By Susan Taylor
TORONTO, July 17 (Reuters) - In the mysterious world of
diamond mining, it turns out that some stones are too big to
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
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
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
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.
"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
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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