Recently I was asked whether I could be interviewed about the global diamond industry by an Australian reporter for some media organisation. I hummed and hah’d but suggested the reporter use messaging etc and I would respond. (The precise details won’t be mentioned here). I never heard back from the connections and I assume the reporter did the homework and discovered I was ex De Beers and hence a source of real and not fake news.
So I was mucking about with the TV and checking the digital sound output into the hi-fi which I knew from a previous setup created a delay in the audio with the video. I used ABC 24 News as the video source and lo, the ABC reported on De Beers entering the synthetic diamond jewelry market, and as usual the story is rather fanciful. I also learnt who the reporter is. A penny dropped.
The main complaint seemed to be that De Beers will be selling synthetic diamonds at cheap prices, say $400 for 1/2 carat stone, and $800 for 1 carat stone, and thus under cutting the existing sellers, having their lewd profits decreased
The greediest sector in the diamond jewelry business are the cutting houses and retail jewelers. These seem to be upset with De Beers. This is par for the course for them. They have a long history of greed.
Diamond mining is no different to other mining operations. The diamonds get crushed in the mills, and if a large stone, say 150 carats, pops out, we hope it gets to the primary crusher so it can be broken into more saleable pieces. When a large stone does survive the milling process it is then taken out of production and a secret selling process is used to sell the diamond privately at a price known only to the buyer, the whole sale being secret. One problem with diamond mining is that gem quality stones are not that a big percentage of the mine output, and a lot of production is composed of low quality goods that still have to be sold. Except that the cutting houses are not interested in buying low quality goods, only the top class goods. Hence De Beers initiated a selling process where the low quality goods were mixed with top quality goods, and sold as a complete parcel, the price of which would be haggled over.
One must also remember that gold jewelry can be re-melted if a mistake is made. Diamond cutting and cleaving is another matter where a badly aligned cleave could result in the diamond being destroyed into thousands of small pieces, none of which can be reconstituted into a single crystal or stone. This is why diamonds sell for the prices they do.
The world’s inventory of natural diamonds is a diminishing commodity and very few new diamond deposits have been found during the last decade. Over a decade ago De Beers estimated that natural diamond inventory would be used up by 2018, assuming no new finds were made. As Yogi Bera noted, it’s hard to make forecasts, especially of the future.
Natural diamonds demand high prices because they are extremely expensive to mine and extract. Most of the mining costs involve wages, administration costs, and dividend distributions to State Owners. Diamond mining also includes “leakage” where the best stones sometimes, magically, never get to the company sort houses but find their way off the mine by most innovative methods, sometimes in body orifices, or other magical processes. De Beers has no control over that sector but it does represent 20% of the global diamond market. We also see leakage in gold mines and similar precious metal and gem mining operations. The urge to redistribute wealth remains a most powerful force. Strange that no one wants to acquire nickel, iron or bauxite from the respective mining operations.
It was inevitable that De Beers would move to synthetic diamond production and sell it at a commercially realistic price reflecting production costs. Those in the retail sector who, from greed, maximise the selling prices of diamonds jewelry would be expected to complain, and I have no sympathy for them as they are among some of the greediest people on the planet.
And no one is forced to buy a diamond.