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”.
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.
Mid-way through my research project (about February 2014, and before this whole Ebola mess), I watched Martin Rapaport’s persuasive TEDx Speech and other words on the issue of diamonds, and then made a decision:
“I’m looking for a diamond from Sierra Leone”.
“What? So you somehow want a conflict stone now? Unsatisfied with Jezebel.com hating on you the last two three times?” asked a good friend of mine.
“As entertaining and easy as that is, allow me to clarify that…”
The truth is that although Sierra Leone has been at peace for over a decade, they are still desperately trying to shed the stigma left from both the civil war and that damn Leonardo DiCaprio film (which wasn’t even shot in the country).
Frustratingly, Mr. Rapaport’s videos omit the path through which one would go about buying a stone of Sierra Leone or West African origin. I then imagined myself as a modern-day Cecil Rhodes and remembered a story that a rough diamond buyer named Sofus Michelsen told me about his grandfather:
“My Grandfather Sofus Michelsen was a Norwegian and married my Grandmother a Scottish woman. His story was he travelled to Kimberley, South Africa in 1880 where the main supply of rough diamonds were mined, the stone he bought was a 10.30ct rough and had it cut there into a beautiful 4.00ct oval. My wife now wears it as I gave it to her for our engagement after it was passed down from my Grandmother, to my Mother, and now my wife.”
In case you’re wondering, travelling from Norway to Kimberley, South Africa in 1880 was quite a feat: “three months by schooner” he informed me. I am at this point both floored and humbled. “Brad Pitt takes a year to design Angelina’s ring, and this guy’s story involves a three months-long trip by schooner? Well, fuck everybody, then. I’m going to Sierra Leone. How cool would it be to get a picture of me, knees-deep in Tongo mud or chillaxin’ on Tokeh Beach holding the very rough that would be polished into Stephanie’s stone. I just want one “makeable I” rough and I’ll walk it to a polisher myself, Surely one of those rough buyers could spare one from a parcel” I naïvely thought.
My dream was not to be. First of all, no, rough buyers do not have a stone to spare from a parcel. There are two other options, the first of which is the legal (expensive) route, where you pay a rough diamond geologist as a consultant (you didn’t fly all this way to get screwed, did you?), plus expenses (accommodations, security, probably licensing, likely more money to “grease the gears”). One geologist even informs me: “Mr. Schulte, I could spend a half hour writing to you telling you why this is not possible. At $200/hr and a 2 hr minimum, why pay for something I’m telling you for free?” Another rough dealer says he’s working on a parcel from Salone, so maybe we could do business, but probably not because that’s not how it goes, chump. A third rough diamond buyer offers to arrange a 7-day trip, though the costs reveal that this is clearly not the most efficient way to purchase exactly one stone. The second option is the illegal, black market route like these very ballsy gentlemen at Vice did, which I will not be pursuing (particularly given the quality of the stone they ended up with).
Also, should one succeed in buying an artisanally-mined stone, it’s more likely than not that the digger’s find would be massively undervalued by the original buyer, and you exponentially increase the risk of exposure to smuggled stones and other delicacies of the illicit market. Moreover, since I’m not exactly a graduate gemologist with experience in grading rough diamonds (yet!), I could well be buying a diamond that isn’t even a diamond, isn’t cuttable or makeable, or with inclusions that significantly impact its quality as a polished stone. Can’t exactly have that, can we?
Even though the timing didn’t coincide with when I was in the market for a ring, I had tentatively planned to go with Nick Montefour, (fully licensed exporter’s agent) in January of 2015, though obviously the whole Ebola epidemic has sidetracked that sexy option, never mind that the Mrs. is not very keen to the idea, at all.
(I still planning on going once this Ebola mess calms down, and over the expected female objections)
I found this speech particularly influential. In fact, before seeing this speech, I was convinced that insisting on a Canadian diamond was the more ‘moral’,’ethical’ thing to do. What I found disappointing is that he encourages people to buy diamonds from Sierra Leone, but from a consumer perspective, it is of course impossible to do so (request a stone in which the rough came from a certain country).