Alrosa has canceled its next two sales and urged caution from buyers and suppliers amid a steep downturn in the diamond market.
The Russian miner informed India’s Gem & Jewellery Export Promotion Council (GJEPC) of the decision in the past few days, citing low demand. The move follows the GJEPC’s recent call for rough producers to act responsibly.
“Alrosa has decided to temporarily halt the allocation of rough diamonds in September and October 2023,” the company said in a note to the GJEPC, seen by Rapaport News. “We believe that this approach is going to have a stabilizing impact by strengthening the market’s supply-and-demand balance. This will aid the prevention of overstocking, especially with manufacturers closed for Diwali.”
Alrosa has continued to sell despite being under US sanctions since the Ukraine war began in February. The company’s revenue was broadly stable year on year at RUB 188.16 billion ($1.9 billion) in the first half of 2023.
Most of the rough goes to India, market insiders believe. That country’s diamond trade has suffered a serious crisis because of weak US and Chinese demand and competition from lab-grown stones. Inventories have piled up as the sales slump has outpaced manufacturers’ production cuts, leading to falling prices.
The GJEPC wrote to diamond miners earlier this month, asking them to be “responsible” when selling to prevent a worsening of the situation. In response, Alrosa said it “expresses equal concern and strives to reverse the existing trend of diminishing demand.”
The Russian company said it would welcome a similar position from other industry players, such as miners, cutters and retailers, “on the matter of rough-diamond purchases and sales” as a “reciprocal effort.”
The benefits of the miner’s decision should be visible in the market by the beginning of next year, it said in a separate statement Wednesday.
“Alrosa has always followed the practice of supporting market stability and leveling its volatility,” a spokesperson for the miner said. “Our solid and high-quality asset base and stable financial position allow us [to implement] such measures.”
By contrast, De Beers will continue to hold sights but take a “responsible approach” to sales, “just as we have previously when faced with challenging industry conditions,” a spokesperson for the Anglo American unit said. The company, which is holding its September sight this week, has already allowed customers to defer up to half of rough purchases for the rest of 2023.
“We will focus on additional supply flexibility as necessary to meet sightholders’ evolving requirements,” the De Beers spokesperson added.
The news comes amid growing expectations for a Group of Seven (G7) ban on Russian diamonds, with an announcement likely in two to three weeks, Reuters reported last Friday, citing Belgian officials. The World Diamond Council (WDC) is also facilitating a proposal for keeping Russian and non-Russian diamonds separate.
Western Australia’s Argyle mine was among nature’s preeminent treasure troves for nearly 40 years. At its peak, Argyle produced more coloured diamonds than anywhere else on Earth and earned an especially sparkling reputation for its unparalleled cache of pink diamonds.
Researchers have spent decades trying to unravel the origins of Argyle’s glimmering gems. Now, by dating minerals in the mine’s volcanic rock, scientists think they may have finally pieced together the process that created the deposit around 1.3 billion years ago. In a paper published on Tuesday in Nature Communications, the team posits that the breakup of an early supercontinent lifted Argyle’s salmon-coloured stones from crushing depths toward Earth’s surface.
Located 2,200 kilometers northeast of Perth, Australia, in the country’s rugged Kimberley region, Argyle mine once covered an area the size of 94 football fields. Between its opening in 1983 and closure in 2020, when mining the gems there was no longer economically viable, Argyle produced more than 865 million carats of rough diamonds. Most of these stones come in pale shades of yellow or brown. But a small percentage of the site’s diamonds radiate rich pinks, purples or reds. More than 90 percent of the world’s pink diamond supply including the nearly 13 carat Pink Jubilee has come from Argyle.
The pink hue of Argyle’s most lavish diamonds is linked to damage they underwent deep within the earth. According to Hugo Olierook, a geologist at Curtin University in Perth and lead author of the new study, these diamonds start out colourless. But immense tectonic pressure from colliding continents can alter the stones’ crystal structure, unlocking the potential colours hidden within. “The diamonds are being forced to bend and twist,” Olierook says. “If they’re twisted just a little bit, it will turn some of these diamonds pink.” Further twisting makes them become brown.
Argyle’s diamonds took on their pink and brown tints around 1.8 billion years ago, when a piece of what is now western Australia smashed into the northern Australian plate and warped the region’s rock. But this only explains part of Argyle’s origin story. When the continents collided, the area’s diamonds were buried in the mantle, hundreds of kilometers below Earth’s surface. If the crystals had been closer to the surface, their carbon atoms would have been compressed into a different structure, transforming them from shimmering diamonds to lumps of dark gray graphite.
A volcano was necessary to bring the molten diamonds up from our planet’s mantle. “You need some sort of tectonic trigger to bring them up to the surface,” Olierook says. As the melt rises, carbon dioxide and steam expand, sparking an eruption that he compares to popping a champagne cork. At Argyle, this eruption likely occurred at a beach, where sand and seawater interacted with volcanic rock called lamproite.
To determine when the eruption occurred, the team sliced two thin sections of Argyle’s volcanic rock and polished them down to a minuscule width. Analyzing the sample’s mineral makeup under a microscope, the researchers were able to pinpoint sand grains from Argyle’s ancient beach and to date them with the help of radioactive elements they contained. By dating the youngest sand grains, the scientists were able to estimate when the beach was buried in lava. They also used tiny lasers to determine the ages of titanite minerals, which formed in the rock when the magma melded with quartz in the beach sand.
Comparing the ages of the youngest sand grains and the oldest titanite crystals allowed the researchers to estimate that the eruption at Argyle occurred between 1.3 billion and 1.26 billion years ago. This age range was older than previous estimates, which surprised Olierook and his colleagues. “We had a betting pool going, and nobody got 1,300 million years,” he says. “That was one of those glass shattering moments.”
That eruption timing corresponds to a volatile period in Earth’s tectonic history when one of the first supercontinents, called Nuna, was splintering apart. The team posits that this instability may have reopened a seam along the continental boundary where Argyle is now situated. This in turn sparked the volcanic activity that brought the diamond-bearing melt toward the surface, creating Argyle’s expansive diamond deposits.
The new time estimates add crucial context for understanding the volcanic eruption at Argyle, says Evan Smith, a researcher at the Gemological Institute of America, who researches the geology of diamonds but was not involved in the new study. “The previous age constraint for Argyle was younger, and it was a lot less clear how to frame the eruption in a broader geological context,” Smith says. He thinks the new study adds exciting evidence that these “eruptions are related to bigger processes that affect whole continents rather than being isolated, random burps of magma.”
Olierook thinks similar events may have occurred at other continental boundaries around the world. Most diamond-bearing deposits are found in the middle of continental plates where rock is exposed. This makes Argyle an outlier. When the mine was first discovered, most geologists thought that searching for diamonds along continental plate boundaries which are often uplifted by ancient mountain belts and buried beneath soil and sand was futile.
Though gem mining in these regions remains difficult, Olierook believes there are plenty of diamonds to be found in the rough. “I think all of them will host some sort of coloured diamonds,” he says. “They may all be brown, but with a little bit of luck, there could be a few pinks in there.”
De Beers decided to call time on offering lab-grown diamonds for engagement rings even as the man-made alternatives continue to cannibalize demand in one of the company’s most important markets.
After vowing for years that it wouldn’t sell stones created in laboratories, in 2018 De Beers reversed that position and only this year started testing sales of the diamonds in the crucial engagement-ring sector.
The diamond industry leader said Wednesday that the trial showed that it wasn’t a sustainable market.
De Beers’ move comes as the kinds of stones that go into the cheaper one- or two-carat solitaire bridal rings popular in the US have experienced far sharper price drops than the rest of the market, with the lower-cost lab-grown competition seen behind the collapse.
De Beers has said the current weakness is a natural downswing in demand after the pandemic, with engagement rings particularly vulnerable. The company concedes that there has been some penetration into the category from synthetic stones, but doesn’t see it as a structural shift.
Lab-grown diamonds — physically identical stones that can be made in matter of weeks in a microwave chamber — have long been seen as an existential threat to the natural mining industry. Proponents say they can offer a cheaper alternative without many of the environmental or social downsides sometimes attached to mined diamonds.
While the price of some natural stones used in lower-quality engagement rings have plummeted in the past year, the fall in lab-grown prices has been even steeper. De Beers has said it expects lab-grown prices to continue to decline as more supply comes into the market
Retailers would need to double the number of lab-grown carats they sell every two years, just to maintain profits, De Beers said.
Diamond processor and trader HB Antwerp said on Monday it had removed one of its three co-founders from management following differences over strategy, a development that comes amid a pending sales pact with major producer Botswana.
Oded Mansori, who co-founded HB Antwerp in 2020 with partners Shai de Toledo and Rafael Papismedov, said he was taking them to court over his removal.
“On September 1, HB terminated Mr Oded Mansori’s management role in all the HB Companies,” the Belgian company said in a statement, citing a “sharp difference in strategic vision and approaches to business”.
The government of Botswana, the world’s No. 1 diamond producer by value, said in March that it had agreed to buy a 24% stake in HB Antwerp. As part of the deal, state-owned Okavango Diamond Company would supply HB with an undisclosed quantity of rough diamonds for five years.
The deal is yet to be signed.
Mansori, a long-time diamond dealer, said in a separate statement that he was “determined to defend his vision and to fight for the wellbeing and the future of HB,” and that “a legal process is currently underway in court.”
Mansori, who declined to comment further, said he was still a shareholder in the company.
HB also has a partnership with Lucara Diamond Corp, buying stones of 10 carat quality and above from the Toronto-listed miner’s Karowe Mine in central Botswana at prices based on the estimated polished outcome of each diamond.
Lucara did not immediately respond to a request for comment on whether the legal tussle could impact its own deal with HB Antwerp.
In 2022, HB Antwerp partnered with Microsoft to track mined gems via blockchain, as consumers focus on clearing the supply chain of fraudsters and diamonds mined in war zones and sold to fund insurgencies.
Other diamond miners, including Anglo American’s unit De Beers, also use blockchain platforms to trace their diamonds and verify authenticity.
Sanctions-hit Alrosa, the world’s biggest diamond-producing company, said on Sunday it has mined the largest gem-quality diamond in Russia in the past decade.
The 390.7-carat diamond was mined at one of the company’s mines in the Republic of Sakha, Alrosa said in a statement. The region, commonly known as Yakutia, lies in Russia’s Far East along the Arctic Ocean.
“The found diamond is a light crystal of an irregular shape, bordered by a yellow-brown halo – a combination of mass, shape and colour that is unique today,” Alrosa said.
The company mined the largest gem-quality diamond in Russia in 2013, weighing 401 carats, Alrosa said.
The world’s largest gem-quality diamond ever mined – the 3,106-carat Cullinan stone – was recovered in South Africa in 1905.
Alrosa was last year placed under sanctions by the United States, which cut it off from its banking system and banned direct sales to the US market after Russia invaded Ukraine.
Last month the company reported a rise of 0.2% in revenue for the first half of the year but said net profit fell 35% year-on-year to 55.6 billion roubles.
The Gemological Institute of America (GIA) has cut some 20% of the workforce at its Carlsbad, California, headquarters amid a prolonged slowdown in the industry.
In late July, the lab let 151 employees go, primarily in its laboratory, as well as some in corporate positions, Stephen Morisseau, the GIA’s director of communications, told Rapaport News Sunday. The lab made the layoffs as a result of a drop in the number of diamonds submitted for grading.
“Many organizations in the global gem and jewelry sector are experiencing a downturn due to economic conditions affecting the global gem trade,” Morisseau explained. “Due to those economic conditions, there has been a decline in demand for GIA’s gem identification and grading services, which led to the difficult decision to reduce staffing.”
The layoffs will bring the GIA’s total workforce in Carlsbad to 600, according to The San Diego Union-Tribune, which was the first to report the story. Globally, the lab has approximately 3,500 employees.
“The reductions will not affect our ability to advance our important consumer-protection mission, nor to meet the needs of our clients,” Morisseau added.
One of the world’s most popular types of rough diamonds has plunged into a pricing free fall, as an increasing number of Americans choose engagement rings made from lab-grown stones instead.
Diamond demand across the board has weakened after the pandemic, as consumers splash out again on travel and experiences, while economic headwinds eat into luxury spending. However, the kinds of stones that go into the cheaper one- or two-carat solitaire bridal rings popular in the US have experienced far sharper price drops than the rest of the market.
The reason, according to industry insiders, is soaring demand for lab-grown stones. The synthetic diamond industry has paid special attention to this category, where consumers are especially price-sensitive, and the efforts are now paying off in the world’s biggest diamond buyer.
The shift doesn’t mean engagement rings are about to go on deep discount — the impact is limited to the rough-diamond market, an opaque world of miners, merchants and tradespeople that is several steps removed from the price tags in a jewelry store.
However, the scale and speed of the pricing collapse of one of the diamond industry’s most important products has left the market reeling. Now, the question is whether the plunging demand for natural diamonds in this category represents a permanent change, and — crucially — if the inroads made by lab-grown gems will eventually spread to the more expensive diamonds that are typically dominated by Asian buying.
Industry leader De Beers insists the current weakness is a natural downswing in demand, after stuck-at-home shoppers sent prices soaring during the pandemic, with cheaper engagement rings having been particularly vulnerable. The company concedes that there has been some penetration into the category from synthetic stones, but doesn’t see it as a structural shift.
“There has been a little bit of cannibalization. That has happened, I don’t think we should deny that,” said Paul Rowley, who heads De Beers’ diamond trading business. “We see the real issue as a macroeconomic issue.”
Lab-grown diamonds — physically identical stones that can be made in a matter of weeks in a microwave chamber — have long been seen as an existential threat to the natural mining industry, with proponents saying they can offer a cheaper alternative without many of the environmental or social downsides sometimes attached to mined diamonds.
For much of the last decade, the risk remained unrealized, with synthetics eating away at cheaper gift-giving segments but making limited headway otherwise. That is now changing, with lab-grown products starting to take a much bigger bite of the crucial US bridal market.
De Beers has responded to weakening demand by aggressively cutting prices for the category known as “select makeables” — rough diamonds between 2 and 4 carats that can be cut into stones about half that size when polished, yielding centrepiece diamonds for bridal rings that are high quality, but not flawless.
De Beers has cut prices in the category by more than 40% in the past year, including one cut of more than 15% in July, according to people familiar with the matter.
The one-time monopoly still wields considerable power in the rough diamond market, selling its gems through 10 sales each year in which the buyers — known as sightholders — generally have to accept the price and the quantities offered.
Price drop De Beers typically reserves aggressive cuts as a last resort, and the scale of the recent price falls for a benchmark product is unprecedented outside of a speculative bubble crash, traders said.
In June 2022, De Beers was charging about $1,400 a carat for the select makeable diamonds. By July this year, that had dropped to about $850 a carat. And there may be more room to fall: the diamonds are still 10% more expensive than in the “secondary” market, where traders and manufacturers sell among themselves.
De Beers declined to comment on its diamond pricing.
One of the clearest signs of the traction being made by lab-grown diamonds is their share of diamond exports from India, where about 90% of global supply is cut and polished. Lab-grown accounted for about 9% of diamond exports from the country in June, compared with about 1% five years ago. Given the steep discount that they sell for, that means about 25% to 35% of volume is now lab-grown, according to Liberum Capital Markets.
The impact on De Beers was clear in the first half. The Anglo American Plc’s unit’s first half profits plunged more than 60% to just $347 million, with its average selling price falling from $213 per carat to $163 per carat. Its August sale was the smallest of the year so far.
De Beers has responded by giving its buyers additional flexibility. It’s allowed them to defer contracted purchases for the rest of the year of up to 50% of the diamonds bigger than 1 carat, according to people familiar with the situation.
While lab-grown diamonds are currently hurting demand for natural stones, the upstart industry is also suffering. The price of synthetic diamonds has plunged even more steeply than that of natural stones, and are selling at a bigger discount than ever before.
About five years ago, lab-grown gems sold at about a 20% discount to natural diamonds, but that has now blown out to around 80% as the retailers push them at increasingly lower prices and the cost of making them falls. The price of polished stones in the wholesale market has fallen by more than half this year alone.
De Beers started selling its own lab-grown diamonds in 2018 at a steep discount to the going price, in an attempt to differentiate between the two categories. The company expects lab-grown prices to continue to tumble, in what it sees as a tsunami of more supply coming onto the market, Rowley said. That should create an even bigger delta in prices between natural diamonds and lab-grown, helping differentiate the two products, he said.
“With the increase in supply we’ll see prices fall through the price point and reach a level where, long term, it does not compete with bridal because it comes too cheap,” said Rowley. “Ultimately they are different products and the finite and rarity of natural diamonds is a different proposition.”
Petra Diamonds’ rough prices decreased at its first tender of the fiscal year as the anticipated pickup in demand proved disappointing.
The August trading session brought in $79.3 million from the sale of 696,194 carats, with like-for-like prices — those for similar categories of diamonds — falling 4.3% compared with May, the miner reported Friday.
The slowdown was primarily due to flagging prices for rough between 2 and 10.8 carats, which dropped 14% on a like-for-like basis. Prices for diamonds under 2 carats rose 1% to 2%, Petra noted.
While the tender saw strong attendance, “demand was more muted than we had expected in exiting the summer holiday period,” explained Petra CEO Richard Duffy. “The expected seasonal improvement in demand was evident for higher-quality 10.8-carat-plus stones, with solid prices realized. [However,] this was offset by slower demand for 2- to 10-carat size ranges.”
The miner did not sell any exceptional stones during the tender, it reported, though it did garner $1.7 million for a 20.9-carat yellow diamond from its Cullinan deposit.
Overall sales value rose 88% from May’s $42.1 million but slid 23% from the equivalent tender a year earlier, which took place in September 2022. Sales volume was up 49% from May and 34% year on year, while the average price jumped to $114 per carat from the previous tender’s $90.
The August tender did not include any output from the Williamson mine; Petra plans to sell material from that site at its September sale. However, the latest round did feature all the rough Petra had chosen to defer in June, when it postponed its sixth tender due to the sluggish market.
The August sale also contained 75,880 carats of goods that Petra had withdrawn from the May tender due to low bids. Prices for those goods were largely unchanged from May’s offers, but Petra expects demand to rise in the coming months.
“As we enter a seasonally stronger period [that] includes Diwali, Thanksgiving, Christmas and the Chinese New Year, we remain optimistic that jewelry demand will improve and provide some support to prices over the balance of the calendar year,” Duffy said.
Main image: Ore processing at the Williamson mine.
Indian jewelry giant Titan Company will up its stake in e-tailer CaratLane to 98%, acquiring the share it didn’t already own for INR 46.21 billion ($557.2 million).
Titan, which already owns 71% of the online jewelry retailer, plans to buy an additional 27% in an all-cash deal, it said Saturday in a notice to the Bombay Stock Exchange (BSE). It intends to complete the buyout by October 31, subject to requisite approvals.
The deal values CaratLane at INR 170.01 billion ($2.05 billion), according to Rapaport calculations.
Incorporated in 2007, CaratLane operates in India and in the US through a local subsidiary. Titan first took a stake in the business in 2016.
Lucara Diamond Corp. has recovered a 692.3-carat diamond from its Karowe mine in Botswana, the second massive rough from the deposit this month.
The white, type IIa stone came from the EM/PK(S) unit in the south lobe, known for its large, high-quality rough, Lucara said Monday. The miner found the diamond via its XRT unit, which uses X-ray technology to identify huge stones in large pieces of ore before they get broken up.
The new discovery is the fourth diamond over 300 carats that Lucara has unearthed so far this year, including one earlier this month: a high-quality white, type IIa rough weighing 1,080.1 carats, which the miner announced on August 8.
In addition, “this stone is the 20th diamond larger than 100 carats recovered during 2023 at Karowe,” said Lucara CEO William Lamb. “The recovery of large diamonds from the EM/PK(S) lithology of the south lobe strongly supports our expectations for the underground project.”
Lamb, who replaced Eira Thomas as CEO earlier this month, will lead the continued development of Karowe’s underground expansion. The miner invested $683 million in the project, which it believes will extend the mine’s life until at least 2040, 15 years beyond the original 2025 closure date.
In its most recent results, Lucara announced a 21% drop in its second-quarter revenue to $41.1 million amid a slowdown in market demand. Profit slid 60% to $5 million.
