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National Geographic Channel had an interesting episode called “Blood Red Rubies” that I tuned in to by total accident but stuck with.

The episode features a gemologist teaching local miners in Greenland how to properly mine for rubies. What particularly caught my eye was a very quick bit of conversation regarding beneficiation, or the participation in the value chain beyond the extraction of raw materials, but in the downstream cutting and polishing value-adding activities as well.

I found it interesting to note that such an initiative is not unique to diamonds (where Southern African nations are particularly interested in), nor is the confrontation of that desire with economic realities.

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A few months ago I had the pleasure of attending a tech/kiteboarding networking event called Mai Tai in Cabarete, Dominican Republic. If there were ever an event designed almost specifically to appeal to me, this is it: kiteboarding, technology, startups, add in a few dashes of Burning Man / Robot Heart parties, and you have “me” encapsulated.

I met a rather idealistic, optimistic, wild-eyed and fascinating young lady who, after telling her of my odd interest in diamonds, quickly interrupted me to tell me a bit about Diamond Foundry, confidently boisting of how they were going to blow the diamond industry apart, completely uninterested and even a bit flippantly dismissive in what I had to say about the DDI or ForeverMark or Botswana.

“There have already been a few companies attempting such with lab-made diamonds. They never can quite get the color up there, can they? Mostly H-L colored stones, and most of them max out at about a carat.” I retorted.

“No, but they’ve figured it out and they’re perfect diamonds now”

I told her about the DDI and the good work they do in the field, helping artisanal miners in Sierra Leone, Angola, DRC, Côte d’Ivoire how to do their risky work, yet also minimizing the chances of death by drowning, cave-ins, geological prospecting and rough diamond valuation, and mitigation of environmental impact.

“I wonder if that’s actually even a good thing”, she posited, as I about gasped. “The people of Sierra Leone need to all become programmers.”

I’ll leave judgement of the wisdom, feasibility and maturity of that statement to my readers. “How could it be that, with no other economic options available to them at all, saving them from drowning or death by cave-in is somehow a bad thing?” I thought.

This week, Diamond Foundry came out of stealth mode with their billionaire and celebrity backers, and I’m trying to gather my thoughts. The goods listed on the rather tiny inventory on their site seem near identical to what has been offered by Gemesis / Natural Grown Diamonds for years, with colors mostly in the H-L range, and most stones under a carat. Maybe the better goods are forthcoming; They certainly have the hype. Furthermore, the stones are apparently not graded by a trusted 3rd party, but by a GIA-trained gemologist. Not to infer that those stones are incorrectly graded, but is there not a conflict of interest when the grading is done by the same party as the one doing the selling?

DF has already announced that they won’t be competing on price. Rather, they may price their goods at higher prices than competitors. With colors mostly in the H-L range, they certainly aren’t competing in quality either, it seems. What then are they competing with?

Assurance of origin. Diamonds born in California, from renewable energy, in a sustainable process. A 100%, nerve-soothing guarantee.

How is this better than assurance of diamonds being “responsibly sourced” by ForeverMark? Does this not seek to capitalize off of a common thinking that all of “Africa” is straw huts and AK-47’s, unsuitable for “ethical” consumers? Does this not do the same that CanadaMark may do, with assurance of Canadian origin, and allowing consumers to draw whatever conclusions they like (no matter how correct) from there?

Undoubtedly, DF’s customers will pay the premium for equal or lesser goods, and walk away from the jewelry counter thinking they’ve done something “ethical” and “good”. But what if they pick DF because of their opinions on De Beers being the “monopoly” that they no longer are? What if they pick DF because of fears of “conflict diamonds” that mostly don’t exist any more, or disappearing Marange diamonds that probably can’t be found in US stores anyway? What would be the “ethics” of collapsing national economies and livelihoods because of mutable and incorrectly-placed stigma? Will DF make diamond customers out of people that otherwise wouldn’t be?

Or maybe they choose DF because they’ve read of issues I’ve discussed on this humble blog: they’ve seen an antagonistic Peter Meeus speech and want nothing to do with him or the Mugabes or the Dos Santos clan? What if they’ve read about the problems at the KP that won’t ever be addressed because all decisions require unanimity? What if they read about under-invoicing and transfer pricing and want nothing to do with that problem, either? Wouldn’t the diamond industry, with almost no good news coming all this year and a gloomy forecast, then outright deserve to be “disrupted”?

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It’s been difficult finding any positive news coming out of diamonds lately.

CAR, KP, and the Nice Narrative

A report from Amnesty International on the Central African Republic and a Time Magazine article on conflict diamonds and the KP offer a sobering reminder that, no matter, what positive narratives can come out of Botswana, Canada, Russia, South Africa or Namibia, no matter what the KP reports for how many carats come out of this and that country as a share of global supply, the temptation to focus on the sore points of the supply chain will always be too easy to pass up, and for good reason. Artisanal diamonds may take up only 15% of carats and 5% of gem production, but the press and public attention will always come back to the artisanal diamonds.

Foxes in Charge of the Chicken Coop

The KP released its figures for 2014, showing that, once again, a certain volume of rough diamonds enter the UAE, about the same volume of rough diamonds leave, yet somehow they magically increase in price by about 40%. I know “conflict diamonds” is a worthy news story and getting photography of such misery is easy, but how is the wholesale looting of national resources not worthy of significant press attention? Fittingly, the UAE has become vice-chair of the KP, and will become the chair in 2016.

Junta Jade

New chapter in a very old story: Global Witness exposes the ties between the Burmese ruby trade and the members of the military junta. How is it that peoples’ negative “ethical” impressions of gemstones mostly extend to the colorless ones with a hardness of 10.0?

Rough Diamond Gemologist resurfaces to remind us that rough buyers are most assuredly the most tough-as-nails street-smart people on the planet.
“When a man with experience meets a man with money, the man with the money gets the experience, and the man with the experience gets the money.”

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Long break, but yes, I’m still interested in diamonds.
The KP Plenary is being held this week in Luanda, Angola. I’m excited to see what the figures will show for production for 2014. Some things in particular that I’ll be zeroing-in on:

Sierra Leone, Liberia, Guinea

Ian Smillie of the DDI had once directed me to look at the figures of both Sierra Leone and Liberia. Sierra Leone historically has very high-quality (and high price per carat) diamonds, while Liberia generally does not. Evidence that diamonds are being smuggled from Salone into Liberia could therefore be found in a high price per carat, matching or nearly-matching that of neighboring Salone.

This region also has been significantly impacted by Ebola during 2014, and this certainly impacted diamond production, as documented by Estelle Levin Ltd


A certain volume of rough diamonds enters Dubai, and about that same volume leaves Dubai as well. Why then is it, that in between their entrance and exit from Dubai, the diamonds increase in price by ~50 %? This is most likely evidence of under-invoicing and transfer pricing, where the value of a parcel of diamonds is under-stated as it leaves its country of origin as a “tax optimization (wink wink)” strategy. The diamonds are then sold in Dubai at a fair market rate, and the tax savings are sometimes split with a kickback to a corrupt local official. Some might call this “tax optimization”. Others could call it by its more accurate description: “theft”.

Côte d’Ivoire

Following the dropping of the ban on export by the UN and the KP, in 2014, Côte d’Ivoire re-enetered the diamond market. I’m extremely curious to see what the average price per carat will be, though I’ve been told it’s in line with other Western African countries.


Zimbabwe’s production should be shown to be down sharply as a result of the alluvial diamonds in Marange running out. Almost no good news has ever come from this country’s diamond production, even lately as the 7 companies currently mining in Marange are reluctantly nationalized and merged.

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I recently read an article about the KP potentially dropping the ban on diamonds from the Central African Republic (or, at least the western portion of the country controlled by the government).

Seeing as the most non-industry news outlets don’t tend to do a very good job preserving important nuance or incorporating all the necessary complexities and caveats when trying to summarize such things — example here, where it was written: “The Kimberley Process system for certifying the origin of diamonds is meant to inform customers about where the stones originated” (it does no such thing) — I reached out to a friend of mine that has worked with the KP on such issues. My subject was this:

Do diamond bans work?

Depends. Do they keep conflict diamonds out of the supply chain? Do they make the diamond trade less appealing as a revenue source to rebel groups? Rough Diamond Gemologist does a proper dressing-down of the KP here. Unsurprisingly, “the ban was only enabling the bad guys” was a commonly touted reason for dropping the ban in Côte d’Ivoire in spring of 2014.

As expected, my friend’s response was awesome. What I learned:

  • Regardless of the ability/inability to keep conflict diamonds out of the supply chain, it would be bad policy to succumb to an apathetic “don’t bother” approach.
  • Yes they do work, as there are considerations and reputational risks all the way down to the retail level.
  • CAR diamonds, when banned in 2013, did not fit the KP’s own definition of “conflict diamonds”, as the suspension was not strictly matching the KP’s definition or scope, but as a result of a lack of guarantee of safety to the review team, as well as lack of monitoring and internal controls, due to the lack of governance.
  • There was no assistance offered to bring CAR back in to compliance, and thus, they are in a similar limbo-esque position as is Venezuela as it regards to the KP
  • This is therefore case-in-point, of how the definition of “conflict diamonds” needs to be broadened at the KP.
    • On an off-tangent note, is it possible for a journalist to title any diamond-related article without a variation of “Diamonds are a Girl’s Best Friend”?

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My friend Estelle Levin recently contributed to an excellent article entitled “Revisiting the Conflict Minerals Rule”. In it, the authors discuss the impacts of Dodd-Frank, which require public companies to report their sourcing of conflict minerals — tin, tantalum, tungsten and gold (3TG) — from the DRC and all adjoining countries.

Frankly I’m still trying to wrap my head around the entire article, but am finding it enlightening as to how good intentions can have unintentionally harmful and devastating impacts while pursuing a top-down “conflict-free” sourcing policy, whereas risk-adverse companies have decided to avoid Congo or even Africa altogether, reducing the demand and therefore price of goods to the most vulnerable producers in the region.

The critical challenge of the Conflict Minerals Rules is the inherent tension between forcing risk-averse companies to make disclosures that could invite public scrutiny and loss of shareholder value without having those companies eliminate the DRC and adjoining countries from their conflict mineral supply chains. In fact, the humanitarian goals of the Conflict Minerals Rule can only be accomplished if legitimate buyers remain engaged in the region. This means that the artisanal and small-scale mining and trading industries1—which are economically critical to the region—must in particular be supported to improve their commercial viability, legitimacy and professionalism, and to ensure they have the capacity to identify and manage the risks that determine their ability to deliver “conflict-free” minerals to the market. If the adoption of these rules produces the opposite outcome—further marginalization and criminalization of these miners—then it is failing to meet its humanitarian goal.

Although artisanal mining is a critical industry in the African Great Lakes region, that region is not necessarily a critical supply for the covered conflict minerals. 5 At least 2 million artisanal miners extract conflict minerals in the affected region, making it a vital contributor to rural economies in the DRC and adjoining countries. However, the relative availability of the covered minerals in other regions around the world combined with the challenges and expense of conducting due diligence and establishing traceability in the DRC region make it attractive for mineral supply chains to pivot away from the DRC and adjoining countries. Even where the DRC and its adjoining countries may be a more attractive source from a pricing perspective, due diligence costs could make the region a more expensive source as compared to lower risk areas.

Marange, Under-Invoicing & Transfer Pricing a/k/a Resource Theft

Marange, Zimbabwe has been back in the news again lately, but this time because they are in the messy process of merging the 7? companies mining in the Marange diamonds fields in to one company, coincidentally and sadly, at the same time that the alluvial diamonds appear to have finally run out. Mbada Diamonds has recently started mining conglomerate diamonds, but these efforts appear to be in vain, as the diamonds are “not commercially viable”, meaning that the costs of bringing them out of the ground (kimberlite mining is exceptionally capital intensive, it seems) is higher than the costs the diamonds would fetch on the market.

“Capital Flight, Natural Resources and Institutions in Zimbabwe” [investigates] the link between capital flight, natural resources and institutions in Zimbabwe”, and “[explores the] mechanism of capital flight by estimating trade misinvoicing.”

This in addition to Kimberley’s Illicit Process, and All That Glitters discuss the problem of under-invoicing and transfer pricing of natural resources from their countries of origin … or as we could also call it: theft … which is generally a shitty thing to do to revenue-starved countries with nothing but natural resources.

Let’s assume that I have a parcel of diamonds that I estimate are worth $10MM. Nobody likes paying taxes, but paying taxes on $10MM really hurts the balance sheets. So how about we say that the diamonds are instead worth $6.5MM… I pay taxes on that reduced amount, give a kickback to the corrupt officials that make this deal happen, and then forward the diamonds on to Dubai where they magically increase in value by over 50%.

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The Diamond Development Initiative — “a unique effort to address the problems faced by the millions of artisanal diamond diggers and their families, in Africa and South America” — came out with this excellent video featuring Ian Smillie, Ngomesia Mayer-Kechom and Dorothée Gizenga:

They speak about the history of the DDI, Development Diamonds, involvement of the industry, and the challenges faced in artisanal mining.

“Development Diamonds” may not yet be available to consumers, but a donation to the DDI can certainly help bring that promise closer to reality. I’ve long thought that the market is screaming for something along these lines (I am in that market) …

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While in the main research phase of my project, I wanted to learn what were the places in the world whose diamonds should be sought out by consumers, and which should be avoided, even if, in a perfect world, that sort of thing were possible (it’s not). Generally, recommending an entire country be considered on or off-limits is a risky and foolhardy errand, and as I’ve learned, conditions and operations can vary greatly within a country and region. For example, diamonds from Rio Tinto’s mine in Murowa, Zimbabwe have evaded all tinge and drama that have generally accompanied diamonds from Marange. Obviously Marange is an easy entrant in to the latter category and not in the category of “diamonds doing good”, though the American jewelry industry has done a good job at keeping these stones out of their jewelry cases. The quality of diamonds coming out of the DRC is extremely low (and therefore the chances that these stones end up set in jewelry) at $8.84/ct, with the caveat that this depends on KPCS statistics being an accurate representation of production.

But what about Angola? There, the quality of diamonds is generally high at $136/ct (for comparison, in Botswana, the world’s greatest producer of diamonds by value is $156/ct), but equally high is the corruption, yet also the opportunity and the growth. Unfortunately, I’ve had an extremely difficult time getting accurate information out of this country through the few sources in-country that I’ve been able to connect with, but what I have found has only made me more curious. My full thoughts are available here.

Once upon a time…

BICC has an excellent report entitled “Legacy of a resource-fueled war: The role of generals in Angola’s mining sector” detailing the history of diamond mining, and in particular, artisanal diamond mining in the Lundas. This report specifically details the often-intertwined nature between the military and artisanal diamond mining in the country.


Angola is one of the countries against changing the term “conflict diamonds” to encompass all violence, no matter the technicality that the current definition is restricted to: that the perpetrators be rebels (thugs on the government or private payroll are kosher). This seems like a no-brainer to me as well as to the countries where most diamonds are bought (U.S.A and the E.U.), but is a harder sell to the Southern and Western African producer countries.

Rafael Marques de Morais is the go-to man on corruption in Angola, the influence of the first family, and diamonds. His book “Diamanates de Sangue: Corrupcao e Torturo em Angola (Blood Diamonds: Corruption and Torture in Angola)” has gotten him embroiled in a libel and defamation suit against the Angolan generals and diamond mining companies that he accuses in his book of human rights offenses. I’ve wanted to get a hold of this book but cannot find an english translation.


Some interesting headlines regarding benefaction and Angola:
Angola’s Endiama plans to buy gold to make jewellery

Angola’s national diamond company Endiama this year plans to purchase gold to make jewellery from the Central African Republic, the Democratic Republic of the Congo, Niger and Mali, the company’s chairman said in Cape Town.

Diamonds Help Angola Offset Drop in Oil Prices

“Value added activities in the diamond sector can have a positive impact on employment and economic diversification,” said the EIU in one of the most recent reports on Angola, while noting that these initiatives are just being launched.
Angola recently resumed diamond cutting and polishing, at a unit in Luanda and is planning to build a second unit in Lobito, Benguela province.

Chairman of the Board

“Angola: President’s Strategic Vision in Creation of Kimberley Process Highlighted”

The Chairman of the Kimberley Process stated that the diamonds that were used to feed armed conflicts today are called in Angola “Prosperity and development diamonds.”


Australian mining company Lucapa has been pulling type IIa diamonds out of the ground at the Lulo diamond concession, including an exceptional 131.4ct stone. In fact, I’ve read that the Lucapa operation has the potential to replace the country’s Catoca mine as the country’s largest.


What I, as an amateur observer, can see:

This is simply an appeal to better information about the diamond production in this country. In my report I concluded that consumers might consider avoiding diamonds from Angola almost entirely because of admitted stigma, corruption and uncertainty, though I must admit I can be swayed to the other side based on better information.

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Last month, The Bride and I went to a very fancy gala for UNICEF.
At a point in the night immediately following the live auction, a video was played about “white jeeps”, and how much they need them in places like Sierra Leone, Liberia, Guinea, Côte d’Ivoire, etc. (basically all the diamond-mining countries). The price was fixed at slightly north of $31,000, and the auctioneer asked: “Who wants to buy us a jeep?”

Hands bolted up. One. Two. Three. Four…. 15 … 20.
At $31k a pop and without a blink of an eye or a twist of the arm, at least 20 white jeeps were donated by some of the wealthiest people in the city and country (The Bride and I, despite what I think of as our rather comfortable lives, are usually by far the poorest people in the room at these events). One of the donors was a woman seated directly to our left; a 40-something socialite married to an apparently obscenely wealthy (and absent on the night in question) octogenarian. In no means do I question the worth of UNICEF or raising awareness by any means necessary, but upon becoming lost in the sparkle of the walnut-sized (I’m not exaggerating) oval-cut diamond on her finger, I couldn’t help but wonder what had contributed more to positive economic development: the diamond, or the Jeep?

I then became reminded of a conversation I had with a co-worker years ago, who, with the biggest heart and best of all intentions, announced her decision to go volunteering in “Africa”, and was seeking donations for her to go. Absent details on the flyer, when prodded a little more, I learned that the country she was destined for was Tanzania and that she’d be teaching … what specifically I don’t know, and I daren’t speculate.

I blame my eternal lover/nemesis Johnny Walker Black for what came later in that night, when I asked her: “what happens to the children after you leave and they graduate? Do they get jobs? Let’s say I go to Tanzania and Kenya for two weeks of kitesurfing, all along the way giving money directly to local businesses in exchange for services. I then return to the USA, blog about the journey, and tell all my friends and relatives to visit as well because it’s a lovely place … and some of them eventually do. Which one of us is responsible for the greater ‘good’?” If the kids don’t get jobs after they graduate from your school, what was the whole point? Awkward silence doesn’t even begin to sum up the stunned reaction.

If you don’t offer consumers some form of traceability, if you don’t even try to change the perception that “Africa” is just one large country, then you don’t give them a reason to buy in to something bigger and better than a pretty rock. If the industry is facing a crisis by continually losing share of the luxury consumer’s wallet, then simply “getting out the love message” (a/k/a, issuing new “greatest hits” collections on CD boxed sets) isn’t going to change that. To the extent that there is a “love message”, I do not disagree. But it has to be more than greenwashing, more than a slick marketing campaign, and more than a “love message” that diamonds bring smiles to happy brides.

“Blood diamonds”, “conflict diamonds”, “illicit diamonds”, “development diamonds” …
… and now, the time has come for “love diamonds”. And how do you prove that?

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I’m going to go ahead an once again link to and quote my favorite Martin Rapaport speech from TEDx:

“The road to hell is paved with good intentions. Just because it doesn’t work doesn’t mean you don’t have good intentions, so you’re not a bad person, you just realize that the unintended consequences or your good intentions, that’s what’s gonna rule. So be careful with your intentions. And just because you’re a nice person trying to do a nice thing, doesn’t mean you are doing the “right” thing.”

Let’s assume you’re a resident of the DRC, specifically in the borderlands with Angola. Your economic opportunities are largely minimal, and one of the most promising paths is illegally entering comparatively more promising lands of the Lundas of Angola to mine for diamonds with a shovel and sieve. You risk torture and rape by Angolan private security companies, in addition to the usual risks of being an artisanal miner, such as death by cave-in, drowning, violence, malaria, etc. Or perhaps at no fault of your own, you live in Marange or the Central African Republic under similar circumstances. But you’ve also got hungry mouths to feed, so Dodd-Frank, the KP or other feel-good schemes be damned: the risks must be assumed.

Along comes a crazy-haired white New Yorker and self-styled researcher (really just a guy with an internet connection) who’s never lived in a war zone, and has been on TV a few times, specifically telling the relatively few consumers that do care about where their diamonds come from, to specifically avoid the resources that are your only economic option and livelihood, all because your government is corrupt and our country can’t meet some Western feel-good standard. Instead, he says, consumers should buy diamonds coming from your comparatively wealthy neighbors in Botswana. He’s certainly well intentioned, but how “good” is it to advise avoiding my diamonds (and everybody that brings them to market), just because, far downstream of me, they transit through Dubai or through some manufacturer with a checkered past and shady ties? How rational is it to essentially punish the people most ill-equipped to meet your “responsibly sourced”, “conflict-free” standards? Moreover, clearly it’s not rational to essentially sanction an entire large country because of problems existing in some regions with some companies and some resources, but that is what has apparently happened in the DRCShouldn’t the accent be on responsible sourcing, and on being “conflict-managed” rather than on a possibly unachievable “conflict free”?

The biggest thing I’ve learned through this whole experience is that complex problems imply complex solutions. The more I think about diamonds and the words “good” and “bad”, the more confused and less pointed I get. There is often very little connection between raw materials and finished products, and as far I’ve learned, little to nothing we can do on the consumer end to make that connection. We’re left to simply take a company’s word for it.

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