South Africa, to Dubai-based Stargems for a nominal sum.

Source: DCLA

Collection of Blue Diamonds to Fetch Over $70M

 

The eight De Beers blue diamonds.

Sotheby’s will sell a group of eight fancy-blue diamonds from De Beers across its global Magnificent Jewels auctions, expecting the set to bring in more than $70 million.

The stones are cut in various shapes and range from 1.22 to 11.29 carats, with a total weight of 32.09 carats, Sotheby’s said last week. The polished originates from five rough blues that De Beers and Switzerland-based manufacturer Diacore purchased jointly from Petra Diamonds in November 2020. Diacore cut and polished those stones into eight diamonds over the past two years.

Sotheby’s will offer three stones from the eight-piece group, called The De Beers Exceptional Blue Collection, this year. The first, a cushion brilliant-cut, 5.53-carat, fancy-vivid blue diamond will go under the hammer at the Magnificent Jewels and Noble Jewels sale in Geneva on November 9, with a high estimate of $15 million. Meanwhile, the December 7 Magnificent Jewels sale in New York will feature a cushion brilliant-cut, 3.24-carat, fancy-vivid blue, internally flawless diamond estimated at up to $8 million. That jewel will be joined by a cushion-cut, 2.08-carat, fancy-intense-blue diamond with an upper price tag of $1.5 million.

“I have remained in awe of the De Beers Exceptional Blue Collection since the first moments I set eyes on it,” said Olivier Wagner, head of Sotheby’s Magnificent Jewels auctions in Geneva. “The market for colored diamonds and precious gemstones has never been stronger. [The diamonds] will, I am sure, captivate all collectors of exceptional gemstones.”

Sotheby’s will sell the remaining five diamonds at its spring 2023 Magnificent Jewels auctions. Those include a step-cut, 11.29-carat, fancy-vivid-blue estimated at up to $50 million; a step-cut, 4.13-carat, fancy-intense-blue expected to go for up to $3.5 million; and a cushion brilliant-cut, 3.10-carat, fancy-vivid-blue diamond with a high price of $5 million.

In April, Sotheby’s sold another De Beers blue diamond: a step-cut, 15.10-carat, fancy-vivid-blue, internally flawless stone that went for $57.5 million in Hong Kong.

Source: DCLA

Diamond exploration hits a new low — even as rough prices soar

 Diamond exploration hits a new low — even as rough prices soar

  Diamonds recovered at the Star-Orion South project. 

There are few things that are more alluring and exciting than a diamond — but one of them is a significant new diamond discovery. Now those are truly rare.  

In Canada, we haven’t had a significant diamond discovery for years — and the current lack of spending on exploration makes one less likely to happen in the future.  

Globally, exploration for diamonds has nearly ground to a halt. In Canada last year, coal exploration attracted more spending than diamond exploration ($61 million vs. $50 million), which fell 21% from the previous year, hitting a 20-year low. 

Adding to this downward momentum, in June, Rio Tinto suddenly pressed pause on its 75%-owned Fort à la Corne (Star-Orion South) diamond joint venture in Saskatchewan. After pouring more than $180 million over the past six years into a bulk-sampling program and other work to evaluate the project, Rio Tinto told JV partner Star Diamond it would not be spending more money this year “beyond what is necessary for care and maintenance.” Star Diamond, which holds 25% of the large but low-grade project, said that Rio also advised that it “intends to conduct a near-term review of its alternatives regarding the project, including its potential exit.” 

It’s not clear yet what Rio Tinto will ultimately decide to do. But further investment, rather than pulling back, would have given the sector a much-needed shot in the arm. And the company, which saw its Argyle mine in Australia close in late 2020, certainly needs to replace that production and would be motivated to make the project work, if possible. 

While the diamond trade and diamond prices were devastated by the pandemic, prices have made a strong comeback (in part benefiting from uneven efforts globally to avoid purchasing diamonds mined by Russia’s Alrosa). De Beers reported a 58% rise in its average selling price to US$213 per carat for rough diamonds in the first half of the year, and its rough price index rose 28% compared to the same period of 2021. 

That’s not likely to help revive exploration immediately, however. 

The fact is that there have been too many surprises in diamond development around the world, which have shattered investor confidence. 

Source: DCLA

US Demand, Uncertain Supply Buoy Diamond Prices

Diamond trading was stable in May despite concerns about inflation, rising interest rates and slumping stock markets. Polished prices initially declined but later steadied as dealers anticipated supply shortages resulting from Russian sanctions.

The RapNet Diamond Index (RAPI™) for 1-carat diamonds slid 0.5% in May but was 9.3% higher on June 1 than at the beginning of the year.

RapNet Diamond Index (RAPI™)
	May	Year to date Jan. 1 to June 1	Year on year June 1, 2020, to June 1 2021
RAPI 0.30 ct.	0.6%	1.3%	-0.1%
RAPI 0.50 ct.	-0.3%	5.8%	8.2%
RAPI 1 ct.	-0.5%	9.3%	22.1%
RAPI 3 ct.	-0.3%	10.6%	25.7%

© Copyright 2022 by Rapaport USA Inc.

                           

US demand is supporting the market even as economic uncertainty sets in. Expectations are rising for the Las Vegas shows, which begin June 8. Dealers hope the positive sentiment will boost trading in the second half of the year. Chinese wholesalers remain cautious as activity resumes after the country’s Covid-19 lockdowns.

Inventory levels are high but have decreased in select categories. The number of diamonds on RapNet stood at 1.8 million as of June 1, up 43% from a year earlier. The quantity of 0.30-carat, D- to H-color, IF- to VS-clarity goods fell 14% in May; 0.50-carat diamonds in the same range declined 11%. Both categories were still significantly above last year’s levels.

While the sanctions on Russian goods have not yet caused notable polished scarcities, shortages are likely in the coming months. Rough supply has dropped since Alrosa canceled its March and April sales. Prices at rough auctions have increased — particularly in the small-diamond category, which Alrosa dominates. De Beers raised prices of small rough at its latest sight from June 6 to 10.

The market is splitting into two segments: Russian and non-Russian goods. Some big cutters are finding ways to buy Alrosa rough in order to serve centers that remain open to buying Russian-origin polished. These diamonds will likely sell at a discount to non-sanctioned ones.

US and European jewelers and brands may have difficulty filling their sourcing requirements in the coming months without Russian supply. This will lend further support to diamond prices.

Source: DCLA

Sotheby’s Rakes In $57.5M for De Beers Blue

A record blue diamond co-owned by De Beers far outstripped its presale estimate in a stand-alone sale at Sotheby’s in Hong Kong, garnering HKD 450.9 million ($57.5 million), the auction house said Wednesday.

The 15.10-carat De Beers Cullinan Blue diamond

The step-cut, 15.10-carat, fancy-vivid-blue, internally flawless stone, called the De Beers Cullinan Blue, is the largest of its color to appear at auction. The stone, which sold to an unnamed buyer, had been expected to fetch up to $48 million.

Petra Diamonds discovered the 39.35-carat rough in April 2021 at its Cullinan mine in South Africa. In July, De Beers and Diacore bought the stone for $40.2 million, and Diacore manufactured the piece into the final polished.

To date, only five blue diamonds weighing more than 10 carats have come to auction, none of which has exceeded 15 carats, Sotheby’s explained. Similar blue diamonds have also fetched high prices, including the Blue Moon of Josephine, a cushion-shaped, 12.03-carat, fancy-vivid-blue, internally flawless diamond that sold for $48.5 million at Sotheby’s Geneva in 2015. Meanwhile, the Oppenheimer Blue, a step-cut, 14.62-carat, fancy-vivid-blue, VVS1-clarity stone, garnered $57.5 million at a Christie’s Geneva sale in 2016.

Source: DCLA

De Beers Cullinan Blue Diamond Could Bring $48M at Auction

De Beers Cullinan Blue Diamond

Sotheby’s will auction a stone described as “the largest vivid blue diamond ever to appear at auction” on April 27 in Hong Kong.

Sotheby’s estimates that it could bring $48 million.

Cullinan Blue Diamond

The 15.1 carat step-cut blue was cut from a rough stone discovered in April 2021. It is “the largest internally flawless step cut vivid blue diamond that the Gemological Institute of America (GIA) has ever graded,” according to a press statement.

“This diamond ranks as one of the best De Beers has ever seen,” said Bruce Cleaver, CEO of De Beers Group. “It is extremely rare and unique, and as the Home of Diamonds, De Beers is pleased to join together with Sotheby’s to bring this diamond to the world.”

Only five blue diamonds over 10 carats have ever come to auction, Sotheby’s notes. Until now, none has exceeded 15 carats.

“Blue diamonds of any kind are rare on the market, but this is the rarest of the rare; nothing of remotely similar calibre has appeared at auction in recent years,” says Patti Wong, chairwoman of Sotheby’s Asia. “Hundreds of millions of years in the making, this extraordinary blue diamond is surely one of nature’s finest creations.

The diamond comes from the Cullinan mine in South Africa.

Source: DCLA