Pink Diamonds – Unprecedented Supply & Demand Fundamentals – January 2017

Despite occupying such an influential position within the diamond industry and the investment market, all mines eventually “burn out”, and unfortunately the Argyle mine is no exception. Its resources are expected to be largely depleted in the near future, an estimation that can be further supported by Rio Tinto’s 2016 announcement of ceasing operations in 2020.

The Importance of the Argyle Mine

Established in the Kimberly region of West Australia, the Argyle mine commenced open pit mining operations in December of 1985. While the diamonds initially unearthed were of a lesser value when compared to the global average; the mine had immense volume and the precious stones had a grade whose richness would eventually rewrite geological textbooks. As operations progressed, Argyle ultimately became the fourth largest diamond producer by volume worldwide, and contributes to roughly 90% of naturally colored diamonds even today.

Filling the “Gap” Created by the Closure 

Great speculation has risen during the past years regarding how the official closure of the mine will ultimately impact the industry as a whole.

Up to this day there has been no evidence of a new mine being found that could potentially fill the gap Argyle will leave, and with good reason; exploration for diamond mines is both a very long and often extremely expensive process.

Profit = (Grade * Average Value per Carat * Total Volume of Ore) – (Capital Costs + Financing Costs + Operating Costs)

It should also be mentioned that only a small sample is examined, therefore there is no guarantee that the end result will meet initial expectations. Further, due to the extensive time period required to set up operations, factors such as global financial stability and market fluctuations heavily influence mining economics, thus adding another layer of uncertainty to the matter.

The abovementioned can explain why major mining companies have severely reduced exploration but what about existing mines? There are in fact a small number of mines throughout the globe that produce colored diamonds (prime examples are in South Africa, Brazil, and Angola), however, none of these can rival the magnificent supply of pink diamonds, especially the unique “bubble gum” hue of its famous pink diamonds.

Can Anything Replace the Annual Argyle Sale?

Regarding tenders, another important question arises. With the closure of the mine, the prestigious annual Argyle sale will also cease to exist, a fact that will most likely greatly impact the investment market.

These sales are truly a staple in the diamond investment market, bringing some of the most beautiful and valuable precious stones the industry has to offer. Each year’s magnificent and unique collection outperforms that of previous sales, and 2016 was no exception. Rio Tinto happily announced that last year’s sale was the most successful in the company’s history, With such quality and value being brought every year, it is safe to assume that once the official closure of the mine takes place, no other sale will be able to adequately replace those pink diamonds in the near term and those who had the foresight to acquire rare pink diamonds will be the ultimate long-term source of supply.

Positioning Ahead of the Closure

Production in Million Carats

With closure being imminent, perhaps this is the ideal time to consider investing in pink diamonds. There are roughly about 1500 days until this mine stops producing which means that the already rare pink stones will become even rarer, with pink diamonds being potentially finite. It is therefore important to understand the impact rarity has on the value of these stones.

With supply greatly decreasing and demand for these precious stones increasing exponentially in the last decade, intense escalation of value could be expected. This statement can be further supported by the fact that annual sales prices in the last few years have experienced a 150 % plus increase. It could therefore be an opportune moment to begin considering investing in such stones.

It is evident that the matter of the 2020 Argyle mine closure is dominated by great uncertainty. It is hard to predict the exact impact this will have on the diamond industry and investment markets, however, only one thing is for sure, the Argyle mine will go down in history and its departure will certainly mark the end of an era.

Rain at Argyle Hits Rio Tinto’s Production

Jul 19, 2017 3:34 AM By Rapaport News

RAPAPORT… Rio Tinto’s rough-diamond output declined 2% to 4.3 million carats in the second quarter as wet weather restricted production levels at the Argyle mine.

Output from the mine in Western Australia fell 8% to 3.2 million carats compared to the corresponding period last year, the miner said on Tuesday. Ore-processing volumes were lower due to the conditions and because of maintenance work that took place during the quarter.

Rio Tinto’s share of production at the Diavik mine in Canada rose 18% to 1.1 million carats due to both increased processing volumes and higher recovered grades, it said. The company owns a 60% stake in the project in a joint venture with Dominion Diamond Corporation.

In the first half, Rio Tinto’s total diamond production dropped 5% year on year to 8.5 million carats, with output from Argyle sliding 9% to 6.2 million carats. The miner’s share of production from Diavik rose 8.5% to 2.3 million carats.

Total production from Diavik, including Dominion’s share, rose 18% to 1.9 million carats in the second quarter and increased 8.5% to 3.8 million carats in the first half.

Rio Tinto kept its production outlook for the full year at 19 million to 24 million carats, representing an increased from actual output of 18 million carats in 2016.

Rare Set of Coins & Diamonds From Rio Tinto & The Perth Mint – June 2017

Rio Tinto sold a set of diamond coins to an Asian buyer for $1.4 million (AUD 1.8 million) within a month of the collection’s unveiling, the miner announced Thursday.

The anonymous collector snapped up the Australian Trilogy, which features three coins, each with a colored diamond — one pink, one purple-pink and one violet — from Rio Tinto’s Argyle mine in Western Australia.

The Perth Mint created the coins together with diamantaire John Glajz, an authorized partner of Argyle Pink Diamonds — meaning he is permitted to sell stones from the iconic mine. The collaboration has also seen the creation of several limited-edition gold-and-pink-diamond bars and coins during the past five years, which have been in demand among investors and collectors, Rio Tinto said.

“We have seen, and continue to see, strong demand from this high end of the luxury market,” Glajz commented. “The coveted Australian Trilogy speaks the language of exclusivity, desirability and collectability.”

The Argyle mine produces the vast majority of the world’s supply of rare pink diamonds, Rio Tinto said. However, it added, less than 0.1% of the diamonds the mine produces are pink. The company expects the asset to last until 2020.

Asian Jewelry Sales 

Chow Tai Fook continued its recovery in the first fiscal quarter as revenue grew across its Greater China network, the Hong Kong-based jeweler reported Wednesday.

Retail sales value rose 17% in mainland China and 7% in Hong Kong and Macau in the three months that ended June 30, the company said. Same-store sales growth in the two regions amounted to 11% and 5%, respectively.

Same-store sales of gem-set jewelry increased 3% in the mainland. Gold sales, by the same measure, rose 16% on the mainland and grew 9% in the jeweler’s home region, driven by a higher average selling price.

US Jewelry Sales

Sales at specialty jewelry stores in the US jumped 4.7% to $3.06 billion in May, according to provisional data recently published by the US Census Bureau.

Sales grew 1.9% to $12.4 billion in the first five months versus the same period a year ago, the data showed.

The increase came as the Consumer Confidence Index, a measure of the health of the US consumer economy, decreased 1.3% in May but rose 1.1% in June, according to the Conference Board.

“Expectations for the short term have eased somewhat, but are still upbeat,” said Lynn Franco, director of economic indicators at the Conference Board, in a statement in late June.

“Overall, consumers anticipate the economy will continue expanding in the months ahead, but they do not foresee the pace of growth accelerating,” Franco added.

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Coloured diamonds or white diamonds?

Angela says that coloured diamonds in particular are reaching dizzying new heights, with the demand for good quality stones such as rare blues and pinks never been stronger. Coloured diamonds are unique in this way and the last six years has seen an upward trend.

“Coloured diamonds are in high demand and in past auctions, achieved strong results,” she says. In November last year, the sale of a rare pink diamond to Hong Kong’s sixth richest man Joseph Lau made headlines. The property tycoon bought the rare 16.08-carat pink diamond mounted as a ring, and renamed it ‘Sweet Josephine’, for his seven-year-old daughter.

“The Sweet Josephine diamond in Geneva, set a new world auction record for a fancy vivid pink diamond, selling for US$ 28.5m, and the 91.81 Fancy Vivid Yellow cushion-shaped diamond which sold in the same sale for US$ 4.2m.” she says.

Do diamonds hold their value?

While diamonds are not traded as a commodity in the same way as gold and other precious metals might be, diamonds are holding their worth and the reputation for them even increasing in value has never been so resoundingly positive. “Each market, including the stock market, is undergoing some fluctuations, but in general terms the diamond market is rather stable,” says Angela. “It is a very healthy market.”

What are the benefits of investing in diamonds?

As rare as such diamonds may be, record prices “show we are dealing with a very healthy stone market,” according to Francois Curiel, chairman of Christie’s Luxury Group. “There is lots of cash in the world right now. At the moment, works of art, diamonds and jewels are a safe haven,” he added.

What to look for in a diamond

When shopping for diamonds, the basic valuation template boils down to the four Cs – Carat (weight), Colour, Clarity and Cut. Colourless, white diamonds are measured on a sliding colour scale in which the rankings are D (the best blue white) and E (exceptional white). Any gem that registers lower than grade H is deemed too yellow. Clarity grades range from Flawless to Imperfect 3. The most important of the four Cs is ‘cut’, because it is the skill of the cutter that gives a diamond its brilliance.

But is there a need to go further for an investment in diamonds? “The four Cs are still the key elements to look at when buying a diamond,” says Angela. “But it is recommended to buy a diamond with a gemological report from an independent diamond laboratory which shows all details of the diamond. Other factors some buyers might want to take into consideration will be cut grade, which analyses quality of symmetry, polish and optical performance; cost reference – the unit of reference used for value; and change in value – each diamond’s classifications appreciation or depreciation over the last year and five years – from the four Cs to its proportions and individual characteristics.”

How much to invest?

“Focus on the quality, rather than on the size of the diamond. Be prepared to invest at the top of your budget and do not think short-term,” says Angela.

Red Diamonds – Argyle Tender 2017

(CNN) As the head of jewelry in Asia for British auction house Bonhams, Graeme Thompson is used to handling beautiful diamonds on a daily basis. Yet he’s only ever held a red diamond once, about five years ago. “Red diamonds are the rarest of them all and whoever gets to hold one in his hand is very lucky indeed,” he said.

Mining company Rio Tinto has been showcasing stones from its Argyle mine in Western Australia for the past 33 years — and during that time, less than 20 carats of Fancy Red certified diamonds have been sold.

Fancy Red diamonds are on the pink diamond color spectrum and is a grading from the Gemological Institute of America.

On Wednesday in New York, Rio Tinto unveiled its largest Fancy Red diamond yet to a select group of collectors, alongside other gemstones in its annual tender of pink diamonds. Known as the Argyle Everglow, the polished radiant cut diamond weighs 2.11 carats.

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It represents “rarity within rarity, and will drive global demand from collectors and connoisseurs in search of the incomparable,” said Argyle Pink Diamonds Manager Josephine Johnson.

The stone is “half the size of a one cent coin, but I expect it to sell for over $10 million,” said Tobias Kormind, Managing Director of 77Diamonds.com, Europe’s largest online diamond jeweler.

Thompson said he was not comfortable making a more definitive prediction on price without having seen the stone, but that the determining factors will be “the carat weight, the strength of the color, how red it is, and the clarity. The difference in value between a stone that is very clean and one that has inclusions is huge.”

Fetching high prices

The largest red diamond in the world, the 5.11 carat Moussaieff Red, was discovered in Brazil in the 1990s and is currently owned by jeweler Moussaieff.

Significant red diamonds rarely appear at auctions. In 2013, a 1.92-carat Fancy Red rectangular-cut diamond, sold for CHF3.15 million at Christie’s, while the auction house also sold a 2.09-carat heart-shaped Fancy Red diamond ring by Moussaieff for HKD39.32 million in 2014.

The 2.42 carat Fancy Purple-Pink Argyle Avaline and the 1.14 carat Fancy Red Argyle Isla.

“The color red is essentially a highly, highly saturated vivid pink, where the body color goes beyond the pink color range — and there can be modifying color to that red, like pinkish red, orangey red, brownish red — and all of these contributing factors will then determine the value of the diamond,” Thompson explained. “A Fancy Red is the rarest of all diamonds.”

“To hold a red diamond in your hand and look at it and say it’s a truly a red stone without any modifying colors, very few people on this planet will ever be able to do that,” Thompson added, noting such red diamond will appeal to Chinese buyers “as it is the most auspicious of colors in China.”

Mine to close soon

The Argyle Diamond Mine produces 90% of the world’s rare pink diamonds and is set to close by 2021, according to Robyn Ellison, communications manager for Rio Tinto.

“It is unlikely that a diamond as rare as this will come out of the mine again,” Ellison said.

At Rio Tinto’s annual tender this year, buyers will have a choice of 58 diamonds weighing a total of 49.39 carats. They include five “hero” diamonds selected for their unique beauty and named to ensure there is a permanent record of their contribution to the history of the world’s most important diamonds.

The collection will be showcased in Hong Kong and Perth with bids closing on October 11.

The information in this newsletter is for informational purposes only. The information contained in these quotes is believed to be from reliable sources. AIDC Advantage Corp. “the company” cannot be held liable for any misrepresentations on behalf of the sources we use. The company is not an investment advisor nor are they licensed to give investment advice. The company assumes that all buyers acquire colored diamonds for collectible and jewelry purposes as well as the long-term potential of the market. It is advised to contact a qualified advisor before entering into the colored diamond market. The company cannot guarantee that past performance of colored diamonds will continue in the future and that a colored diamond purchased from the company will provide a net gain. They are not as liquid as some collectibles. They are not necessarily appropriate for every individual. The quotes used only represent part of the article. For full viewing of any article, please contact your advisor. For more information, please refer to the terms & conditions in the AIDC Advantage website.