De Beers: No Need to Flag Synthetics Treatments

De Beers claims it doesn’t need to disclose treatments to its lab-grown diamonds, placing itself at odds with many synthetics traders pushing for full transparency in the sector.

The company’s synthetics brand, Lightbox, applies post-growth enhancements to its colored lab-grown diamonds, it confirmed with Rapaport News. However, it doesn’t need to tell consumers, because the processes don’t affect the value, and are just one more step in a man-made technological process, a spokesperson argued.

“Our colored (pink and blue) stones are manufactured by a combination of modifications to the synthesis conditions and treatments after synthesis,” Sally Morrison, chief marketing officer at Lightbox, wrote in an email to Rapaport News last week. “Lab-grown diamonds are a manufactured product, and as such it really doesn’t matter how many stages there are to the overall manufacturing process, or whether these comprise separate stages of synthesis and post-synthesis treatment.”

The company also has no problem with the wider lab-grown trade treating diamonds without disclosure, though Lightbox doesn’t enhance its own white stones. Those items come out of its presses with good-enough color, enabling it to keep the cost down by avoiding an extra manufacturing phase. Many other producers do improve the color of their white stones through processes such as High Pressure-High Temperature (HPHT). Morrison refused to specify which enhancement methods Lightbox used.

“All HPHT treatments really do is add cost and complexity to the manufacturing process,” Morrison noted. “This may in part explain why some other lab-grown-diamond manufacturers charge higher prices than Lightbox.”
Still, the production cost is roughly the same for Lightbox’s white, blue and pink stones, despite the extra stages involved in the latter two colors, Morrison noted. That’s one of the reasons the company sells everything at $800 per carat, rather than charging more for colored stones, she said.

Full transparency?

De Beers’ stance on disclosure places the company as an outlier in the debate on whether such transparency is necessary in the lab-grown sector.

The US Federal Trade Commission’s jewelry guidelines, which instruct businesses how to market diamonds fairly to consumers, give three circumstances in which sellers must disclose treatments to natural or synthetic stones: If the process is not permanent, requires special care, or has a significant effect on the stone’s value. The first two do not apply to color treatments to lab-grown diamonds, but the third might.

“In my opinion, since post-growth treatments are typically done to make the laboratory-grown diamonds marketable, that triggers the third prong of treatment disclosure,” noted Sara Yood, senior counsel at the Jewelers Vigilance Committee, which advises the trade on legal matters.

The issue is important for the industry as the synthetics market is full of white stones with undisclosed treatments, according to Ben Hakman, a consultant on lab-grown diamonds at New York-based Diamond DNA Solutions. The largest producers, mainly in India, pump out brownish goods intended as whites, and then treat them for color.

“The consumer is supposed to know about it,” Hakman said, arguing that disclosure standards should apply equally to natural and synthetic stones. “What does it have to do with…[it] being a lab-grown diamond? You’re justifying treating something without disclosure, and that makes Lightbox no different from all the other guys.”
In certain categories, consumers will pay about 10% more for untreated white synthetics than enhanced lab-growns with the same characteristics, Hakman reported.

“There is a premium [on untreated], but the thing is, they just fly off the shelf,” Hakman said. “In fancy shapes up to 1.99 carats and rounds from 1.30 to 1.99 carats, the untreated goods sell the day they arrive on the market.”
Pinks are slightly different: It’s almost impossible to create them in a machine without further treatments, so “as-grown” goods barely exist, explained Tamazi Khikhinashvili, president of Russian synthetics maker New Diamond Technology. Yet, full transparency is essential for all colors, he asserted.

“It’s very important for the buyer that people know what they’re buying,” he noted.

Source: diamonds.net

De Beers: No Need to Flag Synthetics Treatments

De Beers claims it doesn’t need to disclose treatments to its lab-grown diamonds, placing itself at odds with many synthetics traders pushing for full transparency in the sector.

The company’s synthetics brand, Lightbox, applies post-growth enhancements to its colored lab-grown diamonds, it confirmed with Rapaport News. However, it doesn’t need to tell consumers, because the processes don’t affect the value, and are just one more step in a man-made technological process, a spokesperson argued.

“Our colored (pink and blue) stones are manufactured by a combination of modifications to the synthesis conditions and treatments after synthesis,” Sally Morrison, chief marketing officer at Lightbox, wrote in an email to Rapaport News last week. “Lab-grown diamonds are a manufactured product, and as such it really doesn’t matter how many stages there are to the overall manufacturing process, or whether these comprise separate stages of synthesis and post-synthesis treatment.”

The company also has no problem with the wider lab-grown trade treating diamonds without disclosure, though Lightbox doesn’t enhance its own white stones. Those items come out of its presses with good-enough color, enabling it to keep the cost down by avoiding an extra manufacturing phase. Many other producers do improve the color of their white stones through processes such as High Pressure-High Temperature (HPHT). Morrison refused to specify which enhancement methods Lightbox used.

“All HPHT treatments really do is add cost and complexity to the manufacturing process,” Morrison noted. “This may in part explain why some other lab-grown-diamond manufacturers charge higher prices than Lightbox.”
Still, the production cost is roughly the same for Lightbox’s white, blue and pink stones, despite the extra stages involved in the latter two colors, Morrison noted. That’s one of the reasons the company sells everything at $800 per carat, rather than charging more for colored stones, she said.

Full transparency?

De Beers’ stance on disclosure places the company as an outlier in the debate on whether such transparency is necessary in the lab-grown sector.

The US Federal Trade Commission’s jewelry guidelines, which instruct businesses how to market diamonds fairly to consumers, give three circumstances in which sellers must disclose treatments to natural or synthetic stones: If the process is not permanent, requires special care, or has a significant effect on the stone’s value. The first two do not apply to color treatments to lab-grown diamonds, but the third might.

“In my opinion, since post-growth treatments are typically done to make the laboratory-grown diamonds marketable, that triggers the third prong of treatment disclosure,” noted Sara Yood, senior counsel at the Jewelers Vigilance Committee, which advises the trade on legal matters.

The issue is important for the industry as the synthetics market is full of white stones with undisclosed treatments, according to Ben Hakman, a consultant on lab-grown diamonds at New York-based Diamond DNA Solutions. The largest producers, mainly in India, pump out brownish goods intended as whites, and then treat them for color.

“The consumer is supposed to know about it,” Hakman said, arguing that disclosure standards should apply equally to natural and synthetic stones. “What does it have to do with…[it] being a lab-grown diamond? You’re justifying treating something without disclosure, and that makes Lightbox no different from all the other guys.”
In certain categories, consumers will pay about 10% more for untreated white synthetics than enhanced lab-growns with the same characteristics, Hakman reported.

“There is a premium [on untreated], but the thing is, they just fly off the shelf,” Hakman said. “In fancy shapes up to 1.99 carats and rounds from 1.30 to 1.99 carats, the untreated goods sell the day they arrive on the market.”
Pinks are slightly different: It’s almost impossible to create them in a machine without further treatments, so “as-grown” goods barely exist, explained Tamazi Khikhinashvili, president of Russian synthetics maker New Diamond Technology. Yet, full transparency is essential for all colors, he asserted.

“It’s very important for the buyer that people know what they’re buying,” he noted.

Source: diamonds.net

Lucapa Moves into Diamond Manufacturing

Lucapa Diamond Company plans to cut and polish select stones in-house in an effort to maximize value for its shareholders.

Third-party manufacturers charge high fees without adding significant value, explained CEO Stephen Wetherall in a recent interview. Bypassing them — either by partnering with a manufacturer of the company’s choice, or by cutting and polishing its own diamonds — would save Lucapa money, he told Rapaport News.

While the miner would prefer the former solution, it has not ruled out cutting and polishing some of the diamonds itself on a standalone basis, he said. Lucapa has yet to determine the percentage of its stones it will ultimately manufacture, but Wetherall expects the figure to vary from year to year.

“We are initially entering into the sector by looking at select or bespoke diamonds,” he added. “It might grow down the line into other more regular sizes, but it will be select diamonds initially. Ideally, the strategy will incorporate select diamonds from both [the Lulo and Mothae mines].”

Lucapa hasn’t yet found a location for its manufacturing venture, Wetherall noted. However, one option is Angola, which just opened a new facility.

Additionally, the miner intends to maximize profits further by focusing on its Lulo operations in Angola and its Mothae project in Lesotho. While Lucapa won’t discontinue its Orapa or Brooking exploration projects, Wetherall said, ramping up production at the other two mines will take precedence.
 
“Growing shareholder value is our major imperative, which, in the current climate, we believe warrants a complete focus on our high-value and cash-generating assets,” he stated. “We are still very enthusiastic about [the other] two assets, but at present, it is about creating shareholder value.”

While the company had originally expected to double the amount of ore it processes at Mothae by 2021, it now plans to bring that date forward. It is also set to increase production at Lulo this year by 25% — introducing an additional operating shift on the diamond treatment plant to process ore around the clock, the company said.

The miner believes Lulo has significant potential to become a “world-class asset,” Wetherall added.

Source: DCLA

Lucapa Moves into Diamond Manufacturing

Lucapa Diamond Company plans to cut and polish select stones in-house in an effort to maximize value for its shareholders.

Third-party manufacturers charge high fees without adding significant value, explained CEO Stephen Wetherall in a recent interview. Bypassing them — either by partnering with a manufacturer of the company’s choice, or by cutting and polishing its own diamonds — would save Lucapa money, he told Rapaport News.

While the miner would prefer the former solution, it has not ruled out cutting and polishing some of the diamonds itself on a standalone basis, he said. Lucapa has yet to determine the percentage of its stones it will ultimately manufacture, but Wetherall expects the figure to vary from year to year.

“We are initially entering into the sector by looking at select or bespoke diamonds,” he added. “It might grow down the line into other more regular sizes, but it will be select diamonds initially. Ideally, the strategy will incorporate select diamonds from both [the Lulo and Mothae mines].”

Lucapa hasn’t yet found a location for its manufacturing venture, Wetherall noted. However, one option is Angola, which just opened a new facility.

Additionally, the miner intends to maximize profits further by focusing on its Lulo operations in Angola and its Mothae project in Lesotho. While Lucapa won’t discontinue its Orapa or Brooking exploration projects, Wetherall said, ramping up production at the other two mines will take precedence.
 
“Growing shareholder value is our major imperative, which, in the current climate, we believe warrants a complete focus on our high-value and cash-generating assets,” he stated. “We are still very enthusiastic about [the other] two assets, but at present, it is about creating shareholder value.”

While the company had originally expected to double the amount of ore it processes at Mothae by 2021, it now plans to bring that date forward. It is also set to increase production at Lulo this year by 25% — introducing an additional operating shift on the diamond treatment plant to process ore around the clock, the company said.

The miner believes Lulo has significant potential to become a “world-class asset,” Wetherall added.

Source: DCLA

Diamond Scam Probe Reopens Scandal Italian Banks Want to Forget

In 2014, Massimo Balestra received a call from an employee at his bank, offering a risk-free investment “as secure as a wall safe.” The resident of a small northern Italian town ended up spending 6,945 euros ($7,876) on a diamond that he says he hasn’t seen since.

Balestra is one of almost 100,000 Italians who bought so called “investment diamonds” at the urging of their banks in a widespread arrangement that’s now the target of a criminal investigation by the country’s financial police, according to people with knowledge of the matter.

Investigators allege that Italy’s biggest banks hooked up their clients with diamond brokers who sold them stones for as much as double their market price.

Massimo’s diamond when he acquired it in 2014 the last time he saw it.

Police on Tuesday confiscated more than 740 million euros from UniCredit SpA, Intesa Sanpaolo SpA, Banco BPM SpA and one of its units, Banca Monte dei Paschi di Siena SpA as well as two diamond brokerages in connection with the case, according to a court document seen by Bloomberg.

Representatives for UniCredit, Intesa, and Monte Paschi declined to comment.

Banco BPM SpA said in a statement that the company and current and former executives including General Manager Maurizio Faroni are targets of the probe and that authorities had seized 84.6 million euros in the investigation. The bank said it is cooperating with the investigation.

A lawyer for Intermarket Diamond Business SpA, or IDB, the brokerage selling diamonds through UniCredit and Banco BPM, declined to comment. Lawyers for Diamond Private Investment SpA, or DPI, the reference broker for Intesa and Monte Paschi, didn’t respond to emails and calls seeking comment.

Ugly Spotlight

The probe reopens an embarrassing chapter for the banks as they confront challenges including unloading soured loans, boosting profitability and convincing clients to invest their savings when the euro zone’s third-largest economy is sputtering. Four of the five banks targeted in the investigation were hit by fines imposed by the country’s antitrust authority two years ago over the diamond sales.

Among the scheme’s victims is Italy’s most popular rock star, Vasco Rossi, who bought about 2.5 million euros of diamonds from 2009 to 2011, the document showed.

‘Investment Diamonds’

Italian banks went into the business of investment diamonds en masse after 2010 as they sought to boost profitability amid the country’s worst recession since World War II. Customers committed their savings, enticed by bank promotions and employees who reassured them the investment carried no risk and would provide attractive returns.
Banks acted as intermediaries, putting diamond brokers in touch with their clients and earning fees on the sales. The contracts were often signed in the lenders’ branches, giving clients the impression that the banks were counterparties to the deals.
Prosecutors will allege that the diamonds were sold at prices far above their assessed value and that the banks didn’t meet their legal obligations of informing investors of the risks, the document showed. To deceive potential buyers, the brokers took out ads in the business pages of Italian newspapers that displayed their inflated prices in a format that made it appear that they were market quotes.

Criminal Charges

About 70 people, including several top managers of the lenders, face possible charges of fraud and so called self-laundering. The banks and brokerages themselves are also suspects because companies in Italy can be held responsible if they are shown to have failed to prevent, or didn’t try to deter, a crime by their top executives.
Balestra, who’s bank is among those charged in the case, said he was told to expect an annual yield of 3 percent to 4 percent on a diamond that would be held in the broker’s vault. He said he inquired about the investment six months ago and was told by a bank employee that the diamond broker was close to failure after negative publicity about its activities in the Italian media but his investment wasn’t at risk because the diamond business was doing well in the rest of Europe.
A few months later, he was surprised to receive a letter saying that the broker, Intermarket Diamond Business, which is named in the criminal case, had collapsed and he had the right to seek custody of the diamond. “After five years, not only did I not receive any return, but I also haven’t been able to get my diamond back. I only have a photo of my diamond with a certificate from the International Gemological Institute.”
Milan-based Banco BPM said that it has made “adequate provisioning in 2018 to reimburse clients and cover risks and charges related to the probe.”

Perks, Gifts

Employees of UniCredit and Banco BPM allegedly received at least 99,000 euros of gifts from IDB, including antiquities, smartphones, trips to spa hotels and diamond rings, according to the document.
Regulators first started investigating the sale of diamonds through bank branches in 2016. The next year, the country’s antitrust authority imposed total fines of 15 million euros on Intesa, UniCredit, Monte Paschi and BPM as well as brokers Intermarket Diamond Business and Diamond Private Investment for defrauding savers by selling diamonds to them at vastly inflated prices without informing them of the risks.
While the antitrust authority was completing its investigation, Milan prosecutors opened a separate probe on the matter, digging into the practices of diamond sales between 2012 and 2016. That culminated in the asset seizures last week.
While the fines and the seizures are manageable for the lenders, the risks to their reputations may be higher. Balestra said he’s pessimistic about getting back his investment. “I don’t trust anyone at the banks anymore. In the future, I’m going to put my savings under the mattress.”

Source: DCLA

Diamond Scam Probe Reopens Scandal Italian Banks Want to Forget

In 2014, Massimo Balestra received a call from an employee at his bank, offering a risk-free investment “as secure as a wall safe.” The resident of a small northern Italian town ended up spending 6,945 euros ($7,876) on a diamond that he says he hasn’t seen since.

Balestra is one of almost 100,000 Italians who bought so called “investment diamonds” at the urging of their banks in a widespread arrangement that’s now the target of a criminal investigation by the country’s financial police, according to people with knowledge of the matter.

Investigators allege that Italy’s biggest banks hooked up their clients with diamond brokers who sold them stones for as much as double their market price.

Massimo’s diamond when he acquired it in 2014 the last time he saw it.

Police on Tuesday confiscated more than 740 million euros from UniCredit SpA, Intesa Sanpaolo SpA, Banco BPM SpA and one of its units, Banca Monte dei Paschi di Siena SpA as well as two diamond brokerages in connection with the case, according to a court document seen by Bloomberg.

Representatives for UniCredit, Intesa, and Monte Paschi declined to comment.

Banco BPM SpA said in a statement that the company and current and former executives including General Manager Maurizio Faroni are targets of the probe and that authorities had seized 84.6 million euros in the investigation. The bank said it is cooperating with the investigation.

A lawyer for Intermarket Diamond Business SpA, or IDB, the brokerage selling diamonds through UniCredit and Banco BPM, declined to comment. Lawyers for Diamond Private Investment SpA, or DPI, the reference broker for Intesa and Monte Paschi, didn’t respond to emails and calls seeking comment.

Ugly Spotlight

The probe reopens an embarrassing chapter for the banks as they confront challenges including unloading soured loans, boosting profitability and convincing clients to invest their savings when the euro zone’s third-largest economy is sputtering. Four of the five banks targeted in the investigation were hit by fines imposed by the country’s antitrust authority two years ago over the diamond sales.

Among the scheme’s victims is Italy’s most popular rock star, Vasco Rossi, who bought about 2.5 million euros of diamonds from 2009 to 2011, the document showed.

‘Investment Diamonds’

Italian banks went into the business of investment diamonds en masse after 2010 as they sought to boost profitability amid the country’s worst recession since World War II. Customers committed their savings, enticed by bank promotions and employees who reassured them the investment carried no risk and would provide attractive returns.
Banks acted as intermediaries, putting diamond brokers in touch with their clients and earning fees on the sales. The contracts were often signed in the lenders’ branches, giving clients the impression that the banks were counterparties to the deals.
Prosecutors will allege that the diamonds were sold at prices far above their assessed value and that the banks didn’t meet their legal obligations of informing investors of the risks, the document showed. To deceive potential buyers, the brokers took out ads in the business pages of Italian newspapers that displayed their inflated prices in a format that made it appear that they were market quotes.

Criminal Charges

About 70 people, including several top managers of the lenders, face possible charges of fraud and so called self-laundering. The banks and brokerages themselves are also suspects because companies in Italy can be held responsible if they are shown to have failed to prevent, or didn’t try to deter, a crime by their top executives.
Balestra, who’s bank is among those charged in the case, said he was told to expect an annual yield of 3 percent to 4 percent on a diamond that would be held in the broker’s vault. He said he inquired about the investment six months ago and was told by a bank employee that the diamond broker was close to failure after negative publicity about its activities in the Italian media but his investment wasn’t at risk because the diamond business was doing well in the rest of Europe.
A few months later, he was surprised to receive a letter saying that the broker, Intermarket Diamond Business, which is named in the criminal case, had collapsed and he had the right to seek custody of the diamond. “After five years, not only did I not receive any return, but I also haven’t been able to get my diamond back. I only have a photo of my diamond with a certificate from the International Gemological Institute.”
Milan-based Banco BPM said that it has made “adequate provisioning in 2018 to reimburse clients and cover risks and charges related to the probe.”

Perks, Gifts

Employees of UniCredit and Banco BPM allegedly received at least 99,000 euros of gifts from IDB, including antiquities, smartphones, trips to spa hotels and diamond rings, according to the document.
Regulators first started investigating the sale of diamonds through bank branches in 2016. The next year, the country’s antitrust authority imposed total fines of 15 million euros on Intesa, UniCredit, Monte Paschi and BPM as well as brokers Intermarket Diamond Business and Diamond Private Investment for defrauding savers by selling diamonds to them at vastly inflated prices without informing them of the risks.
While the antitrust authority was completing its investigation, Milan prosecutors opened a separate probe on the matter, digging into the practices of diamond sales between 2012 and 2016. That culminated in the asset seizures last week.
While the fines and the seizures are manageable for the lenders, the risks to their reputations may be higher. Balestra said he’s pessimistic about getting back his investment. “I don’t trust anyone at the banks anymore. In the future, I’m going to put my savings under the mattress.”

Source: DCLA

Higher Costs Hit De Beers Profit

De Beers’ earnings fell in 2018 due to the costs of new initiatives such as its Lightbox synthetics business.

Underlying earnings slid 34% to $349 million, as capital expenditure rose 53% to $417 million for the year, the company reported Thursday. That included outlays related to the launch of De Beers’ lab-grown jewelry brand, as well as its Tracr blockchain program, and Gemfair, which aims to help artisanal miners. It also spent more on marketing, exploration and evaluation in Canada.

Volatile conditions also negatively affected margins in De Beers’ trading unit, it added. Consumer demand for diamond jewelry was strong in the first half, but faltered from July onward amid political uncertainty, unstable stock markets, and the US-China tariff dispute. Manufacturers bought less rough as a result.

“In the second half, the low-priced-product segment came under considerable pressure due to weak demand and surplus availability, the rapid depreciation of the rupee, and a reduction in bank financing in the midstream,” De Beers explained.

Revenue still increased 4% to $6.08 billion for the year, driven by strong consumer demand in the first half, with prices growing 1% on a like-for-like basis. Sales of rough diamonds grew 4% to $5.4 billion, while the average selling price climbed 6% to $171 per carat, reflecting lower sales of cheaper goods in the second half. Sales volumes dropped 4% to 33.7 million carats.

De Beers noted an improvement in sales at De Beers Jewellers, its high-end consumer chain. Revenue from Element Six, its industrial-diamond subsidiary, dropped 5% due to lower sales to the oil-and-gas market.
The company expects some of the group-wide challenges to continue this year.

“The outlook for 2019 global diamond-jewelry consumer demand faces a number of headwinds, including the risk of a potential intensification of US-China trade tensions, the Chinese government’s ability to rebalance economic growth towards consumption, and further exchange-rate volatility,” it said.

De Beers maintained its production forecast of 31 million to 33 million carats for this year, down from 35.3 million carats in 2018. However, profitability could suffer as output from its wholly owned Venetia mine in South Africa enters a lull this year amid a transition from open-pit to underground mining. A larger proportion of production will, therefore, come from mines in Botswana and Namibia that it operates in joint ventures with governments.

Those businesses generate lower margins than it receives from deposits it owns completely.

Source: DCLA