(MoneyNewsWire.Net, January 10, 2018 ) PREMIER DIAMOND GROUP (NORTH AMERICA) LTD
Volume 2, No. 7
COLORED DIAMONDS PROVING THEIR WORTH
AS INVESTMENT VEHICLES
Source: Rough & Polished, Editor-in Chief – Vladimir Malakhov
Every diamond needs to find its niche, and the colored diamond business is increasingly promoting itself as the investment diamond vehicle of choice.Colored diamonds account for just 1 percent of the entire diamond market. And some industry observers estimate that there is just one carat of colored diamonds for every 100,000 carats of white stones! And if that was not enough to make colored diamond prices continuously soar higher, supply is falling while demand, particularly from collectors and investors, is rising.
Given that colored diamonds are so much rarer than white diamonds, they naturally cost more than their transparent counterparts. That also means that factors affecting diamond prices and sales are different than those for white diamonds. As has been seen at auctions around the globe over the past several years, demand for rare color diamonds is exceptionally strong. Auctions provide an indication as to the rising demand for these colored stones. In this industry, a Rising Tide Floats All Boats! The number of specialist Companies dealing with Natural Colored Diamonds is small. Plus, there are very few cutters and polishers who have the experience to work with such diamonds. It is a highly specific market. “You have to be aware of so many factors, and that is why there are relatively few long-standing experts. It is not just a case of understanding color diamonds inside out, and how and where to manufacture and market them. You also have to understand the requirements of the investor or collector.”
“If you look at the prices of colored diamonds over the past 10 and 20 years, you can clearly see that not only have they risen, but that they have actually soared.” Israeli color diamonds company, Leibish & Co., says “Investment bankers, financial institutions, and business analysts who have investigated colored diamonds as an investment class are often surprised by their results. So much so that in today’s versatile market specific colored diamonds are considered by many as one of the strongest investment opportunities around. Colored diamonds exhibit investment characteristics that other asset classes can only dream about emulating.”
Among the advantages that fancy color diamonds present are that they are internationally recognized, well established goods that have a long history of being collected and traded for hundreds of years. In addition: “Diamonds are small, they weigh next to nothing and they are extremely portable. Therefore, large amounts can easily be transported and concealed in emergency situations. Your entire portfolio can be stored in your pocket, set in a piece of jewelry, or secured in a safe deposit box,” says Assaf Wallenstein of Maroz Diamonds.
“Even just a little research proves that over the past 30 years, the price appreciation of natural fancy colored diamonds has dominated the market. Auction results prove the strength of colored diamonds in today’s market, not to mention that they have repeatedly broken auction house records for the highest price per carat ever paid at auction for a diamond or jewel. In addition, fancy color diamonds retain their value and beauty, they are durable, are extremely rare, and are a highly private asset – as well as being beautiful and wearable.”
Petra Diamonds Cullinan mine in South Africa is among the best-known source of blue stones, while the Rio Tinto Argyle operation in Western Australia is famous for its rare pink and red diamonds. However, neither of these mines is getting any younger, and the supply of rare diamonds is declining – thus making them even more attractive as an investment. The investment opportunity provided by colored diamonds is clear against the background of a supply shortage in the coming years due to rising demand from China and the Far East, says Mund. “If we see that collectors and investors are looking at white diamonds as an investment for the future due to the shortfall that we know is coming, then how much more are colored diamonds a clear investment prospect given their extraordinary rarity.”
Indeed, pink diamonds have seen their value almost double every five years. High profile purchases by celebrities of such diamonds has boosted demand further. These include the purchase by actor Ben Affleck in 2003 of a six-carat pink diamond ring worth a reported $1.2 million which he gave to then-fiancé Jennifer Lopez. However, demand for pinks, in what might be described as the non-celebrity market, is generally in the range of 1 to 2 carats, the deeper the saturation of color the higher the cost. And for those persons interested in wealth accumulation there may be no better asset available at a still reasonable price then Pink diamonds of between ½ to ¾ carat. Appreciation levels are comparable to larger 1 and 2 carat stones, but at a fraction of the price. Pink diamonds have never seen a fall in value. Indeed, many of them have been sold a number of times, setting new records with every transaction. Among the most famous example of a Blue diamond is the 35.5-carat Wittelsbach diamond for which Laurence Graff paid $24 million. He recut the diamond to remove imperfections, and then sold the Wittelsbach Graff for an undisclosed amount.
Colored diamonds are bought as a long-term investment, meaning they are kept out of the market for lengthy periods. That in itself makes them even rarer, ensuring that the diamonds, when they are put up for sale – (sometimes only once in 20 years in the case of 1 of a kind stones) – will command extraordinarily high prices. “We are talking about portable, wearable, fashionable, high-profile forms of wealth,” said a dealer. “It’s not like gold or cash that is under lock and key in a bank vault – although many diamonds are similarly locked away – they are worn for pleasure as well as being an investment.”
That inevitably means that consumers who, nonetheless, are interested in acquiring colored diamonds usually start on a more affordable level with entry level brown and yellow diamonds. It is vital that a dealer in colored stones knows the sector inside out. “You have to know the business very well to be able to place a proper price on a stone,” he explained. “A poor hue can reduce the price of a diamond by 50 – 70 percent. You need a well-trained eye to see the imperfections in the stone because if they are missed you can get it very wrong.”
“If the rough stone is not a strong color, then you need an extremely experienced and trained eye to understand it and cut it to its’ maximum potential.” As for setting the price of the colored diamond, that is determined by the quality and scarcity of such goods. “A pricelist has no relevance because there are not that many colored diamonds available and the best stones change hands very quickly. The price of pink and blue diamonds is set at the upper level by auctions, while the price of yellow diamonds and other entry level stones is set according to the quality of the goods and what is available on the market,” he added.
ARGYLE PINK TENDER CHROMA COLLECTION
Source: Rapaport, October 2016
A wide spectrum of powerful colors earned this year’s Argyle Pink Diamonds Tender the title “Chroma Collection”. There were 63 stones in this year’s tender, which kicked off its world tour in Copenhagen, Denmark at an exhibition hosted by Denmark’s luxury jeweler Hartmann’s. Befitting these extraordinary diamonds the event was held in Copenhagen’s Moltkes Palace.
Determined by the experts at Argyle to be one of the finest tenders ever, the Chroma Collection has 21 stones over 1-carat each and 50 percent of the gems are VS clarity or above. Two of this year’s hero stones were violet diamonds. The 2.83-carat oval shaped Argyle Violet, a fancy deep grayish bluish violet, which is the largest violet diamond found from the mine; and the fancy dark gray-violet 1.11-carat pear shaped Argyle Ultra. In 32 years of tender history there have only been 12-carats of polished violet diamonds with the 2016 tender featuring just under 4-carats of those stones. The violet color comes from an infusion of hydrodgen while the stones are growing within the earth. This year’s tender also boasts four red diamonds and pinks that were more color saturated than usual. In addition, for the first time since 1987 one of the stones – a .71-carat fancy intense pink – was internally flawless, it is a particularly rare stone since there have only been three internally flawless diamonds at the pink tenders ever.
The Argyle Blossom ring was also on tour with the Chroma Collection. A floral motif, the ring has a .33-carat violet center stone, with five pink diamonds of various shapes and intensities scattered like dew drops on petals of white diamonds. Each petal of the flower is outlined in Argyle violet melee. The underside of the ring is accented with pink diamonds surrounded by white diamonds and beautifully highlights the flower theme. It took a decade to collect the stones used in the ring created by Singapore-based designer John Glajz, the ring is priced at $2 million.
During the viewing in New York City, a party was held by JFine showcasing the hero stones from the tender and jewelry that features pink diamonds from the Argyle mine. The tender also made stops in Hong Kong and Perth. Bidding for the stones closed on October 12, 2016.
SELF-MANAGED SUPERANNUATION FUNDS
BUYING IN TO ARGYLE PINK DIAMONDS
Source: ABC RURAL, October 2016, Babs McHugh
One of the exclusive sellers at Argyle pink diamonds says a number of the stones are being purchased for self-managed superannuation funds (SMSF).
Rio Tinto’s Argyle mine in the East-Kimberley, in the far north of Western Australia, is the only source of the diamonds, and it is scheduled to close production within a few years.
Australian jewelers Linneys is currently displaying the largest commercial collections of pinks around Australia.
“As a product, it’s the most concentrated form of wealth in the world if you look at the weight of what those diamonds are,” CEO David Fardon said. “Relative to white diamonds, which are already a much sought after product, the pinks can fetch up to 20 or 30 times the price, with all other things being equal in terms of size and cut and shape. There are some where the intensity of color is so strong that it might command prices that are 50 times more.”
Rio Tinto says the rare ‘pinks’ as they are known, are only 1 per cent of all the diamonds recovered from the mine.
There are only 34 luxury jewelers, or ateliers, who are officially allowed to buy and sell the rare Argyle pink. Rio Tinto sells a collection by invitation-only private tender, as it also does for the even more rare red and blue diamonds.
Diamonds are measured in carats, which is 0.2 of a gram. “There are some very intensely colored pinks that can go for hundreds of thousands of dollars per carat,” Mr. Fardon said. “And there would be some that are very intensive that would be even into the millions.”
Caution urged on putting diamonds into superannuation funds.
Andrew White, an investment strategist with financial and consulting outfit BDO, said there was merit in considering rare diamonds for SMSFs. According to Rio Tinto, indices show that the Argyle pinks have increased in value, on average, 15 per cent a year for the last ten years. With the imminent closure of the mine, slated for 2020, that would make the diamonds more rare. But Mr. White that said alone was not enough reason to put them in a superannuation fund. “From a supply and demand point of view, less supply and increased demand is a positive. But the other thing we’ve seen in the last decade or so is an increase in demand for diamonds, particularly pinks, from India and China. That’s been part of what’s driven prices up over the last five to ten years...”
With some of the world’s rarest diamonds, why aren’t there more mines?
The Argyle diamonds mine produces red, pink, blue and brown orange diamonds. The former Ellendale mine, in the same region in the WA Kimberley, has now closed but used to produce almost half of the global supply of rare yellow diamonds.
Diamonds were formed billions of years ago from carbon that was subject to enormous pressure and were brought to the surface by volcanic eruptions.
So with the Kimberley proving it has the necessary geology to produce diamonds, why are there not more diamond mines across northern Australia?
Well known Australian diamond veteran Miles Kennedy, who once owned the Ellendale mine with his former company Kimberley Diamonds, said there was no point of comparison between mining ore like coal, iron ore, gold and base metals, with mining diamonds. “The hardest game in town is undoubtedly diamond exploration and then turning that into a mine.Diamonds are very, very rare because they’re very, very hard to find. It costs many, many millions of dollars to explore and investors need to be prepared to hang in long-term with maybe no return.”
“Yes, we believe there are a lot more diamonds out there but it’s all very long term. The drilling in this area was done in the 1970s, and here we are nearly 50 years later, with new exploration methods and techniques. But I have no doubt at all it will be a number of years before we can establish anything viable.”
The only other diamond project in Australia is the Merlin operation in the Northern Territory, which is not in production but is recovering diamonds from existing ore stockpiles.
This report is based on information available to the public. The information and any statistical data contained herein has been obtained from sources we believe reliable, but we do not represent that they are accurate or complete and should not be relied upon as such. The material contained herein is for information purposes only.
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