Three small towns outside Mumbai in India have replaced Antwerp in Belgium as the world’s diamond-cutting centre. Instead of stones being cut and polished by Orthodox Jews who have a centuries-old connection to the jewel industry, they are now processed by Indians using sophisticated tools in a hi-tech environment. The customer base is changing too – many buyers are likely to be from Hong Kong and increasingly the mainland and Taiwan.
The highly portable asset has retained its exclusivity and expensive benchmark prices. Diamonds such as the Cullinan which measured over 3,000 carats as a rough are few and far between but even much smaller diamonds can command stratospheric prices. Earlier this year a buyer in Geneva paid US$57.5 million for the 14.62 carat Oppenheimer Blue diamond. The previous record holder for most expensive gem retains the title of most expensive price per carat – the Blue Moon of Josephine fetched US$4.03 million per carat in Geneva in 2015.
Pink and red diamonds don’t come cheap either. A 15.38 carat vivid pink diamond sold for US$42.8 million earlier this year in Geneva. In 2014 a buyer in Hong Kong paid US$5 million for a 2.09 carat fancy red diamond.
Mining conglomerate Rio Tinto currently has a collection from its Argyle mine in Western Australia open to tender. Rather than an open auction, offers are taken as sealed bids, with a closing date of October 12th. Bidders can place offers for the entire collection or as many individual stones as they want.
At a showing of the gems, Marie Chiam cups her hands together to show the volume of diamonds produced in a year at the Argyle mine. The marketing executive’s petite hands reinforce the message that this is a very small quantity indeed but even smaller is the “teaspoonful” of pink diamonds excavated from the mine – about 0.1 per cent of annual production.
Rio Tinto is taking its jewels around the world, stopping in New York, London, Perth and Copenhagen. Hong Kong is on the itinerary, not just because it is a good market in its own right – one year the Peninsula Hotel-based jewellers Graff Diamonds bought the whole collection and turned it into a piece for the Sultan of Brunei – but because there is increasing interest in diamonds from mainland collectors.
“In the last five years the Chinese have become sophisticated buyers of pink and coloured diamonds,” says Josephine Johnson, the Argyle Pink Diamonds manager. Pointing out that red is a highly symbolic colour for the Chinese, she says the rising demand is obvious in the number of ateliers expanding into Hong Kong and Shanghai. Three have opened recently in the two cities. Johnson says Taiwan will be the next big market and that it is already difficult for the mining conglomerate to supply enough diamonds to Asian shops.
For collectors the aim can be to own a complete set of colours. Typically, a new collector will start by buying white diamonds and then move on to yellows and then the increasingly rare pinks, blues, violets and reds. For connoisseurs the important element is not the size but the intensity and clarity of the colour in any given stone. That makes the stone better suited for jewellery.
This year’s Argyle Pink collection weighs in at 58.24 carats, with an average size of 0.92 carats, which Chiam says is significantly bigger than other years’ average of 0.88 carats. The collection comprises 57 pinks, three reds, one purplish red and two violet diamonds. The Argyle mine is the world’s only known source of diamonds that are violet because they are saturated with hydrogen. Other violet diamonds contain trace metals that give them their colour. To give an idea of their rarity, over 30 years of sales, only 12 carats of violet diamonds have been on offer – just under four carats are available this year. Two of what Rio Tinto calls the collection’s five hero diamonds are violets, weighing in at 2.83 and 1.11 carats.
There is also a “hero” red diamond of 1.09 carats. While all diamonds are lumps of carbon that have been put under immense heat and pressure in the earth’s crust, reds are formed by even more intense pressure, explains Chiam, adding that this is not the mine’s only geological peculiarity.
The diamond pipe or seam that became Argyle mine was discovered by a prospector called Ewen Tyler, who had been scouring an area the size of Great Britain. Chiam says that Tyler’s insight was to realise that looking for a mineral called Kimberlite was an error. “This is the indicator mineral found in creeks and streams in South Africa,” says Chiam. Instead Tyler found garnets and other small gems in a mineral called Lamprorite. “After a lot of effort of exploration over an enormous area, Tyler traced the creeks back to the pipe and a mine was constructed in record time.”
The mine is now known for its production of coloured diamonds.
Several of the diamonds in this year’s collection are being called “heroes” or “historic” because of their rarity and the intensity of the colours. The Argyle Violet started as a 9.17 carat rough diamond but after 80 hours of cutting and polishing is now 2.83 carats. Chiam explains that the shape of the rough and the path that light takes through it, will determine the cut. “It’s a blend of art and science.”
The stone may be as historic a find as a more famous stone such as the Koh-i-noor but is dwarfed by the latter’s 105.6 carat weight. It was believed to be closer to 800 carats on discovery but lost much if its weight to successive cutting, the last by order of Prince Albert, Queen Victoria’s consort. When the British acquired the diamond they put a strange value on it – having taken it through their conquest of the last Muslim dynasty of India, the chaplain of Delhi, the Reverend Midgley John Jennings thought the British should show their gratitude by converting the last owners of the diamond to Christianity.
Whatever the spiritual value of the exercise, it’s hard to convert to a dollar price. In fact, according to data from Gemdax, Argyle pink diamond prices outperformed the SP500, the Dow Jones and Hang Seng indices between 2000 and 2015. The SP500 outperformed diamond prices from 2006-2008 but has failed to match the performance since. Over the same period pink diamonds have also outperformed white diamonds by a considerable margin and roughly tracked art as an asset.
However, diamonds have lost their appeal to some investors due to the taint of blood or conflict diamonds, stones that have come from war zones, dug up in questionable circumstances and used to fund further conflict or, according to the NGO Global Witness a parallel state in Zimbabwe. The diamond industry has attempted to counteract the negative publicity by instituting the Kimberley Process, a process of verification that was supposed to exclude rough diamonds from war zones entering the market. Global Witness discontinued its involvement with the process in 2011, believing the diamond industry was not doing enough to prevent blood diamonds from entering the market.
Johnson says that the industry has worked hard to eradicate blood diamonds. “There is a closed chain of custody from mine to market,” she says of Rio Tinto’s gems. “We know everyone who has handled it.” The Argyle collection is obviously from Australia, making the blood diamond issue irrelevant in this instance.
How much could you expect to pay for stones in this year’s collection? Chiam and Johnson remain tight-lipped. “Diamonds are a unique asset class. There’s more of a parallel with fine art,” says Johnson, claiming that the type of connoisseur who buys a coloured diamond might equally buy a painting by Picasso or Monet. Does that mean buyers can expect to pay the same as they would for paintings by those artists? The pair won’t be drawn.
Over the last 12 years growth in prices for Argyle pink diamonds have been double digits year-on-year and are only likely to rise further as the mine only has four years productive life left, meaning the world’s only known source of diamonds of this quality will soon run dry.