When big­ger is bet­ter dream loses its shine

Some stones are just too big to sell off

The Star Early Edition - - INTERNATIONAL - Su­san Tay­lor

IN THE mys­te­ri­ous world of di­a­mond min­ing, it turns out that some stones are too big to sell.

Canada’s Lu­cara Di­a­mond Corp will have to cut its tennis ball-sized rough di­a­mond to find a buyer, in­dus­try in­sid­ers say, fol­low­ing Sotheby’s failed auc­tion for the world’s largest un­cut stone last sum­mer.

It’s not the end­ing that Wil­liam Lamb wanted for his 1 109-carat stone, named “Lesedi La Rona”, or “Our Light” in the na­tional lan­guage of Botswana where it was mined.

“It’s only the sec­ond stone re­cov­ered in the his­tory of hu­man­ity over 1 000 carats. Why would you want to pol­ish it?” said Lu­cara’s chief ex­ec­u­tive.

“The stone in the rough form con­tains un­told po­ten­tial… As soon as you pol­ish it into one so­lu­tion, ev­ery­thing else is gone.”

Lamb had gam­bled that ul­tra-rich col­lec­tors, who buy and sell pre­cious art works for record-break­ing sums at auc­tion, would do the same with a di­a­mond in the raw.

The un­prece­dented bet failed.

Bid­ding for the 2.5 to 3 bil­lion-year-old stone stalled at $61 mil­lion (R788m) – short of the $70 mil­lion re­serve.

“When is a di­a­mond too big? I think we have found that when you go above 1 000 carats, it is too big – cer­tainly from the as­pect of analysing the stones with the tech­nol­ogy avail­able,” said Pan­mure Gor­don min­ing an­a­lyst Kieron Hodg­son.

“At the end of the day, it’s about un­der­stand­ing what the stone can pro­duce. And the in­dus­try now doesn’t work on hunches as much as it used to 20-30 years ago.”

An ar­cane busi­ness, the di­a­mond in­dus­try has no spot mar­ket trad­ing, no guar­an­tee that “roughs” will yield any value, and a pun­ish­ing grad­ing sys­tem that can dra­mat­i­cally swing val­ues.

Stones in the hun­dreds of carats come with ad­di­tional risk, from the multi-mil­lion-dol­lar price tags and cut­ting process that can take months or years, to capri­cious cus­tomer de­mand.

There is a “very, very small uni­verse” of com­pa­nies with the skill, money and net­work to pol­ish and sell the Lesedi, which will likely take two to four days for the first laser cut, said Lamb.

But af­ter Lu­cara’s pub­lic auc­tion, po­ten­tial buy­ers now know what the mar­ket is will­ing to pay, said Edahn Golan, of Edahn Golan Di­a­mond Re­search & Data. “Maybe it’s worth wait­ing a cou­ple of years,” he said.

While Lu­cara does not need the money, in­vestors may not have that pa­tience.

Lamb said the un­sold stone “weighs heav­ily” on the stock, which is down more than 30 per­cent from late last year.

To be sure, Lu­cara has seen other ben­e­fits from the stone, said in­de­pen­dent di­a­mond an­a­lyst Paul Zimnisky.

“There’s the value of a par­tic­u­lar di­a­mond, but then there’s also a story be­hind the sec­ond-largest rough di­a­mond ever re­cov­ered in mod­ern time,” he said.

“Just from a pub­lic­ity stand­point, no­body knew what Lu­cara Di­a­mond was when they re­cov­ered that stone… now they’re prob­a­bly one of the most recog­nised names.”

Lamb, a for­mer De Beers ex­ec­u­tive, says it’s un­likely Lu­cara can sell the stone for its de­sired price and polishing the Lesedi it­self is risky.

An­other op­tion is for the Van­cou­ver-based miner to part­ner with one or more com­pa­nies to cut and sell the stone. “We’ve al­ready done our home­work,” Lamb said. “You don’t take a stone like this and give it to the sec­ond best.”

In­dus­try sources agree that high-pro­file Bri­tish di­a­mond dealer Lau­rence Graff makes the list of po­ten­tial part­ners, but be­yond that, opin­ions vary.

Lu­cara could work with a con­sor­tium, sources said, in­clud­ing Cora In­ter­na­tional, Di­am­cad, the so-called “King of Di­a­monds” Lev Le­viev, Mouawad, Tache Di­a­monds, Op­ti­mum Di­a­monds, the An­golan pres­i­dent’s daugh­ter Iso­bel dos San­tos, Swiss­diam In­ter­na­tional and Rare Di­a­mond House (RDH).

It would be a mis­take for Lu­cara to hold on to the Lesedi, said Oded Man­sori, RDH man­ag­ing di­rec­tor. “Maybe next week, there will be a larger stone.”

New tech­nol­ogy means min­ers like Gem Di­a­monds, Lu­capa Di­a­mond, Pe­tra Di­a­monds and Let­seng Di­a­monds are un­earthing more mega­s­tones in­tact rather than break­ing the brit­tle crys­tals.

Lu­cara, which in­stalled a Large Di­a­mond Re­cov­ery ma­chine, us­ing X-ray trans­mis­sion sen­sors (XRT), re­cov­ered the Lesedi, an 813-carat and 374-carat stone, over two days.

A Dubai trad­ing com­pany paid a record $63m for Lu­cara’s 813-carat “Con­stel­la­tion”, while Graff bought the 374-carat stone for $17.5m.

“Min­ers have more ad­vanced tech­nol­ogy, this is why we see these large stones com­ing up all of a sud­den,” said Man­sori. “I think that Mother Na­ture has some more sur­prises wait­ing for us.” Lamb won’t take that bet. “Don’t hold your breath. There’s no guar­an­tee that there’s go­ing to be a next one,” he said. – Reuters

PHOTO: REUTERS

A model shows off the 1 109 carat “Lesedi La Rona”, the largest gem qual­ity rough di­a­mond dis­cov­ered in more than 100 years, dur­ing a sale pre­view at Sotheby’s auc­tion house in Lon­don last month.

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