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 Canada's Lucara Diamond Corp will have to cut
its tennis ball-sized rough diamond to find a buyer, industry
insiders say, following Sotheby's failed auction for the world's
largest uncut stone last summer.
It's not the ending that William Lamb wanted for his 1,109-carat
stone, named 'Lesedi La Rona', or 'Our Light' in the national
language of Botswana where it was mined.
"It's only the second stone recovered in the history of humanity
over 1,000 carats. Why would you want to polish it?," said
Lucara's chief executive.
"The stone in the rough form contains untold potential...As soon
as you polish it into one solution, everything else is gone."
Lamb had gambled that ultra-rich collectors, who buy and sell
precious art works for record-breaking sums at auction, would do
the same with a diamond in the raw.
The unprecedented bet failed.
Bidding for the 2.5 to 3 billion year old stone stalled at $61
million - short of the $70 million reserve.
"When is a diamond too big? I think we have found that when you
go above 1,000 carats, it is too big - certainly from the aspect
of analyzing the stones with the technology available," said
Panmure Gordon mining analyst Kieron Hodgson.
"At the end of the day, it's about understanding what the stone
can produce. And the industry now doesn't work on hunches as
much as it used to 20-30 years ago."
An arcane business, the diamond industry has no spot market
trading, no guarantee that 'roughs' will yield any value, and a
punishing grading system that can dramatically swing values.
Stones in the hundreds of carats come with additional risk, from
the multi-million-dollar price tags and cutting process that can
take months or years, to capricious customer demand.
There is a "very, very small universe" of companies with the
skill, money and network to polish and sell the Lesedi, which
will likely take two to four days for the first laser cut, said
Lamb.
But after Lucara's public auction, potential buyers now know
what the market is willing to pay, said Edahn Golan, of Edahn
Golan Diamond Research & Data. "Maybe it's worth waiting a
couple of years," he said.
While Lucara does not need the money, investors may not have
that patience.
Lamb said the unsold stone "weighs heavily" on the stock, which
is down more than 30 percent from late last year.
To be sure, Lucara has seen other benefits from the stone, said
independent diamond analyst Paul Zimnisky.
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"There's the value of a particular diamond, but then there's also a
story behind the second-largest rough diamond ever recovered in
modern time," he said.
"Just from a publicity standpoint, nobody knew what Lucara Diamond
was when they recovered that stone ... now they're probably one of
the most recognized names."
Lamb, a former De Beers executive, says it's unlikely Lucara can
sell the stone for its desired price and polishing the Lesedi itself
is risky.
Another option is for the Vancouver-based miner to partner with one
or more companies to cut and sell the stone. "We've already done our
homework," Lamb said. "You don't take a stone like this and give it
to the second best."
Industry sources agree that high-profile British diamond dealer
Laurence Graff makes the list of potential partners, but beyond
that, opinions vary.
Lucara could work with a consortium, sources said, including Cora
International, Diamcad, the so-called 'King of Diamonds' Lev Leviev,
Mouawad, Tache Diamonds, Optimum Diamonds, the Angolan President's
daughter Isobel dos Santos, Swissdiam International and Rare Diamond
House (RDH).
It would be a mistake for Lucara to hold onto the Lesedi, said Oded
Mansori, RDH managing director. "Maybe next week, there will be a
larger stone."
New technology means miners like Gem Diamonds, Lucapa Diamond, Petra
Diamonds and Letseng Diamonds are unearthing more mega-stones intact
rather than breaking the brittle crystals.
Lucara, which installed a Large Diamond Recovery machine, using
X-ray transmission sensors (XRT), recovered the Lesedi, an 813-carat
and 374-carat stone over two days.
A Dubai trading company paid a record $63 million for Lucara's
813-carat 'Constellation', while Graff bought the 374-carat stone
for $17.5 million.
"Miners have more advanced technology, this is why we see these
large stones coming up all of a sudden," said Mansori. "I think that
Mother Nature has some more surprises waiting for us."
Lamb won't take that bet.
"Don't hold your breath. There's no guarantee that there's going to
be a next one," he said.
(Reporting by Susan Taylor)
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