Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 6848 STATE OF THE MAJORS 2016 market and taking limited share from miners,” says Neri Tollardo, an analyst with Morgan Stanley’s Europe, Middle East and Africa Metals & Mining research team, which compiled the research. The DPA’s Lieberherr agrees, and dismisses the idea that lab- grown diamonds and mined diamonds are competing for the same dollar. “To reduce a diamond to its molecular composition and suggest that magic and lasting value can be created in a press is a deception that consumers will not fall for,” he says. “As is the case for all technology-driven, man-made products, the value of synthetic diamonds will fall year by year. They are neither rare nor precious and as production capacity builds up in China in particular, the cost of production will continue to plummet … Our research shows that the majority of consumers considering lab-grown diamonds do so for economic reasons. It is going to be a price game. Diamonds are about emotion and value.” But, it is also about giving the customer what he or she wants. Manufacturer and supplier Stuller Inc., which recently joined the 21-member International Grown Diamond Association, now sells both mined and lab-grown stones. “I see it more as a way to expand our industry,” says Stanley Zale, vice president of diamonds and gemstones at the Lafayette, La.-based company, in explanation of the company’s decision to diversify its product offering. “This is about offering choices to our customers. Lab-grown diamonds are a product at a different price point that enables the end consumer to either spend less, or even buy a bigger diamond for the same money.” The lab-grown debate has been a major topic of discussion this year, and it “elicits a lot of emotion,” says Zale. After assuaging con- cerns that lab-grown and mined products would get mixed up, he says there has been greater acceptance of the company’s strategy. “The product is here, whether anyone likes it or not. I realize that it raises questions and concerns for some people, not knowing what this means for the future of our industry,” he says. “By our being active and involved in lab-grown diamonds, we can have some influence in creating the best outcome for our customers.” Currently, the lab-grown stones account for a small percentage of Stuller’s overall dia- mond business, but says Zale, “If we take the colored gemstone business as a guide, then it could be as much as 15 percent of the total diamond market.” If this really is a new niche, then it is perhaps something for the industry to seriously consider. BIG TROUBLE IN LITTLE GOODS While Stuller and other responsible manu- facturers ensure their goods are clearly disclosed and kept separate from mined diamonds, the constant penetration of small CVD diamonds, whose origins are incredibly difficult to verify, into the market is causing price deflation in the small-size rough market, says Guy Harari of online rough trading platform Bluedax. It is not what the industry, which is already grappling with a lack of financing and shrinking margins, needs. “After a very tough 2015, when demand for polished dropped drastically and the rough market came to a halt, the main rough pro- ducers understood that something needed to be done and in January (2016) they reduced the price of their goods,” explains Harari. “Since then, rough prices have increased almost 15 percent on average and are now at the highest level since the beginning of the year.” Says Harari, most of the profit in trading rough emanates from short-term credit and high premiums (the price non-sightholders pay in the secondary market to buy boxes from sight- holders), which give a much better return on capital than manufacturing. “At (De Beers’) August sight, the average premiums we saw were 5.8 percent, compared with negative premiums during the same month last year.” Add the entry of small CVD diamonds, a drop in demand for large, expensive goods and a lack of financing and Harari believes if demand for polished goods does not increase, the industry might once again see a fall in rough prices with manufacturers no longer pur- chasing rough. “Every year that passes makes it more expensive to rebuild eroding brand equity. It is a dangerous lose-lose cycle. What the industry has to do now is to focus on building a strong diamond equity base, create an emotional connection, and divert some investment from short to longer term.” —Jean-Marc Lieberherr, Diamond Producers Association Petra Diamonds and Ekapa Mining paid $7.2 million to acquire South Africa’s Kimberley Mines from De Beers. (Photo courtesy of De Beers) Like De Beers ads of days gone by, the Diamond Producers Association’s new marketing campaign is designed to boost diamond demand.