The End of the Diamond Age

In a corner of South Africa shortly after the Boer War a small mining operation owned by one Thomas Cullinan has just come to a halt. The year is 1905 and just a little over 5 metres underground the world’s largest diamond has just been unearthed.

At 3,106 carats and measuring 10.1 centimetres long, 6.35 centimetres wide, and 5.9 centimetres deep it became an instant celebrity. On display in Johannesburg it got around 8-9,000 visitors as the government of the day debated what to do about it. It was decided it might make a good gift to the crown as a gesture of goodwill after the whole war thing and thanking the king for allowing the area it’s own constitution. It was eventually decided and was bought for £150,000. It was a deal for them though because due to tax on diamonds, two thirds of the profit from the sale went straight back to the government.

Transporting the diamond provided it’s own challenges. With their heads full of elaborate heists, detectives were assigned to it as it was ceremoniously locked in the captain’s safe and sent on its way on a steamboat. That was the decoy. The actual diamond was put in a plain box and chucked in the post.

There was hesitancy over whether King Edward VII should accept the gift. But the process was eventually lubricated by the Colonial Under-Secretary, some unknown called Winston Churchill. For his part in the matter he himself was gifted a replica which he reportedly liked showing off to friends on a silver tray. It is unknown whether it was the same one that had the escort. Around that time a whole raft of replicas were commissioned and sometimes come up for auction today, so the chances are slim.

While in the King’s collection a formal promise was made to the people of Transvaal that the diamond would be “kept among the historical jewels and heirlooms of the Crown”. It was sent to Amsterdam to be cut, transported in a coat pocket while the Royal Navy unwittingly guarded an empty box over the North Sea. It would eventually be cut into 109 pieces, the two largest pieces of which are set into the crown jewels.

Over a hundred years later we have still not found a diamond that large. This is despite Miners now using things like x-ray technology to see through the ground to identify high value minerals. This process means they don’t need to risk damaging ores while thrashing through the earth either.

The second largest diamond ever found was just discovered in August in Botswana coming in at a hefty 2,492-carats. The mining operation that discovered it, Lucara Diamond Corp, saw its shares jump 91% with the news, making it’s market value go up to $150 million. Not bad considering the rock itself is likely to be worth tens of millions, maybe even more if its grading is good. The same mining operation found a 1,109-carat gem-quality diamond in 2015 which sold for $53 million.

“This find not only showcases the remarkable potential of our Karowe Mine, but also upholds our strategic investment in cutting-edge XRT technology. The ability to recover such a massive, high-quality stone intact demonstrates the effectiveness of our approach to diamond recovery and our commitment to maximising value for our shareholders and stakeholders.”
Beyond near record breaking style news like this, diamonds face a headwind.

Growing awareness over the years thanks to the likes of Djimon Hounsou & Leonardo Dicaprio’s Blood Diamond has led to a decline in Diamond demand. It sort of ruins the romanticism if every time you look at your engagement band and all you can think of is slave labour.

People have discovered that the marketing jingle “diamonds are forever” doesn’t apply to their aftermarket value either. Stores can markup prices by 100% to 200% and you’ll be lucky to resell for 25% to 50% of the purchase price. If you wanted to shore up assets in metals you’re better off going for something like gold, silver or platinum.

Diamonds still reign supreme as the engagement stone of choice, making up 85% of the market. However this is rapidly getting eaten up as people become more receptive to lab grown diamonds. It’s seen as a more eco-friendly choice since it doesn’t require levelling an entire mountain or natural habitat to acquire. They can also be sold larger and cheaper in comparison to it’s free-range cousins. As a diversion. If you were in the market for diamonds and ethics were a factor in your purchase, natural antique diamonds may be a better option as it’s not feeding a market that requires massive amounts of energy to produce. All the work has already been done.

This has destroyed the stranglehold De Beers has had on the market. They have largely been able to call the shots on diamond prices, but are now growing its own diamonds in an effort to stay competitive while offering them at ultra competitive prices. Many see this as the company bottoming out the lab grown market to put them on the same level as trash fashion, while maintaining the mystique of natural diamonds. Five years ago they sold at a 20% discount of the price of natural diamonds. Now they are selling at an 80% discount. Natural diamond prices have dipped by a quarter in the last two years.

Back in 2021 fashion jeweller Pandora put a line in the sand when it declared it would be fully switching to only selling lab grown diamonds. This has resulted in big profit margins for the company and rosey outlooks at a time when brands like LVMH have had to be more modest in their forecasts.

“It’s clear that our positioning to be an accessible jewellery company in a situation where discretionary [spending] is pressured means that we are in the sweet spot. Globally, the jewellery market continues to be sluggish and, of the few companies that report results, they’re all having a rougher ride than us,” Alexander Lacik, chief executive of Pandora told Financial Times.
“People are discovering that a diamond is a diamond. It’s a different value proposition, and people are voting with their wallets . . . Older customers are more wedded to mined diamonds. Younger ones are more open to lab-grown,” he added.

Other brands with only Lab-grown offerings have also seen strong returns as consumers feel the pinch.

The question is, one day when we finally dig up a diamond to rival the Cullinan, will anyone care?