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Jeweller - December 2018

The debate has divided the industry for years. However, is the De Beers move to enter the lab-grown market simply a U-turn, a logical extension of its natural diamond business, or a strategic attempt to control its upstart synthetic competitors? It’s a new game with new rules. Are you ready?

The debate has divided the industry for years. However, is the De Beers move to enter the lab-grown market simply a U-turn, a logical extension of its natural diamond business, or a strategic attempt to control its upstart synthetic competitors? It’s a new game with new rules. Are you ready?

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VOICE OF THE AUSTRALIAN JEWELLERY INDUSTRY<br />

DECEMBER <strong>2018</strong><br />

The<br />

GREAT<br />

DEBATE<br />

it<br />

Natural Vs Synthetic<br />

The debate has divided the industry for years.However, is the De Beers move to<br />

enter the lab-grown market simply a U-turn, a logical extension of its natural<br />

diamond business, or a strategic attempt to control its upstart synthetic competitors?<br />

It’s a new game with new rules. Are you ready?


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Innovation Vs Disruption:<br />

Spectators don’t win games<br />

There are plenty of questions and theories concerning<br />

De Beers’ decision to enter the synthetic diamond market.<br />

Some believe synthetics are simply a logical extension of<br />

its existing business while others view it as monopolistic<br />

behaviour aimed at controlling the industry.<br />

For me, the only question is, “Why did it take so long?”<br />

It was 13 years ago in July 2005 when I wrote: “De Beers<br />

should begin manufacturing synthetic diamonds. Crazy,<br />

huh? Rather than fighting the inevitable, perhaps the<br />

company would be best to embrace it.”<br />

At the time I noted that De Beers was fully aware of the<br />

dire consequences synthetic diamonds could cause to<br />

the natural diamond market and that the company’s<br />

scientists were developing technology to accurately<br />

identify the lab-created ‘menace’.<br />

After all, the diamond behemoth had an enormous<br />

income stream to protect so, for me, it was not a matter<br />

of ‘if’ but ‘when’ it would begin selling lab-created stones.<br />

My reasoning was simple: you can’t win a game you’re<br />

not playing. Indeed, in 2005 I asked, “Have you ever seen<br />

a game won by a spectator?”<br />

As the synthetic diamond market expanded, bringing<br />

increased quality and production capacity, De Beers and,<br />

more importantly, the wider financial and investment<br />

industries would have wondered whether they were<br />

witnessing innovation or disruption. The sceptics or,<br />

more precisely, the nay-sayers probably viewed the<br />

expanding synthetic market as mere innovation,<br />

dismissing the slow advances as merely improvements<br />

in technology and therefore production.<br />

“Not much will change,” the nay-sayers would’ve said<br />

at the time”; Synthetic diamonds will not be a threat to<br />

natural diamonds!” To some extent, that was probably<br />

a reasonable position up until only a few years ago;<br />

however, at some point since, people have started<br />

realising that they aren’t witnessing innovation but<br />

instead witnessing full-scale disruption.<br />

Don’t be fooled; there’s a big difference between the two –<br />

innovation is the product of changes within a market while<br />

disruption is a change to the overall market itself, often<br />

significant enough to turn an entire industry on its head.<br />

Disruption changes how traditional business practices are<br />

viewed and transactions conducted. Consumer behaviour<br />

is altered forever, usually because the ‘new way’ is more<br />

efficient and valued by the consumer. Whereas innovation<br />

improves and advances, disruption often damages or<br />

destroys existing categories or markets.<br />

That’s the last thing De Beers wants, it would lose ‘control’!<br />

Not all innovation leads to disruption. Indeed, the majority<br />

doesn’t; you can have innovation without disruption<br />

but not vice versa. However, I’m guessing at some point<br />

De Beers had to consider the ramifications of not acting or,<br />

if you like, not reacting to the continuing innovation of the<br />

lab-grown diamond manufacturers and marketers.<br />

How can you win a game you’re not playing?<br />

Extending the sporting analogy to include basketball<br />

parlance, De Beers has always been seen as the jewellery<br />

industry’s ‘point guard’. All eyes are on point guards<br />

because they call the offence, direct the moves and control<br />

the speed of the game. Furthermore, as any basketball<br />

aficionado will tell you, the best point guards can control<br />

the opposition too, often without them even knowing it!<br />

Potentially confronted with a type of Moore’s Law,<br />

De Beers had to no choice but to start playing the synthetic<br />

game and it did exactly that on May 29, <strong>2018</strong>.<br />

Six months down the road we can ask: Was this decision a<br />

strategic move to ensure that competitor innovation did<br />

not become blanket disruption or was it because De Beers<br />

finally saw the light and realised lab-grown diamonds are<br />

not a menace after all?<br />

Perhaps it’s even a little bit of<br />

both, or perhaps it doesn’t<br />

really matter anyway!<br />

Our Great Diamond<br />

Debate might help<br />

you decide.<br />

Coleby Nicholson<br />

Managing Editor<br />

VOICE OF THE AUSTRALIAN<br />

JEWELLERY INDUSTRY<br />

jewellermagazine.com<br />

Publisher & Editor<br />

Coleby Nicholson<br />

Associate Publisher<br />

Angela Han<br />

angela.han@gunnamattamedia.com<br />

Advertising Manager<br />

Julie-Anne Bosworth<br />

julieanne@jewellermagazine.com<br />

Production Manager<br />

& Graphic Design<br />

Jo De Bono<br />

art@gunnamattamedia.com<br />

Accounts<br />

Paul Blewitt<br />

finance@gunnamattamedia.com<br />

Subscriptions<br />

info@jewellermagazine.com<br />

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<strong>December</strong> <strong>2018</strong> <strong>Jeweller</strong> 5


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DIAMONDS<br />

AND YOUTH:<br />

Millennials and<br />

Gen Z drive sales<br />

THE LATEST DE BEERS’ RESEARCH FOUND THAT MILLENNIALS<br />

AND GEN Z CONSUMERS ACCOUNTED FOR TWO-THIRDS OF<br />

GLOBAL DIAMOND JEWELLERY SALES LAST YEAR.<br />

ccording to data published in September,<br />

Millennials – consumers currently aged<br />

21 to 39 - accounted for almost 60 per<br />

cent of jewellery sales in the US last year and 80<br />

per cent in China .<br />

Gen Z – people aged 20 and under – represent<br />

35 per cent of the world’s population and are<br />

forecast to become the majority consumer group<br />

of diamond jewellery sales in coming decades,<br />

already representing 5 per cent of the<br />

US consumer market.<br />

De Beers Group CEO Bruce Cleaver stated: “The<br />

younger generations present wide-ranging<br />

opportunities for the diamond industry with the<br />

significant size and purchasing power of today’s<br />

Millennials and tomorrow’s Gen Z consumers.”<br />

“While both of these generations desire diamonds<br />

just as much as the generations that have<br />

come before them, there are undoubtedly new<br />

dynamics at play: those diamonds may now be in<br />

different product designs, used to symbolise new<br />

expressions of love and researched and purchased<br />

in different ways to mark different moments in life.”<br />

The report pointed to four major characteristics<br />

that can be attributed to both generations’<br />

buying habits: love is meaningful to them, they are<br />

digital natives, they value authenticity, individuality<br />

and self-expression, and they are engaged with<br />

social issues.<br />

Cleaver went on to acknowledge that both<br />

generations are influenced by social media and<br />

online shopping, utilising both to research the<br />

diamond market before investing in a product,<br />

noting that 98 per cent of Chinese Millennial and<br />

Gen Z consumers research purchases through one<br />

or more channels before buying.<br />

“The ‘always on/always connected’ nature of<br />

today’s consumers – buying what they want<br />

when they want it – is resulting in changes to the<br />

typical decision-making and purchasing approach.<br />

Retailers across a range of industries are finding<br />

they need to rewrite the rule book when it comes<br />

to forging and maintaining connections with<br />

consumers,” Cleaver said.<br />

Among the changing requirements for diamond<br />

marketing targeted to the younger generations,<br />

the report noted the use of ‘influencer marketing’<br />

as a key tool for engaging consumers. Digital<br />

marketing across Instagram, Snapchat and Youtube<br />

were considered top channels for social media<br />

engagement in the diamond sector.<br />

The report also recognised differing socio-political<br />

METHODS USED FOR RESEARCHING DIAMOND<br />

ACQUISITIONS<br />

8 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


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attitudes among Millennials and Gen Z to their parents’ generation<br />

(Baby Boomers) in relation to sexuality, stating: “The young<br />

generations’ liberal attitudes towards sexuality and gender identity<br />

require businesses in the diamond industry to move beyond binary<br />

approaches to these issues by avoiding gender stereotypes and<br />

venturing out of traditional relationship contexts.”<br />

Globally, Millennials represent 29 per cent of the total population<br />

equating to 2.1 billion people, while all older generations combined<br />

account for 36 per cent. In India, they account for 31 per cent of the<br />

population and outnumber all older generations put together.<br />

Millennials represent the “bridal generation” with the average age<br />

of marriage between 24-30 in main diamond-consuming countries.<br />

Bridal jewellery accounts for more than a quarter of diamond<br />

jewellery acquired by women in the US, China and Japan.<br />

According to the report, it is crucial that the diamond industry looks<br />

to the younger generations who are increasing spending while the<br />

Baby Boomers are decreasing their spending in the category.<br />

The World Bank forecasts Millennials’ total income will exceed<br />

US$4 trillion (AU$5.6 t) by 2030 and will have overtaken Gen X<br />

as soon as 2020.<br />

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Aside from the two younger generations, diamond jewellery<br />

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outside of Japan, China, India, US and Gulf (Saudi Arabia) – classed<br />

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New product,<br />

new market<br />

LAB-GROWN DIAMONDS CAN CREATE NEW OPPORTUNITIES AND,<br />

ACCORDING TO SALLY MORRISON, ALLOW JEWELLERS<br />

TO COMPETE WITH OTHER FASHION CATEGORIES.<br />

he Lightbox brand is born from research<br />

conducted over the past couple of years<br />

by De Beers Group. We learned from<br />

consumers that there was great confusion about<br />

exactly what laboratory-grown diamonds were,<br />

and this was exacerbated by non-standardised<br />

nomenclature, pricing, and in some cases, concerns<br />

about non-disclosure of the product.<br />

Once they understood what laboratory-grown<br />

diamonds are, it became clear to us that the<br />

consumer interest in lab-grown product was<br />

for attractive, accessibly priced jewellery as a<br />

decorative accessory rather than a lasting symbol<br />

of a major milestone moment.<br />

After careful consideration and market analysis<br />

it was decided to launch a jewellery brand that<br />

would be transparent, made to the highest quality,<br />

and pitched to celebrate the multiple moments<br />

that happen with frequency in a woman’s life, but<br />

do not connote “forever”.<br />

This means that we are specifically not targeting<br />

the engagement market.<br />

Lightbox uses a US$800 a carat linear pricing<br />

model, regardless of whether this is a one carat<br />

stone, two half carats, or four quarter carat stones.<br />

To this we add a setting cost of US$100 for silver<br />

and US$200 for 10k gold.<br />

The De Beers’ name will not appear in Lightbox<br />

advertising and promotions, and the brand will not<br />

be marketed as conflict-free or eco-friendly.<br />

We are regularly asked why the pricing model is<br />

linear and not similar to natural diamond pricing?<br />

Our reasoning is simple: this is a manufactured<br />

product and we firmly believe lab-grown stones<br />

should be priced based on cost of manufacture,<br />

not as a discount from natural diamond pricing,<br />

which is defined by relative rarity.<br />

Our product is many things: sparkly, colourful and<br />

fun. However, by definition, it’s not rare.<br />

We can manufacture more of it every day.<br />

Lightbox diamonds will not be graded, as<br />

we do not believe grading is relevant for labgrown<br />

product because it can be manufactured<br />

consistently, over and over again. In order to<br />

ensure that our product is easily identifiable all<br />

stones above 0.2-carat will be laser inscribed using<br />

innovative new technology.<br />

Importantly, we believe that the Lightbox brand<br />

can help define and build a new market for the<br />

jewellery sector: and which will allow jewellery to<br />

compete with other products, including purses,<br />

shoes, and other accessories.<br />

It offers women the opportunity to buy themselves<br />

attractive and appealing jewellery that doesn’t<br />

have the deep emotional implication of natural<br />

diamonds, which we know has often been a barrier<br />

for self-purchases.<br />

For example, Lightbox can be offered for new<br />

occasions such as Galentine’s Day (Valentines Day<br />

celebration for single women), travel jewellery and<br />

can potentially re-invigorate existing celebrations<br />

such as Sweet Sixteen or Quinceanera (a<br />

celebration of a girl’s 15th birthday in Latin cultures)<br />

for a new generation of consumers.<br />

In a consumer category that has a constant need<br />

for ‘new news’ to invigorate sales, Lightbox offers<br />

an entirely new product: pink and blue laboratorygrown<br />

diamonds, which most of us have never<br />

seen, much less hoped to wear. And above all, it<br />

looks great.<br />

We have launched in the US via our own website<br />

selling direct to consumer, and for now that remains<br />

our focus. We plan to test the product in limited<br />

bricks and mortar stores in 2019 and beyond that,<br />

we’ll see! u<br />

Sally Morrison is Lightbox’s chief<br />

marketing officer and has previously held<br />

senior marketing roles at World Gold Council<br />

(LoveGold), Gemfields and Forevermark.<br />

12 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


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Don’t be fooled,<br />

real matters<br />

JEAN-MARC LIEBERHERR SAYS CONSUMERS<br />

WILL CONTINUE TO VALUE THE RARITY AND<br />

AUTHENTICITY OF NATURAL DIAMONDS BECAUSE,<br />

IN THE END, REAL MATTERS.<br />

few years after the introduction of<br />

laboratory-grown diamonds in the<br />

US market, we can reflect on the<br />

strategies implemented by synthetic diamond<br />

manufacturers and marketers to assess the future<br />

of this ‘new’ category.<br />

From the outset lab-grown diamond marketers<br />

have attempted to position their product in the<br />

consumer’s mind as the equivalent of a natural<br />

diamond albeit at a 20 per cent price discount to<br />

the real thing.<br />

The product was said to be ‘identical to a diamond’<br />

because of its chemical properties, and in some cases<br />

synthetic diamonds have claimed to be ‘even more<br />

rare’ because they are produced in smaller quantities!<br />

Other claims included ‘equally precious’ because<br />

they are expensive to produce, ‘better value’ because<br />

producers work on lower mark-ups, ‘ethical’ because<br />

they are non-conflict and sourced responsibly and,<br />

finally, lab-grown diamonds have been said to be<br />

‘eco- friendly’ because they don’t involve mining.<br />

The terms used to promote lab-grown diamonds<br />

were, and still are attempting to obscure their<br />

industrial origin and worse, bestow some natural or<br />

organic qualities they do not have.<br />

Synthetic stones became ‘cultured’, ‘cultivated’,<br />

‘hot-forged’, ‘above-ground’, or even ‘above-earth’<br />

diamonds. The strategy was to take advantage of the<br />

mystique and esteem of natural diamonds, capture<br />

some of the extremely valuable heritage and equity<br />

of the category while, at the same time, denigrate<br />

the diamond industry and the very product it aimed<br />

to emulate. It is fair to say that this strategy was<br />

implemented with some success.<br />

The ethical and eco-friendly narrative struck a chord<br />

with the media, as did the idea of a new technology<br />

disrupting an established industry that some believe<br />

has been left unchallenged for too long.<br />

Scientists and experts were quick to claim that<br />

natural and synthetic diamonds are identical,<br />

the only difference being the origin, while some<br />

retailers viewed this as an opportunity to restore<br />

profitability by generating premium (larger) margins.<br />

As for consumers, they were – and still are – largely<br />

confused about the whole category: what is it really?<br />

Is it natural? Is it a diamond? What is it called? How<br />

much is it really worth?<br />

There is a great deal of confusion in consumer<br />

minds, largely driven by inconsistent and misleading<br />

terminology and claims used by many laboratorygrown<br />

diamond marketers. However, a number of<br />

things are gradually becoming clear to consumers<br />

and the trade alike.<br />

First, the category is here to stay. It is an attractive<br />

technology that has the potential to produce<br />

beautiful product in unlimited quantities at ever more<br />

attractive prices, which I am sure many brands will be<br />

able to use to their benefit.<br />

There is no escaping the fact that a synthetic<br />

diamond is an artificial product with no inherent or<br />

resale value. As production capacities are brought<br />

on-line in low-energy-cost locations, we will see<br />

prices fall accordingly. In 2017, the price differential<br />

of natural and synthetic diamonds has increased by<br />

70 per cent and, as we know, Element Six – De Beers’<br />

synthetic diamond company – launched its Lightbox<br />

Jewelry range at US$800 per carat .<br />

This pricing demonstrates that synthetic diamonds<br />

are around only 15 per cent of the value of a<br />

natural diamond.<br />

There is no doubt that as capacity grows, all synthetic<br />

diamond prices will converge towards Lightbox<br />

Jewelry prices or lower. It might take a little while and,<br />

in the meantime, competitors will no doubt argue<br />

that their products are different from Lightbox when<br />

really they are not, and will attempt to take advantage<br />

of the lack of volumes to charge a premium.<br />

However, in the end, just as surely as gravity exists,<br />

prices will meet at the marginal cost of production,<br />

unless supported by a strong consumer brand. This<br />

means that synthetic diamonds will serve a low-value,<br />

fashion jewellery category, clearly distinct from that<br />

filled by natural diamonds.<br />

When well-informed, consumers will have a much<br />

clearer understanding about the differences<br />

between natural diamonds and synthetic<br />

diamonds. A <strong>2018</strong> US Harris Poll Survey conducted<br />

for the Diamond Producers Association (DPA)<br />

shows that 68 per cent of consumers believe a<br />

‘real diamond’ is a diamond coming from the<br />

earth, a natural diamond. This speaks to the<br />

well-documented importance of authenticity for<br />

consumers when they consider a product.<br />

Whether it is an organic product (naturalness), a<br />

work of art, a collectable, a vintage piece of furniture,<br />

or a precious stone, consumers attribute value to<br />

the notion of authenticity and to the story of the<br />

product. This is on top of the rarity value associated<br />

with a finite resource. In other words, ‘real’ matters to<br />

consumers and they give it a clear meaning when it<br />

comes to diamonds.<br />

Numerous claims about ‘eco-friendliness’ made<br />

by synthetic diamond brands are now being<br />

challenged as unsubstantiated and in breach of the<br />

US Federal Trade Commission’s Green Guides. Some<br />

14 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


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68 PER CENT OF CONSUMERS BELIEVE A ‘REAL DIAMOND’<br />

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IMPORTANCE OF AUTHENTICITY FOR CONSUMERS WHEN<br />

THEY CONSIDER A PRODUCT.<br />

well-advertised brands operating in high-electricitycost<br />

areas with no significant access to renewable<br />

energy claim a zero-carbon footprint through<br />

use of renewable energy, while in reality using<br />

questionable solar credits.<br />

It is easy to establish that the carbon footprint of<br />

a 1-carat CVD diamond (most larger diamonds<br />

will be CVD diamonds) produced in Singapore is<br />

approximately 40 per cent higher than that of the<br />

equivalent natural diamond. The questionable<br />

claims by synthetic diamond factories are being<br />

increasingly exposed and are starting to sink in<br />

with consumers.<br />

It is fair to say that while most lab-grown marketers<br />

AWJ_<strong>Jeweller</strong>HalfPage_Sept_235x144.pdf 1 19/7/18 2:53 pm<br />

claim a transparent, short supply chain, the original<br />

producer or even production origin is seldom<br />

disclosed to the consumer. This is not to say that<br />

the source is illegitimate, but it is clear that many<br />

synthetic diamond manufacturers and marketers<br />

are not being transparent, nor held to the same<br />

demanding standards as the highly scrutinised<br />

diamond industry.<br />

Of course, not everything is perfect in the diamond<br />

industry, despite the significant progresses made<br />

over the past 15 years, and we should demand that<br />

our industry be held up to the light and demonstrate<br />

continuous improvement. Consumers have the right<br />

to demand transparency and integrity and we have a<br />

duty to deliver on this expectation.<br />

While many in the industry work relentlessly on these<br />

issues, it is important for everyone to remember<br />

and remind our customers that the diamond sector<br />

directly and indirectly sustains about 10 million<br />

people worldwide in some of the most disadvantaged<br />

regions of the world. Entire regions and communities<br />

have been built, and become prosperous, thanks to<br />

the legitimate diamond trade. This is cause for much<br />

pride and satisfaction for the<br />

natural diamond industry<br />

because, in the end,<br />

Real Matters. u<br />

Jean-Marc Lieberherr is CEO Diamond<br />

Producers Association. He has held senior<br />

positions at Rio Tinto, LVMH and Unilever.


Lab-grown diamonds<br />

– 100 per cent diamond<br />

LAB-GROWN DIAMONDS OFFER SIGNIFICANT VALUE AND LEGITIMATE CONSUMER<br />

CHOICE. AS SUCH RICHARD GARARD SAYS A DOWNWARD PRICE SHIFT IS UNLIKELY.<br />

diamond is a diamond, whether extracted<br />

from the earth or grown above earth.<br />

This is a fact, a truth that is now accepted<br />

and recognised by experts and leading consumer<br />

bodies such as the US Federal Trade<br />

Commission (FTC).<br />

This was acknowledged in the latest revisions<br />

introduced by the FTC to its Jewelry Guides that<br />

are meant to assist in correctly marketing jewellery<br />

to consumers.<br />

The FTC not only revised its primary definition of<br />

diamond, making it clear that real diamonds could<br />

be from above earth or below, but it also removed<br />

the descriptor ‘synthetic’ from its list of prescribed<br />

terms for lab grown diamonds. The International<br />

Grown Diamond Association (IGDA) along with labgrown<br />

diamond manufacturers have long argued<br />

that the term ‘synthetic’ was inappropriate as it<br />

could confuse consumers about the real value and<br />

authenticity of the product.<br />

The FTC based its revisions on its own analysis of<br />

the diamond market, acknowledging technological<br />

advancements over the past 10–15 years in<br />

growing diamonds above ground, which are<br />

identical to diamonds extracted from ground. They<br />

rejected the suggestions from mined diamond<br />

trade organisations to align FTC’s revisions on<br />

the existing industry standards such as CIBJO’s<br />

guides or the International Organisation for<br />

Standardisation (ISO).<br />

FTC noted that these industry standards weren’t<br />

necessarily meant for consumer marketing and,<br />

in the end, the federal body developed an<br />

appropriate and, more importantly, a technically<br />

correct terminology. The IGDA believes the revised<br />

definitions are fair and inclusive, allowing<br />

both mined and grown diamonds to be marketed<br />

to customers.<br />

We believe that lab-grown diamonds offer<br />

a significant value and legitimate choice<br />

for consumers. Consumer confidence and<br />

communicating 21st Century facts when marketing<br />

are critical for the survival of any industry. IGDA<br />

advocates fair representation to consumers for<br />

both grown or mined diamonds, with the customer<br />

having the option and the right to choose.<br />

MVI Marketing, an independent market research<br />

firm, has been tracking the lab-grown market for<br />

years and reports that both consumer awareness<br />

and preference had been increasing by about 3–5<br />

per cent annually until 2016. However, around mid<br />

2017 the numbers jumped up by 12 per cent while<br />

one year later the research reported an 18 per cent<br />

increase. This is reflective of consumer preference<br />

and demonstrates future expectations.<br />

Writing for the Wall Street Journal, Paul Zimnisky,<br />

an independent diamond industry analyst, wrote<br />

an article on August 28, <strong>2018</strong> in which he stated:<br />

“At an estimated $US1.9 billion dollars today, the<br />

lab-grown diamond jewellery market is forecasted<br />

to grow at 22 per cent annually to $US5.2 billion by<br />

2023 and to $US14.9 billion by 2035, equating to a<br />

longer-term growth rate of about 9 per cent.”<br />

As consumer awareness for lab-grown diamonds<br />

accelerates (as research indicates), acceptance of<br />

the product has also climbed. In October <strong>2018</strong>, MVI<br />

conducted research about lab grown diamonds<br />

which found a whopping 81 per cent<br />

of respondents said they would definitely buy<br />

or consider a lab-grown diamond as a centre stone<br />

in jewellery.<br />

A 2016 report by Morgan Stanley titled Game of<br />

Stones – Lab vs Pipe, made it very clear that the cost<br />

of developing and producing lab-grown diamonds<br />

was basically the same as opening and producing<br />

from a new diamond mine. And, the report also<br />

highlighted the deep investments in technical<br />

process development required to produce good<br />

quality lab-grown diamond.<br />

Assuming Morgan Stanley’s manufacturing cost<br />

basis calculations, coupled with the increasing<br />

consumer demand for lab-grown diamonds, it is<br />

unlikely that there would be a downward price shift<br />

for grown diamonds, specifically for the high quality<br />

lab-grown diamonds typically chosen for centre<br />

stones (1-carat and up).<br />

The key to success within the lab-grown market<br />

has been the 1.0–3-carat, good quality stones for<br />

the bridal market. And we feel that this is where<br />

the lab-grown sector will continue to<br />

see positive growth. The IGDA believe that labgrown<br />

diamonds present an excellent growth<br />

opportunity for retailers to build a business today<br />

and for tomorrow!<br />

Not only is a lab-grown diamond 100 per cent<br />

genuine diamond, and has the exact characteristics<br />

of a diamond it is also graded to the same<br />

standards as mined diamonds.<br />

Very clearly, consumers accept this too!<br />

So we believe that when a consumer wants to<br />

compare lab-grown and mined diamonds to<br />

celebrate or mark an important milestone in<br />

their life, they will request an independently<br />

certified, lab-grown stone to be fully aware of<br />

what they’re buying.<br />

In conclusion, our entire industry of lab-grown<br />

diamond producers and supply chain<br />

partners anticipate and look<br />

forward to a very<br />

promising<br />

future. u<br />

Richard Garard is Secretary General,<br />

International Grown Diamond Association<br />

and CEO of CVD diamond equipment<br />

manufacturer, Microwave Enterprises.<br />

<strong>December</strong> <strong>2018</strong> <strong>Jeweller</strong> 17


Sorting through<br />

the fact and fiction<br />

DIAMONDS CAN’T BE MADE; THEY ARE PART OF MOTHER NATURE.<br />

ERNIE BLOM SAYS SYNTHETIC STONES ARE AKIN TO MAKING<br />

WIDGETS ON A FACTORY PRODUCTION LINE.<br />

he issue and debate surrounding natural<br />

diamonds and synthetic stones has increased<br />

in recent years due, in part, to improvements<br />

in the quality of lab-grown diamonds coupled with<br />

the large increase in production volume.<br />

We can expect the production of lab-grown<br />

diamonds to continually rise not only in higher<br />

production levels but also the number of<br />

manufacturers. We should always remember, and<br />

stress, however, that lab-grown diamonds are like<br />

any other manufactured product; their prices will fall<br />

as manufacturing processes improve and production<br />

costs decline.<br />

Unfortunately, I don’t believe that consumers fully<br />

understand this truism. Do jewellery buyers really<br />

want to buy a synthetic diamond today only to find<br />

that it has negligible or no re-sale value only a few<br />

years from now?<br />

This is why I believe the decision by De Beers to enter<br />

the lab-grown market by producing product for its<br />

Lightbox collection is so important. At US$800 for a<br />

one-carat diamond, it shows clearly the value of<br />

such stones.<br />

Another unfortunate side-effect of synthetic<br />

diamonds is that it is forcing midstream diamond<br />

suppliers/dealers to regularly examine their stocks at<br />

the time of buying to ensure they are not mistakenly<br />

passing on synthetic stones to their clients.<br />

This burden adds to the supplier’s administration<br />

costs as well as the need to purchase new testing<br />

equipment at a time when profit margins are already<br />

paper-thin. That said, I’m happy to report that the<br />

cost of lab-grown testing equipment and devices<br />

is reasonable, however it’s a constant battle to stay<br />

ahead of the curve.<br />

I would stress that the World Federation of Diamond<br />

Bourses (WFDB) does not object to the sale of<br />

synthetics diamonds as long as they are fully<br />

disclosed as lab-grown.<br />

Synthetic stones have their own niche in the market,<br />

as do diamonds, however; synthetics must be<br />

ethically traded and sold, and in this respect, I believe<br />

it is critical that synthetic manufacturers advertise<br />

their stones in an ethical manner, not at the expense<br />

of natural diamonds.<br />

It is unfortunate that synthetic diamond suppliers<br />

typically claim that their factories manufacturers<br />

product in an environmentally friendly way and<br />

it’s not tainted as conflict diamonds. This ignores<br />

the enormous efforts of the industry to stamp out<br />

conflict diamonds via the Kimberley Process, as<br />

well as the many corporate social responsibility<br />

and sustainability practices, which natural diamond<br />

suppliers and other members of the pipeline, have<br />

initiated over the past 15 years.<br />

We should also not ignore the enormous amount of<br />

power and energy used by the synthetic companies<br />

to keep their factories operating around the clock.<br />

That is not exactly environmentally friendly.<br />

It goes without saying that the synthetic stone<br />

manufacturers never mention the benefits that<br />

natural diamonds offer poor communities across<br />

the world. It is a fact that artisanal miners put food<br />

on the tables for millions of people across Africa<br />

which is certainly not the case concerning factorymade<br />

stones.<br />

It is disingenuous to promote one product by<br />

dubiously denigrating another.<br />

I would be more than happy to meet with the<br />

18 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


producers of synthetics in order to create a healthy<br />

dialogue between us.<br />

We believe that diamonds can’t be made; you have<br />

to find them. Each one is unique and this sums up<br />

perfectly the difference between mined diamonds,<br />

and lab-grown stones manufactured in a factory<br />

production line.<br />

The former involves ancient history, uncertainty and<br />

fascination while the latter is akin to making widgets<br />

in a massive industrial plant.<br />

Unfortunately, we have witnessed a number of<br />

instances of deliberate and cynical mixing of<br />

undisclosed synthetic stones with natural diamonds<br />

and that is a major concern for the WFDB. We will<br />

have zero tolerance for this practice because the<br />

damage it could cause to consumer confidence in<br />

diamond jewellery is immense.<br />

The WFDB’s overriding concern is to ensure<br />

that synthetics suppliers do not cause damage<br />

confidence across the wider jewellery industry.<br />

They must be clearly marked, identified and sold<br />

as lab-grown stones. People and/or companies<br />

conducting themselves illegally will be removed as<br />

bourse members where it is found to be the case,<br />

and prosecuted for fraudulent activity.<br />

The WFDB’s Charter “on disclosure of synthetic,<br />

treated natural and natural diamonds” obliges<br />

traders to include a statement on their invoices<br />

providing a proper description and declaration<br />

attesting to the nature of the diamonds sold:<br />

namely, that all the goods sold are guaranteed to be<br />

natural and also untreated.<br />

The WFDB, as an organisation, does not hold a<br />

position on the policies of its affiliated bourses<br />

regarding the trading of lab-grown diamonds within<br />

their own bourses.<br />

For example, the Israel Diamond Exchange does not<br />

allow the trading of synthetic stones on its trading<br />

floor, while the Bharat Diamond Bourse forbids the<br />

trading of such stones anywhere on its premises.<br />

Each exchange is free to decide its own policy.<br />

In closing, I would like to sum up the arguments as I<br />

see them:<br />

We have a rare product that was created deep in the<br />

earth by Mother Nature billions of years ago<br />

It is an exceptional story of value and can be passed<br />

on across generations in the knowledge that it retains<br />

a high value<br />

Diamond mining puts food on the table for hundreds<br />

of thousands of people across Africa<br />

Do people really want<br />

to gift and pass on to<br />

family members a stone<br />

that was created in a<br />

factory and which is<br />

being made ever more<br />

cheaply and thus has<br />

little, if any, inherent<br />

value? u<br />

Ernie Blom is president World Federation<br />

of Diamond Bourses and chairman Diamond<br />

Dealers Club of South Africa.


Synthetic diamonds legitimate<br />

but different product category<br />

WE SHOULD NOT FIGHT THE SYNTHETIC DIAMOND MANUFACTURERS, BUT RATHER<br />

DIFFERENTIATE THEIR PRODUCT FROM NATURAL DIAMONDS SAYS GAETANO CAVALIERI.<br />

he CIBJO Congress, the annual gathering<br />

of national associations and other major<br />

jewellery industry bodies, closed its<br />

proceedings in Bogotá, Colombia, on October 17.<br />

Developments that have taken place over the past<br />

year usually crowd the Congress’s agenda, and one<br />

that received considerable attention during the <strong>2018</strong><br />

event was the publication in June by the US Federal<br />

Trade Commission (FTC) of its Guides for the <strong>Jeweller</strong>y,<br />

Precious Metals and Pewter Industries.<br />

In particular, the decision by the FTC to remove the<br />

word ‘natural’ from its diamond definition generated a<br />

great deal of discussion.<br />

The FTC’s release of the revised Guides five months<br />

earlier had caught many in the industry off guard,<br />

and the initial reaction of some was almost of<br />

disbelief. However, a careful examination of the<br />

document revealed that, in practical terms, very<br />

little had changed, and the apparent victory of the<br />

synthetic diamond manufacturers may well prove to<br />

be a pyrrhic one.<br />

Readers will note that I just used the adjective<br />

‘synthetic’ as a descriptor, which is not<br />

recommended but, nonetheless, also not prohibited<br />

under the FTC’s new regime.<br />

Two observations made during the CIBJO Congress<br />

by Tiffany Stevens, president and CEO of the Jewelers’<br />

Vigilance Committee in the United States, and Sara<br />

Yood, JVC’s senior counsel, are worth noting.<br />

The first is that the FTC Guides are not a set of<br />

professional industry standards on a par with the<br />

CIBJO Blue Books and the 2015 ISO (International<br />

Organisation for Standardisation) diamond definition.<br />

They primarily are designed to protect the American<br />

consumer from misleading or confusing marketing<br />

information, and as such may sometimes deviate<br />

from what would seem scientific fact.<br />

This could be a way of explaining why the more<br />

broadly characterised diamond is still referred to as<br />

a mineral, even though a mineral, by definition, can<br />

only have been mined from the earth.<br />

The second observation is that, had the FTC not<br />

removed the word ‘natural’ from its diamond<br />

definition, synthetic diamond manufacturers could<br />

have claimed that the Guides do not pertain to them.<br />

Consequently, now that they are clearly included in<br />

the document, synthetic diamond manufacturers<br />

have no choice but to abide by its rulings.<br />

These include not being able to refer to their product<br />

as diamonds, without clearly specifying that they<br />

are man-made, nor use such terms as ‘real’, ‘genuine’,<br />

‘precious’, ‘semi-precious’ and, of course, ‘natural’. It is<br />

for this reason that the man-man diamond suppliers<br />

eventually may come to consider the cost of their<br />

apparent accomplishment to be considerably more<br />

than they originally had assumed.<br />

Already before the start of the <strong>2018</strong> Congress, the<br />

CIBJO Diamond Commission had decided the best<br />

reaction to the new FTC Guides was no reaction at<br />

all. Our diamond definition has not been changed,<br />

and indeed the possibility of change was not even<br />

put up for debate. According to the CIBJO Blue Book,<br />

the “diamond is a mineral which has been formed<br />

completely by nature without human interference<br />

during its formation.”<br />

This is not to say that we deny or even question<br />

the legitimacy or viability of synthetic diamonds, or<br />

whatever the term is that they legally are referred<br />

to. In fact, our stated intention is to provide an equal<br />

place at the table for them, as a separate product<br />

category.<br />

Recent moves by De Beers, and particularly<br />

those related to its Lightbox Jewelry man-made<br />

diamond collection will, I believe, lead to synthetic<br />

diamonds becoming a sizeable market segment<br />

catering predominantly to the high-end fashion<br />

jewellery market.<br />

In the meantime, our primary strategy should not be<br />

to fight the synthetic diamond manufacturers, but<br />

rather to differentiate their products from natural<br />

diamonds. It will require the proper use of industry<br />

nomenclature, the development of inexpensive<br />

detection technology or procedures, the cooperation<br />

of government, and a<br />

good deal of marketing<br />

and public information.<br />

Our industry is a big<br />

tent. There is room<br />

for all of us. u<br />

Gaetano Cavalieri is president CIBJO<br />

(Confédération Internationale de la Bijouterie,<br />

Joaillerie, Orfèvrerie des Diamants) the body<br />

that unites national jewellery and gemstone<br />

associations from more than 40 countries<br />

around the world.<br />

<strong>December</strong> <strong>2018</strong> <strong>Jeweller</strong> 21


Natural diamonds<br />

are the natural choice<br />

NO PRODUCT, AS SHINY AND SPARKLY AS IT MAY<br />

BE, CAN TAKE THE PLACE OF A NATURAL DIAMOND.<br />

BOAZ MOLDAWSKY EXPLAINS WHY SYNTHETIC<br />

STONES ARE BANNED BY THE IDE.<br />

he Israeli diamond industry is one of the<br />

strongest and most respected industries<br />

in the world. With more than 80 years<br />

behind us, we build upon a tradition that goes<br />

back generations. We respect our heritage, our<br />

longstanding experience and our commitment<br />

to excellence.<br />

These are the components of our international<br />

reputation for excellence and reliability, and the<br />

building blocks of our industry. While history<br />

and tradition are important, the Israel Diamond<br />

Institute (IDI) also embraces market change in<br />

the form of innovation, technology and internet<br />

trading platforms.<br />

Together with the Israel Diamond Exchange, IDI has<br />

entered into partnerships with forward thinking<br />

organisations and we have also established our own<br />

technological incubator.<br />

I mention the above to demonstrate our<br />

commitment to natural diamonds in the Natural<br />

vs Synthetic debate. We love diamonds and we<br />

appreciate their beauty. Diamonds are a gift of<br />

nature, created in the depths of the earth over<br />

many millions of years. We believe that, for most<br />

consumers, only natural diamonds symbolise<br />

eternity, commitment and love.<br />

No product, as shiny and sparkly as it may be, can<br />

take the place of a natural diamond.<br />

Our commitment to natural diamonds has meant<br />

that the Israeli diamond industry has barred<br />

synthetics. The Israel Diamond Exchange (IDE)<br />

issued a regulation prohibiting the trade in synthetic<br />

diamonds on the bourse floor. It has also conducted<br />

an educational campaign to increase awareness of<br />

the dangers of illegal trade in synthetics amongst its<br />

3,500 members.<br />

Synthetic, or what are now called ‘lab-grown’ or<br />

‘man-made’ diamonds, have created challenges for<br />

the traditional diamond industry. However this is not<br />

because synthetic stones threaten to replace natural<br />

diamonds, since we are convinced, and research<br />

confirms, that consumers want their significant<br />

jewellery pieces to feature only natural, not manmade<br />

diamonds.<br />

Some people may be willing to buy lab-grown<br />

diamonds for, what De Beers calls, ‘affordable fashion<br />

jewellery’, no different to buying cubic zirconia<br />

jewellery as a low-cost alternative. This is simply<br />

consumer choice. However, the greater problem<br />

that synthetics have caused is the penetration of<br />

man-made diamonds into the legitimate natural<br />

trade without disclosure.<br />

The diamond trade is based on a long tradition<br />

of honesty and mutual trust that is essential to<br />

the industry. Unfortunately, as the technology for<br />

creating man-made diamonds advances it becomes<br />

increasingly difficult to identify them.<br />

There have been many cases reported where<br />

duplicitous traders have mixed undisclosed<br />

synthetic and natural diamonds, or have passed off<br />

synthetic solitaires as natural diamonds.<br />

These have eventually been detected and the<br />

offenders prosecuted, however there must be many<br />

more such transactions that are never discovered.<br />

If undisclosed synthetic stones are set in jewellery<br />

and sold as natural diamonds, this may cause a<br />

huge disruption to consumer confidence. We<br />

cannot allow the criminal activities of a minority of<br />

dishonest dealers who choose to fraudulently sell<br />

lab-grown diamonds as natural to taint and severely<br />

damage the entire diamond and jewellery industry.<br />

The solution lies in clearly distinguishing between<br />

the two distinct products – natural and lab-grown.<br />

The good news is that awareness within the<br />

global diamond industry is high. Our international<br />

organisations are demanding full disclosure<br />

of synthetics diamonds and there is improved<br />

equipment for detecting this product.<br />

Clear terminology is being created and standards are<br />

being set to protect consumers, including sanctions<br />

for non-compliance. It is still early days but the<br />

process has been set in motion.<br />

The IDI sees a successful future for the natural<br />

diamond industry. We are confident that natural<br />

diamonds will continue to capture the imagination<br />

of consumers in years to come and will remain the<br />

precious gem of choice to celebrate love<br />

and commitment.<br />

As for synthetic diamonds, they are a separate and<br />

distinct product category and may well offer a<br />

cheap solution for fashion jewellery, just as CZs have<br />

for many years. The vital issue for everyone in the<br />

trade – supplier through to retailer - is to be honest,<br />

fully transparent and<br />

to clearly explain and<br />

educate the consumer<br />

about the difference<br />

between natural<br />

diamonds and the<br />

mass-manufactured,<br />

cheaper ‘cousin’. u<br />

Boaz Moldawsky is chairman Israel<br />

Diamond Institute, a non-profit, public<br />

interest company acting to promote and<br />

advance the Israel diamond industry which<br />

helps Israeli diamantaires execute tasks<br />

and projects that a single company cannot<br />

usually manage itself.<br />

22 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


Present and future challenges<br />

for natural coloured diamonds<br />

ALAN BRONSTEIN AND NILESH SHETH BELIEVE SYNTHETIC STONES ONLY THREATEN THE<br />

NATURAL DIAMOND MARKET IF THERE IS NO DISCLOSURE OR TRANSPARENCY.<br />

t’s difficult to predict the future for any topic,<br />

however; it is reasonable to refer to the past<br />

as a potential guide to what may eventuate.<br />

For example, over the past 40 years there have been<br />

many technological advances in the creation of lower<br />

cost ‘substitutes’ for natural coloured diamonds.<br />

Witness radiation treated diamonds; cubic zirconia,<br />

moissanite and now we have man-made diamonds<br />

created to challenge nature’s most unique gem<br />

creation. As each one was launched many in the<br />

industry feared how these low-cost challengers<br />

could affect the consumer’s perception and love of<br />

nature’s creation.<br />

Ultimately, on each occasion, these fears were<br />

unwarranted as people are innately attracted to<br />

‘The Real Thing’. The romance surrounding natural<br />

diamonds was unwavering.<br />

Therefore, while all artificially created gem substitutes<br />

may appear to be the perfect way for consumers to<br />

purchase what they want, past trends have indicated<br />

that there has been no long-term effect on the<br />

interest and desire for the most beautiful and rare<br />

natural colour diamonds.<br />

Today we are faced with the latest challenge –<br />

synthetic diamonds grown in factories – which<br />

simulate all the characteristics of diamonds mined<br />

from the earth. These lab-grown stones were not<br />

created to compete with natural colour diamonds,<br />

rather they are created to offer a lower cost alternative<br />

for someone who desires to own something that they<br />

might otherwise find too expensive.<br />

All too often marketers use negativity to attract<br />

customers by presenting untrue and obsolete<br />

concepts, and the messages about man-made<br />

diamonds are no different. The trade is working<br />

very hard to make the industry more transparent<br />

and remove the, so-called, objections. All mined<br />

diamonds, including natural coloured diamonds,<br />

are a rapidly depleting resource so it’s not unusual<br />

to see these substitutes appearing on the market as<br />

alternatives to nature.<br />

Does this mean synthetic diamonds are a threat? Only<br />

if there is no disclosure or transparency and we know<br />

there are always dishonest people and fraudsters who<br />

seek to profit by lying to the public.<br />

This is the largest threat to our segment of the<br />

jewellery industry, however; leading international<br />

scientists and gemmologists are quickly addressing<br />

this issue. Natural diamonds have been treasured<br />

since they were first discovered in India thousands<br />

of years ago. For the people who acquired them,<br />

coloured diamonds had magical powers and were<br />

symbols of positive dreams and concepts. To this day,<br />

we project our innermost emotions from the colours<br />

that inspire good thoughts associated with natural<br />

coloured diamonds.<br />

Our favourite colours are metaphors for prior<br />

experiences, emotions and relationships. This<br />

personal connection cannot be replaced by synthetic<br />

substitutes. Therefore, we believe that the beauty,<br />

rarity and individuality of nature are unbreakable<br />

bonds, which is the inexplicable and subconscious<br />

desire for nature’s creation.<br />

Quality natural diamonds have exponentially<br />

appreciated in value over the years, which is clearly<br />

evident in recent and past auction results.<br />

The existence of the alternatives, which includes<br />

man-made diamonds, has a wonderful purpose and<br />

appeal. It provides an opportunity for consumers<br />

to afford the beauty of nature by mimicking the<br />

appearance, but not the essence, of the evolution of<br />

carbon to diamonds. This is the force that will bind<br />

mankind to always desire what is earth-born.<br />

While there may come a time when natural colour<br />

diamonds can no longer be found in the ground,<br />

the demand for substitutes will increase because of<br />

our desire to be inspired by adornment and beauty.<br />

However, for the moment, all alternatives are just an<br />

affordable opportunity to obtain a symbol and assist<br />

in the memory of a special moment in life.<br />

We both have confidence in the natural objects as<br />

they have, and still are, the major object of human<br />

desire. We believe that DeBeers’ main objective in<br />

launching lab-grown diamonds – via its new business<br />

Lightbox – is to create market awareness and protect<br />

consumers by disclosing the actual value of these<br />

synthetic products - which is a fraction of the cost<br />

that some wholesalers and retailers were selling them<br />

before De Beers’ move into the market.<br />

The subsequent industry-wide price fall since the<br />

announcement has been notable and we believe<br />

prices will further drop with advancements in<br />

technology and manufacturing processes.<br />

DeBeers and its Lightbox brand is no threat to ‘the<br />

real thing’. It simply provides consumers with a<br />

lower cost option so more people can participate in<br />

the jewellery market.<br />

While consumer choice is important to all industries,<br />

mankind may have developed great knowledge in this<br />

re-creation process, but for us, nature is the ultimate<br />

creator of beautiful and naturally occurring coloured<br />

diamonds and gemstones. u<br />

Alan Bronstein is president Natural<br />

Colored Diamond Industry Association and<br />

Nilesh Sheth is president Indian Diamond<br />

and Colorstone Association.<br />

Diamonds from the Aurora Pyramid of Hope/ Copyright<br />

Photo:Robert Weldon<br />

24 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


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Zero tolerance for deceptive<br />

diamond trading<br />

THE INDIAN GEMS AND JEWELLERY SECTOR IS A US$40 BILLION INDUSTRY<br />

AND, ACCORDING TO MEHUL SHAH, AROUND 1 MILLION FAMILIES EARN<br />

THEIR LIVELIHOOD THANKS TO THE DIAMOND INDUSTRY.<br />

he Bharat Diamond Bourse (BDB) is the<br />

world’s largest diamond trading hub and,<br />

in accordance with accepted industry<br />

terminology, the BDB adheres to the definition of a<br />

diamond as being ‘natural’ or ‘mined’.<br />

We do not consider synthetic stones to be real<br />

diamonds and for that reason the BDB has banned<br />

the trading of synthetic stones. It is the only bourse<br />

in the world to prohibit such trading from the<br />

bourse’s 20-acre complex.<br />

Some synthetic diamond manufacturers may<br />

be using misleading marketing and advertising<br />

methods to promote synthetics stones, however<br />

consumer awareness has increased a great deal<br />

in recent years and buyers know what is real and<br />

what is man-made.<br />

The BDB provides detection facilities for its<br />

members who can use the hi-tech equipment to<br />

ensure the ongoing success of our transparent<br />

diamond trading.<br />

Any person caught illegally mixing synthetic stones<br />

with natural diamonds will be suspended from<br />

entering the BDB complex.<br />

The International Natural Diamond Monitoring<br />

Committee (INDMC) was formed in July 2017 to<br />

tackle the issue of mixing undisclosed synthetic<br />

stones with natural stones, among other<br />

objectives. The Committee consists of the major<br />

Indian trade bodies; the Diamond Producers<br />

Association (DPA) and other international trade<br />

organisations, all of which have done excellent<br />

work in raising consumer awareness as well as<br />

increasing the marketing of natural diamonds.<br />

All diamond businesses in the pipeline – from<br />

mine to market – support full transparency, respect<br />

human rights and ensure the laws of the land are<br />

fully maintained. Thanks must go to the World<br />

Diamond Council (WDC) and the World Federation<br />

of Diamond Bourses (WFDB) which have done a lot<br />

of work in this field.<br />

SYNTHETICS BANNED AT BHARAT DIAMOND BOURSE<br />

It’s not widely known by consumers that around<br />

one million Indian families earn their livelihood<br />

thanks to the diamond industry which is one of<br />

the reasons why the INDMC is concerned about<br />

the danger to consumer confidence that can be<br />

caused when synthetic diamonds are sneakily<br />

mixed into packages of natural diamonds – mainly<br />

in smaller goods – or diamond set jewellery.<br />

The Indian industry has also commissioned a<br />

great deal of research into the issue of lab-grown<br />

diamonds and has prepared extensive information<br />

on synthetic diamonds. Indian diamond dealers<br />

all over the world can learn about the methods<br />

used to make such stones – High Pressure<br />

High Temperature (HPHT) and Chemical Vapor<br />

Deposition (CVD).<br />

In addition, the Diamond Producers Association<br />

has created Project Assure, which is an ongoing<br />

industry-wide project to objectively establish<br />

industry standards regarding the performance<br />

of Diamond Verification Instruments (DVI) and/<br />

or synthetic detection machines. The objective is<br />

to support the diamond and jewellery trades to<br />

make informed decisions and acquire the right<br />

equipment for their operations.<br />

Currently about 13 detection equipment<br />

manufacturers have signed up to the project.<br />

These companies have developed 21 instruments<br />

designed to identify synthetic stones. For example,<br />

the Gemmological Institute of India has designed<br />

and developed a detection device, which sells for<br />

only US$7,000.<br />

At the time of publication, Project ASSURE was<br />

due to report its results and aims to have an online<br />

industry directory.<br />

I would like to conclude by emphasising the<br />

position of the WFDB, of which the Bharat<br />

Diamond Bourse is a leading member: undisclosed<br />

mixing of synthetic, or lab-grown, diamonds<br />

with parcels of natural diamonds is illegal and<br />

transgressors should be prosecuted. We have zero<br />

tolerance for whoever is caught in this<br />

illegal activity.<br />

Any member found to be trading or mixing<br />

synthetic stones will be ejected from the bourse<br />

and lose their membership and may also be<br />

prosecuted for fraudulent activity.<br />

The WFDB’s Charter on the disclosure of synthetic,<br />

treated natural and natural diamonds demands<br />

that companies print a statement on their invoices<br />

providing a proper description and<br />

declaration attesting to the<br />

nature of the diamonds<br />

sold: namely, that all<br />

goods are guaranteed<br />

to be untreated, natural<br />

diamonds. u<br />

Mehul N. Shah is vice president Bharat<br />

Diamond Bourse and is on the board of Indian<br />

Customs Valuation Panel as well as chairman<br />

of the Santacruz Electronics Export Processing<br />

Zone (SEEPZ) in Mumbai. He is chairperson<br />

of the Star Brillant Group and on the board of<br />

Diamond India Limited.<br />

26 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


Predicting a synthetic future<br />

GARRY HOLLOWAY THINKS THERE IS MORE THAN MEETS THE<br />

EYE BEHIND DE BEER’S MOVE INTO LAB-GROWN DIAMONDS. INDEED SOME OF<br />

THE EARLY RAMIFICATIONS HAVE BEEN ‘UNINTENDED’, OR WERE THEY?<br />

t was more than a decade ago when I forecast<br />

that De Beers would one day sell its own manmade<br />

diamonds.<br />

In a 2008 letter to the editor to Rapaport I wrote:<br />

“There is no reason why synthetic diamonds can’t<br />

develop strong market positions given time and<br />

investment in branding. Some well-informed<br />

consumers have already found appealing attributes<br />

over natural diamonds.”<br />

My reasoning came about when I discovered that<br />

De Beers had patented a way to ‘grow’ synthetic<br />

diamonds with a logo inside the stone. De Beers<br />

had many other patents where it was trying<br />

to make it difficult for other manufacturers to<br />

grow diamonds as quickly and cheaper as it<br />

could but this was an instance where the patent<br />

was registered to insert a logo during the<br />

growing process.<br />

It has been 10 years since my prediction, which<br />

came to fruition in late May when De Beers<br />

blindsided the industry by announcing it would<br />

offer its debut synthetics range at what many<br />

people believe is below manufacturing cost.<br />

CUTTING CARAT COST<br />

Of the 1,000 loose diamond and diamond<br />

jewellery exhibitors at this year’s JCK Las Vegas,<br />

there were perhaps a dozen or so companies<br />

selling synthetic diamonds.<br />

The synthetic diamond manufacturers at JCK<br />

were selling stones at half the price of a natural<br />

diamond. In doing so, they were saying, “Natural<br />

diamonds are 30 per cent off the Rapaport price list<br />

so we are going to sell 60 per cent off the list.”<br />

However, out of the blue De Beers came along and<br />

announced it was going to take 90 per cent off the<br />

Rapaport prices, completely pulling the rug out<br />

from under man-made diamond competitors.<br />

Using the high-pressure, high-temperature (HPHT)<br />

method of making diamonds made in presses, it is<br />

very expensive to make larger sizes; however, with<br />

the advent of chemical vapour deposition (CVD),<br />

a technology developed mainly for high-speed<br />

computer cooling chips and weapons systems,<br />

equipment became cheaper and growing a<br />

diamond twice the size simply required machines<br />

to run twice as long.<br />

It’s important to note that generally speaking<br />

the price of a natural diamond rises fourfold<br />

when it doubles in weight. Therefore, a one-carat<br />

diamond costs four times as much as a 0.50-carat<br />

one. Larger crystals are genuinely rare despite what<br />

people tell you, and this is consistent with the<br />

Rapaport price list.<br />

The cost to manufacture a large diamond is far<br />

less than to mine one. If all a company has to<br />

do to double the size of a diamond is leave the<br />

machines running, the attitude of De Beers is that<br />

it can do just that and bank a fortune by trading off<br />

the rarity of larger natural stones. In addition, the<br />

restriction on CVD diamonds is the depth whereas<br />

the diameter is the restriction on natural and<br />

HPHT diamonds; 90 per cent of natural and HPHT<br />

diamonds are cut too deeply reducing brilliance<br />

and perceived size. CVD diamonds will prove to be<br />

better cut and look bigger for their carat weight.<br />

When De Beers entered the man-made<br />

diamond market and announced its pricing<br />

strategy at US$800 per carat, investors were<br />

shocked to find that the ‘rarity factor’ does not<br />

apply to man-made diamonds.<br />

<strong>December</strong> <strong>2018</strong> <strong>Jeweller</strong> 27


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If a natural, one-carat diamond were to<br />

sell for US$10,000 then the man-made<br />

diamond companies believed that they<br />

could offer it for sale, with a good margin<br />

at US$5,000 but what De Beers has chosen<br />

to do with Lightbox Jewelry is sell its<br />

one-carat lab-grown diamonds at US$800,<br />

regardless of rarity-based industry price<br />

listings and competitors.<br />

If De Beers can indeed manufacture clean,<br />

colourless and attractive pink and blue<br />

diamonds, all with great eye-clean clarity,<br />

and if it isn’t even going to bother to certify<br />

or grade these stones, it’s easy to see why<br />

this could be a most profound effect the<br />

diamond giant has on the market.<br />

The strategy is both a pro and a con for<br />

the wider industry, including business for<br />

natural diamond companies.<br />

LIGHTBOX, FOR LOCAL ECONOMY<br />

What few people have understood is<br />

that the US Federal Trade Commission’s<br />

(FTC) recent decision to amend the<br />

definition of diamonds was most likely in<br />

the best interest of the American economy<br />

and government.<br />

De Beers registered its patent back in 2008<br />

and in the time since, it’s generally believed<br />

that the company would have been in<br />

talks with the US Government to secure<br />

sponsorship for its Element Six Factory,<br />

which is currently under construction<br />

in Portland, Oregon. The factory is set<br />

to produce upwards of 500,000 carats<br />

annually and will bring the manufacturing<br />

process to the US.<br />

President Donald Trump has spoken<br />

about wanting to reduce imports and<br />

increase exports. Given the US does not<br />

mine diamonds commercially – it has a<br />

recreational diamond mine – Lightbox<br />

Jewelry offers an inroad into a new<br />

diamond-manufacturing sector with<br />

enormous export potential. If Trump<br />

wanted America to enter the hightech<br />

diamond manufacturing business,<br />

who would be better placed than the<br />

company that conducts the most industrial<br />

diamond manufacturing in the world<br />

and manufactures and sells diamonds at<br />

US$800 per carat?!<br />

CIBJO diamond nomenclature in the Blue<br />

Books originally states, “A diamond is a<br />

natural mineral consisting essentially of<br />

pure carbon crystallised in the isometric<br />

system.”<br />

This conflicts with the new US FTC ruling<br />

that does not require the word ‘natural’.<br />

The ruling provides man-made diamond<br />

manufacturers with the opportunity to<br />

change their marketing tactics, only in the


smaller print clarifying to consumers that their products<br />

are synthetic.<br />

Detection is getting much easier for all man-made diamonds,<br />

whether they are HPHT or CVD stones. All synthetic diamonds<br />

are type II whereas only a small percentage of natural diamonds<br />

are type II.<br />

GIA has released a device for less than $AUD10,000 that reportedly<br />

identifies type II set or loose diamonds in a few seconds from large<br />

sizes down to stones of one point or less. If a piece of jewellery<br />

contains more than five per cent type II diamonds, it is very likely<br />

that the stones will be synthetic and should be removed for further<br />

spectrographic testing under liquid nitrogen conditions.<br />

Twenty years ago nobody had the techniques to be able to verify<br />

whether or not diamonds were possibly synthetic and it won’t be<br />

long now until all of the ‘crooks’ attempting to hide synthetics in<br />

diamond parcels will inevitably be caught.<br />

MAN-MADE POPULARITY<br />

Another recurring pattern we have seen in our industry is the<br />

rise in popularity of coloured gemstones in spite of synthetic<br />

counterparts.<br />

When companies introduced synthetic emeralds to the market<br />

in the 1950s, it was argued that it would reduce the demand for<br />

natural emeralds. In fact, some people will argue that emerald<br />

demand increased across the sector for both synthetics and natural<br />

stones because more people were wearing emeralds<br />

We have seen this trend repeated countless times; entry-level<br />

jewellery consumers purchase a synthetic gemstone, develop<br />

an appreciation for its appearance and then want to purchase<br />

the real thing.<br />

In terms of Lightbox Jewelry, the notion that it is being marketed<br />

to Millennials may also be a misconception – I know people aged<br />

in their 50s, 60s and 70s who own many natural diamonds yet<br />

these same consumers are buying Lightbox diamonds cheaply and<br />

having them re-set in ‘fun’ pieces.<br />

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Don’t think for a second that this brand is<br />

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Another consumer group who will be<br />

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‘tech heads’, mostly because they love the<br />

science behind it. This is also a consumer<br />

group that hates the idea of visiting a real<br />

store and talking to real people only to be<br />

‘ripped off by jewellers’.<br />

They loathe shopping and I estimate<br />

50 per cent of tech heads buy their<br />

diamonds online to avoid the bricks-andmortar<br />

stores.<br />

Will lab-created diamonds reduce mining<br />

and monopolise the sector? Only time<br />

will tell. In fact, they may even increase<br />

demand. Lab-created diamonds are gaining<br />

popularity at the same time as moissanite,<br />

a stone that would have otherwise taken<br />

over as the most preferred substitute for<br />

lower-priced diamonds.<br />

Charles & Colvard first introduced<br />

moissanite, regarded as a diamond<br />

alternative to the jewellery market in 1998,<br />

with some optical properties exceeding<br />

those of diamond. The company controlled<br />

the use of moissanite in jewellery by<br />

patents; however the worldwide IP began<br />

expiring in August 2015.<br />

Therefore, it is the moissanite market<br />

that is probably going to be hit harder by<br />

Lightbox Jewelry than anything else, just<br />

as far better and much cheaper moissanite<br />

is available now that the Charles & Colvard<br />

patent has expired.<br />

MUDDY MINING ETHICS<br />

It is often said that synthetic diamonds will<br />

appeal to ethically-conscious consumers<br />

such as those people who are attracted to<br />

fair-trade-coffee.<br />

These consumers are said to be concerned<br />

for the welfare of miners in African<br />

countries where purported exploitation<br />

occurs and ‘blood’ or ‘conflict’ diamonds<br />

are mined.<br />

However, the problems associated with<br />

conflict diamonds are now confined to the<br />

Democratic Republic of Congo as a result of<br />

the successful Kimberely Process.<br />

Even NGOs like Global Witness, who blew<br />

the whistle on the conflict diamond scene<br />

in West Africa, would agree.<br />

An alternative view to this takes into<br />

account the livelihood of the more than<br />

one-million artisanal diamond miners<br />

in the world, according to the Diamond<br />

Development Initiative. As a result, the rise<br />

of man-made diamonds – purchased by<br />

consumers who feel no blood is spilled in<br />

the synthetic process – could result in the<br />

starving of thousands of artisanal miners<br />

who won’t have demand for their product,<br />

let alone the chance to receive a premium<br />

price, as do the fair-trade coffee growers.<br />

Man-made diamond manufacturers<br />

also appear to promote their factories<br />

as ‘green’ or environmentally-friendly by<br />

using electricity or wind power rather<br />

than coal. These claims appear to be<br />

unsubstantiated at best and the locations<br />

of these factories are often not even close<br />

to wind power stations.<br />

One US company, Diamond Foundry, claims<br />

Leonardo DiCaprio as an investor; however<br />

a friend who is close to the company told<br />

me the shares were gifted/donated to the<br />

star of the ‘Blood Diamond’ movie in return<br />

for international publicity.<br />

If true, it’s another example of the skewed<br />

ethics of ‘do-gooders’ where millionaire<br />

celebrities are given more ‘money’ to<br />

promote man-made diamonds than what<br />

we are willing to give to starving Africans.<br />

These lab-created manufacturers clearly<br />

recognise that their products are marketed<br />

to consumers who want the satisfaction of<br />

purchasing seemingly ethical products and<br />

want to appear to fulfil those aspirations in<br />

all aspects of their production.<br />

It’s a noble cause but the benefits are, as<br />

yet, unsubstantiated and which could have<br />

more negative ramifications than benefits.<br />

BRILLIANT FUTURE?<br />

Production of man-made diamonds equals<br />

less than 1 per cent of total worldwide<br />

mined diamond production, however De<br />

Beer’s entry into the synthetic diamond<br />

market may impact the industry in<br />

unexpected ways.


Most pundits have analysed the strategy from the consumer’s<br />

perspective however, few have taken into account the affect<br />

on investor confidence. If Lightbox Jewelry is selling its manmade<br />

diamonds below the cost price of other manufacturers/<br />

competitors, then synthetic diamond manufacturing investors will<br />

now question the return on investment.<br />

CREATE A LOOK<br />

YOU’LL LOVE<br />

In truth, the synthetic diamond market is in its infancy and<br />

therefore relies heavily on improvements in manufacturing<br />

processes along with advances in technology and equipment. Both<br />

of these require deep pockets with the funding being provided by<br />

long-term investors.<br />

Furthermore, by selling diamonds at US$800 per-carat, the market<br />

has already had to suffer a sudden and unexpected a 60 per cent<br />

price drop in one hit. This price decline, along with crippling<br />

investments, means that the value of man-made diamond product<br />

depreciates rapidly and instantly – consumers cannot sell their<br />

man-made diamond rings for even a quarter of the price they paid.<br />

In fact, at this very moment they may be lucky to get $10 for a<br />

synthetic stone that cost $2,000.<br />

Another price reducing influence is that there are engineers in<br />

China, Russia and India who are without jobs and it would not<br />

be far-fetched to consider that it will only be a matter of time<br />

until they also build their own backyard CVD machines. Faced<br />

with unemployment and the poverty that comes with it, these<br />

engineers probably won’t care too much about cheating on<br />

De Beers patents, which outline in detail how to best<br />

manufacture diamonds.<br />

Maybe soon those engineers will start ionising carbon and<br />

methane, and Bob’s your uncle – we will have another 100<br />

companies in the market manufacturing synthetics!<br />

De Beers’ decision to enter and control the man-made<br />

diamond market is really one without<br />

precedent and no one can possibly<br />

foretell precisely how the diamond<br />

industry will be affected. The<br />

only sure thing is that any impact<br />

will bring large and probably<br />

permanent changes. u<br />

Garry Holloway is a self-confessed ‘cut nut’. He graduated<br />

as a geologist in 1973 and in 1975 he established two<br />

fine jewellery stores in Melbourne. While studying for the<br />

Diamond Diploma in 1984, Holloway became obsessed<br />

with diamond cut research; he invented the Ideal-Scope<br />

and Patented Holloway Cut Advisor on pricescope.com. He<br />

lectured at the Gemmological Association of Australia and<br />

National Council <strong>Jeweller</strong>y Valuers and works with a group of<br />

Russian and Indian researchers known as The Cut Group.<br />

TALK TO US TODAY<br />

WORTH & DOUGLAS<br />

PO Box 866, Tullamarine, VIC 3043<br />

(03) 9338 0091 / 1800 006 388<br />

sales@worthdouglas.com.au<br />

www.worthdouglas.com


Lab-created diamond jewellery<br />

market to grow to US$15B by 2035<br />

THE GLOBAL JEWELLERY INDUSTRY IS ESTIMATED TO BE WORTH<br />

US$270 BILLION. PAUL ZIMNISKY REPORTS ON THE STAGGERING<br />

POTENTIAL OF THE ‘NEW DIAMOND’ ECONOMY.<br />

t’s been five short years since the jewellery<br />

industry saw the first gem-quality lab-created<br />

diamond larger than one carat polished. Today,<br />

varieties in sizes larger than 10 carats are now being<br />

produced in even better qualities and in colours<br />

such as vivid pinks and blues.<br />

Gem-quality lab-created diamond production for<br />

use in jewellery now exceeds 1.5-million carats of<br />

polished annually.<br />

On a relative basis, gem-quality lab-created<br />

diamonds sold as jewellery have dropped in price<br />

30-40 per cent over the last three years. Further,<br />

De Beers announced in late May that the company<br />

would be entering the lab-created diamond<br />

jewellery space from September <strong>2018</strong>, offering<br />

product to consumers at as much as an estimated<br />

65-80 per cent discount to current generic labdiamond<br />

market prices in sizes up to one-carat.<br />

The lab-grown diamond jewellery market is<br />

estimated to be worth US$1.9 billion dollars today<br />

and it is expected to grow at 22 per cent annually<br />

to US$5.2 billion by 2023 and to US$14.9 billion by<br />

2035. This equates to a longer-term growth rate<br />

of about 9 per cent. The growth is estimated to be<br />

driven by the continued advancement in labdiamond<br />

production technologies, which should<br />

improve production economics and further push<br />

down prices, in turn taking market share from<br />

both the natural-diamond and fashion-jewellery<br />

industries.<br />

Excluding watches, the global jewellery industry is<br />

estimated to be worth estimated US$270 billion.<br />

This can be segmented into diamond jewellery,<br />

fashion jewellery and non-diamond fine jewellery.<br />

For purposes of this analysis, diamond jewellery can<br />

be defined as diamond jewellery selling for greater<br />

than US$250, typically gem-quality stones set in<br />

gold or platinum.<br />

Forecasted Lab-Created Diamond Jewelry Market Penetration<br />

Estimated Size of Global Markets (on an annual consumer sales basis)<br />

In billions of USD, all figures nominal <strong>2018</strong> 2023 2035<br />

Total Jewelry Market 1 271 340 645<br />

Lab-created diamond % of Market 1% 2% 2%<br />

Diamond Jewelry Market 2 87 108 173<br />

Lab-created diamond % of Market 2% 3% 5%<br />

Fashion Jewelry Market 3 40 52 110<br />

Lab-created diamond % of Market


also reminding consumers of the value inherent<br />

in the rarity of its non-renewable resource,<br />

a characteristic that lab-created diamonds<br />

don’t share.<br />

The Diamond Producers Association, an<br />

organisation financed by the industry’s largest<br />

miners, is leading the effort to return to generic<br />

marketing for diamonds in the post ‘A Diamond<br />

is Forever’ era.<br />

While production of higher-quality lab-created<br />

diamonds is still in its early stages, there has been<br />

significant investment to improve the quality of<br />

output and the economics of production.<br />

New producers are focused on improving<br />

production capabilities using the chemical vapor<br />

deposition (CVD) method with a longer-term<br />

goal to supply high-quality diamond for industrial<br />

and technological uses, like semiconductors,<br />

quantum-computing components, lasers and<br />

optic equipment, an industry that could be worth<br />

hundreds of billions of dollars one day.<br />

Others are prioritising scaling production to take<br />

advantage of the high margins the lab-created<br />

diamond jewellery market currently has to offer.<br />

To highlight the demand, the world’s largest<br />

supplier of off-the-shelf CVD reactors currently has a<br />

backlog on orders approaching one year.<br />

Synthetic producers using the high-pressure, high<br />

temperature (HPHT) method – the original method<br />

of production – are also improving production<br />

capabilities. In China alone, HPHT presses produce<br />

an estimated 10-billion carats of industrial-grade<br />

diamond annually; however some producers are<br />

upgrading their equipment to produce larger<br />

diamonds in near-gem quality grades and better.<br />

HPHT presses are also being used to enhance<br />

the quality of lab-created diamonds produced<br />

using CVD, a practice that is typically considered<br />

unacceptable with natural diamonds.<br />

Given the scale of production capability, it is<br />

reasonable to assume that the supply of lab-created<br />

diamonds is boundless long term and that the<br />

lowest-cost producer, ideally fit for the fashion<br />

jewellery market, will set the price of generic<br />

goods. The lab-created diamonds most likely to<br />

compete with the natural diamond<br />

jewellery industry will be<br />

higher-priced diamonds<br />

built around successful<br />

brands or unique<br />

jewellery designs. u<br />

Paul Zimnisky is an independent diamond<br />

industry analyst and consultant covering<br />

the natural diamond and the lab-created<br />

diamond industry. He can be reached at<br />

paul@paulzimnisky.com and followed on<br />

Twitter @paulzimnisky.<br />

Disclosure: at the time of writing, the author held a long<br />

position in Lucara Diamond Corp, Stornoway Diamond<br />

Corp, Mountain Province Diamonds Inc, Diamcor<br />

Mining Inc, North Arrow Minerals Inc and Signet<br />

Jewelers Ltd.


DON’T<br />

poke the bear!<br />

ABE SHERMAN SAYS BOGUS CLAIMS AND OVERPRICED PRODUCTS FROM SYNTHETIC<br />

MANUFACTURERS PROBABLY ‘FORCED’ DE BEER’S INTO THE LAB-GROWN MARKET.<br />

he first text came in at 3:43am Las Vegas<br />

time. It was a press release from De Beers<br />

announcing the launch of Lightbox<br />

Jewelry, the company’s new collection of synthetic<br />

diamonds. The irony is so thick in that I was at<br />

Newark airport fewer than 24 hours earlier, where<br />

someone who works for one of the laboratorygrown<br />

companies was telling me they now own<br />

200 reactors and that business was great.<br />

The discussion motivated me to become more<br />

knowledgeable about what synthetic diamonds<br />

actually cost to grow and I had been researching<br />

the costs. How expensive is a reactor? What are their<br />

growth rates and labour costs?<br />

I concluded that the cost to produce these goods<br />

is far below what the current sellers are claiming.<br />

In fact, my friend at the airport told me the cost of<br />

their laboratory-grown crystals was twice what it<br />

cost them for mined diamonds.<br />

“So let me get this straight,” I said. “The goods cost<br />

twice as much yet you’re able to sell them for 30 per<br />

cent less than natural diamonds?!” I told him that<br />

prices would eventually drop because the goods<br />

aren’t worth what the trade is asking. I added that<br />

retailers would get hurt in the process. He told me I<br />

didn’t know what I was talking about.<br />

Then at 3:43am the announcement came that De<br />

Beers was going to start selling one-carat synthetic<br />

diamonds for US$800 retail … Mic Drop!<br />

There are three things that have irked me about<br />

the emergence of the man-made diamond<br />

market. Firstly, manufacturers and wholesalers<br />

have refused to label them as what they truly are<br />

– synthetic diamonds. Secondly, the industry has<br />

not found a way to easily differentiate synthetic<br />

product from natural diamonds. Thirdly, these same<br />

manufacturers have priced their goods at a discount<br />

from natural diamonds.<br />

While De Beers has opted to label its brand as<br />

laboratory-grown rather than synthetic, it is putting<br />

an easy identifier inside the stones that can be seen<br />

with an eye-loupe and are pricing the goods as a<br />

stand-alone product based on their value and not<br />

as a discounted competitor of natural diamond.<br />

Despite what sellers of synthetic diamonds say,<br />

there is no difference in rarity between a halfcarat<br />

and a two-carat laboratory-grown synthetic<br />

diamond; the cost to produce them is simply a<br />

linear equation where time in the reactor equals<br />

the size of the cube.<br />

So now what?<br />

Unfortunately, retailers are already entrenched<br />

in the laboratory-grown category at very high<br />

prices. As the news spreads – and this is very<br />

newsworthy given the hype that other laboratorygrown<br />

companies have generated over the past<br />

year – consumers are going to be very angry about<br />

the prices they paid for their synthetic stones. I<br />

don’t have any wisdom for how to address these<br />

conversations and I’m concerned about how it will<br />

affect reputations, especially at retail level.<br />

INDUSTRY RESPONSES<br />

Some of the retailers and suppliers think De Beers is<br />

cannibalising its own product – natural diamonds.<br />

Others think De Beers is screwing the industry by<br />

selling directly to consumers as the first step in its<br />

omni-channel distribution plans – one woman<br />

even shouted this out during the De Beers<br />

presentation at JCK.<br />

Let me say that those companies that have gone<br />

‘all-in’ on synthetics and are understandably upset<br />

that their world has been rocked should have seen<br />

this coming. This is especially true of the growers<br />

who know what synthetic diamonds cost to<br />

produce and have dug their own holes regarding<br />

the wholesale and retail ‘value’ of their goods.<br />

NOTE TO LAB-GROWN MANUFACTURERS<br />

To the manufacturers of synthetic diamonds, who<br />

tied their wholesale prices to the prices of natural<br />

diamonds, this is your fault.<br />

For those of you who have had your synthetic<br />

diamonds graded as if they deserve the same<br />

value determinations as a natural diamond, this<br />

is your fault.<br />

For those of you who have told your customers that<br />

lab-grown diamonds are a) not synthetic, and b)<br />

identical to natural diamonds, this is your fault.<br />

Through its Element Six division, De Beers knows<br />

more about growing synthetic diamonds than<br />

anyone else in the world but I don’t believe it even<br />

considered producing this material for jewellery<br />

until the synthetic manufacturers entered the<br />

marketplace with your bogus claims and<br />

overpriced product.<br />

34 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


You have no one else to blame but yourselves so stop it already.<br />

Stop telling the jewellers that Lightbox diamonds are brown, that<br />

Lightbox won’t be able to keep up with production and that<br />

De Beers is running out of diamonds.<br />

Stop telling consumers that Lightbox won’t be able to consistently<br />

produce the qualities it has already demonstrated, that this is a<br />

publicity stunt and that De Beers has opted against providing<br />

grading reports because of poor quality.<br />

SHOCK AND AWE<br />

I have been writing about synthetic diamonds over the past few<br />

years and, although I had no idea that De Beers would use an<br />

all-out assault on the rhetoric spewed by synthetic growers and<br />

sellers, the result is the battle should be over.<br />

This was simply a rout on all fronts but instead of hearing that the<br />

synthetic diamond companies will lower their prices immediately<br />

and stop the nonsense that they are the same as natural diamonds,<br />

they appear to be doubling down.<br />

Denials about the quality of Lightbox goods and the scope<br />

of Lightbox’s production capabilities are as embarrassing as<br />

declarations that De Beers is selling directly to consumers to<br />

screw the industry… and retailers are parroting this drivel.<br />

THE MARKETPLACE<br />

The new market will be pink, blue and white CVD lab-grown<br />

diamonds up to one carat at US$800 retail plus setting. Any<br />

consumer looking for an alternative to a natural diamond will be<br />

aware of these goods and their prices.<br />

I am hoping Lightbox is made available to retailers offering labgrown<br />

diamonds at realistic prices. Anyone selling lab-grown<br />

diamonds today must take this information into consideration<br />

regarding how they represent the goods they are selling and how<br />

much they are selling for.<br />

The introduction of lab-grown diamonds has forced US retailers<br />

to purchase expensive testing equipment to check every item of<br />

diamond jewellery that passes through their inventory and also<br />

each item coming in for repair. The burden of testing for lab-grown<br />

goods has fallen on the retail jeweller<br />

who must protect themselves and<br />

their customers.<br />

As for how to deal with customers<br />

who have already purchased labgrown<br />

at high prices, I remain<br />

opento ideas. u<br />

Abe Sherman is CEO Buyers Intelligence Group, a<br />

jewellery buying group, merchandising consulting and<br />

market-research firm that supports retailers and suppliers.<br />

He writes extensively on developments within the jewellery<br />

and diamond industries. Visit: bigjewelers.com<br />

WWW.CUDWORTHENTERPRISES.COM


Synthetic diamonds call<br />

for retailer awareness and caution<br />

WHILE LAB-GROWN DIAMONDS MIGHT PROVIDE<br />

BENEFITS FOR RETAILERS, BILL SECHOS SAYS<br />

THERE ARE MANY POTENTIAL PITFALLS.<br />

s synthetic diamonds gain a larger foothold<br />

in the marketpace the overriding issue<br />

for retailers is the need to be vigilant and<br />

aware. Man-made diamonds are here to stay,<br />

and they’re not going away. We’ve got to know<br />

what they are.<br />

They are not an imitation like cubic zirconia and<br />

moissanite - they are diamonds and because of that,<br />

we must be more educated and a lot more aware.<br />

Diamond imitations such as synthetic moissanite<br />

and synthetic cubic zirconia can be accurately<br />

identified by a trained jeweller or gemmologist using<br />

a 10x loupe and testing instruments.<br />

However, the new synthetic (or man-made)<br />

diamonds are impossible to identify with a 10x<br />

loupe or normal equipment that is used for the<br />

CZ and moissanite. They are diamonds, so look<br />

like diamonds with a loupe and are identified as<br />

diamonds with the normal instruments.<br />

We’ve made the decision to invest in the high-tech<br />

equipment necessary to be able to positively identify<br />

a suspect stone as a high pressure/high temperature<br />

(HPHT) or chemical vapour deposition (CVD)<br />

diamond. We have also built a reference collection<br />

of about 30 CVD and HPHT man-made diamonds<br />

ranging melée size to half carat for comparison and<br />

study purposes. Over the last year we have been<br />

asked to test parcels of melée purchased at very low<br />

prices and unfortunately we discovered CVD stones.<br />

We’ve had one case where five stones were identifed<br />

as man-made. We have had other instances where<br />

small stones turned out to be ‘suspect’. We’ve also<br />

had stones submitted for diamond certification<br />

without disclosure that turned out to be man-made.<br />

If a large diamond submitted for certification is<br />

identified as a man-made diamond we will laser<br />

inscribe the girdle with a unique identification<br />

number and add it to the certificate registry and the<br />

‘certificate check’ section on our website.<br />

There are a number of concerns for retail jewellers<br />

arising from the advent of the latest synthetic<br />

diamonds.<br />

These include;<br />

• Whether a large diamond purchased overseas<br />

without a recognised certificate submitted<br />

for a ring design might be man-made with<br />

the ramifications of being later identified as a<br />

synthetic after it’s left your premises.<br />

• Whether diamonds set in jewellery purchased ad<br />

stock purchases at overseas fairs where the prices<br />

are extremely competitive include synthetic<br />

diamonds,<br />

• Whether a piece of jewellery submitted for repair<br />

or valuation contains synthetic diamonds,<br />

• Whether a piece of jewellery being pawned or<br />

sold second hand contains synthetic diamonds<br />

If the jeweller has suspiciouns, it’s not the end of<br />

the world because there are some very affordable<br />

safeguards they can take.<br />

There are now inexpensive testing devices for only<br />

a few hundred dollars which can test both set and<br />

un-set stones and which provide the retailer a first<br />

warning to say there is something wrong with the<br />

stones and they need to be examined further.<br />

These devices give you a red flag by identifying the<br />

diamond as a Type II diamond.<br />

Currently all white synthetic diamonds are Type II, so<br />

if the stone does not pass this first test it’s rejected<br />

or should be sent to a well-equipped laboratory for<br />

further testing.<br />

All white diamonds that are mined except for a very<br />

tiny percentage (less than 2 per cent) are Type I<br />

diamonds. So, if a diamond passes the first screen it<br />

can only be natural.<br />

But there is a remote possibility that initial testing<br />

identifies a Type II diamond as synthetic even though<br />

it’s a natural diamond. CVD man-made diamonds<br />

are often brown out of the manufacturing chamber<br />

and are post treated with HPHT to make them white.<br />

There are rare occasions where natural brownish<br />

Type II diamonds are whitened by the same process to<br />

make them “D, E or F.”<br />

However, because they are Type II diamonds, these<br />

stones can also be flagged by using the same very<br />

affordable instruments mentioned above before<br />

further testing is done. So, there’s quite a bit of<br />

safeguard that the jeweller can take for a relatively<br />

small investment in equipment and which is very<br />

easy to use.<br />

Another issue concerning man-made diamonds<br />

is that there’s a perception that because they’re<br />

manufactured in a factory, they are all equal or<br />

identical. We’re starting to learn all man-made<br />

diamonds are not equal, they’re not the same quality,<br />

even within the same factory, let alone from different<br />

factories using different equipment. This makes them<br />

more believable because they have different levels of<br />

inclusions that differ from one stone to another, much<br />

like mined diamonds.<br />

So, consumer education around this is very important.<br />

<strong>Jeweller</strong>s need to understand this themselves so they<br />

can discuss it with customers. It’s intersting that De<br />

Beers’ advertising sounds like the stones they release<br />

– as opposed to manufacture – will all be of the same<br />

or similar quaility. De Beers is promoting a consistent<br />

quality, almost identical for all their stones which is<br />

why they won’t need to be graded.<br />

It’s early days and the<br />

steps De Beer’s has<br />

taken to enter the<br />

synthetic market are very<br />

significant and we don’t<br />

know what sort of impact<br />

it will have in the industry<br />

until it gains a bigger<br />

foothold. u<br />

Bill Sechos is managing director of<br />

Sydney-based Gem Studies Laboratory, the<br />

Gemmological Association of Australia’s (GAA)<br />

endorsed diamond grading laboratory. He<br />

holds a science degree from the University of<br />

Sydney and has served as the GAA president<br />

and chairman of the GAA Board of Studies and<br />

Examinations.<br />

36 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


De Beers<br />

“Fire in the Hole”<br />

WHAT IS REALLY BEHIND THE JEWELLERY INDUSTRY’S<br />

GREATEST U-TURN? CHAIM EVEN-ZOHAR WITH<br />

PRANAY NARVEKAR ANALYSE DE BEERS’ REAL MOTIVES.<br />

n the mining business, shouts of “fire in<br />

the hole” are warnings that an explosive<br />

detonation in a confined space is imminent.<br />

They warn of a dynamite charge that has been set.<br />

Depending on where you are positioned, ignoring<br />

it can be hazardous or even lethal.<br />

The Lightbox Jewelry announcement of De<br />

Beers, signaling its policy U-turn of moving into<br />

the gem-quality synthetic diamond business, is<br />

a comparable ‘fire’ warning to the industry. This<br />

explosion may be foreshadowing the eventual end<br />

of natural diamond mining.<br />

This U-turn by De Beers has always been a question<br />

of ‘when’ and not ‘whether’. The introduction<br />

of the Lightbox lab-grown diamond jewellery<br />

lines, coming on top of several other lab-grown<br />

diamond collections, symbolises another light<br />

pole on the edge of the road towards a rapidly<br />

growing global diamond jewellery market in<br />

which, eventually, any dissimilarity (differentiation)<br />

between lab-grown and naturally mined diamonds<br />

will evaporate. Product differentiation will not<br />

be sustainable – except, maybe, for some very<br />

exceptionally large natural stones ‘with a history’.<br />

In the long term, there will be only one diamond<br />

price, one product, without premiums for naturals.<br />

However, we aren’t there yet – and it might take<br />

anywhere between five to 15 years to get to this<br />

point. The Lightbox announcement, however, will<br />

unquestionably fast-track this process.<br />

De Beers has now taken ownership (or rather<br />

macro-management) of a most uncomfortable<br />

transition period marked by accelerated<br />

disruptions brought about by new technologies,<br />

by new entrants into the diamond business and<br />

new business models. It may delay, frustrate, or<br />

otherwise impact the timeline – but the end<br />

result is inevitable.<br />

The diamond jewellery market, as we know it<br />

today, has lost its ability to grow – for the simple<br />

reason that it will be running out of its natural<br />

product. As it has matured, it will now only<br />

stagnate and decline. However, the diamond<br />

jewellery market of tomorrow – in which the<br />

principal growth driver will consist of lab-grown<br />

diamonds – can become a global market worth<br />

hundreds of billions of dollars. The Lightbox entry<br />

must be seen as positive for the midstream and<br />

downstream. The pain suffered by the midstream<br />

in the transition period can be mitigated through<br />

responsible management – especially when<br />

restocking decisions are made. For the natural<br />

diamond miners, it is unequivocally bad news.<br />

THE FUTURE IS NOW HERE<br />

Well over a decade ago, we publicly went on<br />

record that gem-quality lab-grown diamonds will<br />

become ‘the future’ – and that De Beers will join<br />

and lead this endeavor. It has made enormous<br />

investments in the technology – and it didn’t do<br />

so without intention to capitalise on it. Polishing<br />

lab-grown diamonds will deliver colossal benefits<br />

to the Indian diamond jewellery-manufacturing<br />

centres. If once upon a time the Indian cutting<br />

industry employed more than 800,000 workers, this<br />

number now could multiply. The added value will<br />

be considerably greater, while the working capital<br />

required for acquiring rough will be much lower –<br />

and will continue to decline.<br />

<strong>December</strong> <strong>2018</strong> <strong>Jeweller</strong> 37


Historically, diamond traders (erroneously) believed<br />

that diamonds were a good investment that prices<br />

would always go up and that if there were no<br />

money to be made in the manufacturing, there<br />

would be earnings through appreciation<br />

of inventory values. That’s not true anymore (if<br />

it ever was). Diamond manufacturers only make<br />

money on the added value – on the difference<br />

between the raw material costs and the resultant<br />

polished product.<br />

Today, the added value to be made in polishing<br />

small synthetics is higher than working in naturals<br />

– and the resultant synthetic polished product<br />

(parcels of smalls) often looks better. The diamond<br />

producers (miners) led by De Beers have abused<br />

their oligopolistic market positions by denying,<br />

year after year, any meaningful returns to their<br />

rough diamond clients. Whether done deliberately<br />

or unwittingly De Beers themselves may have<br />

stimulated the move towards gem-quality<br />

synthetic diamond.<br />

Let’s not belittle the Lightbox announcement. All<br />

the evidence points to a well considered strategy<br />

by De Beers, which was put into motion in the<br />

fourth quarter of 2017 (including the copyright<br />

registration of the brand name). Clearly, decisions<br />

and debates would have preceded that. What it<br />

also means is that De Beers has had six months to<br />

fine-tune the messaging and communication to<br />

the industry. This is why almost all the De Beers<br />

spokespersons seem to parrot the same script. This<br />

is not a knee-jerk reaction to lab-grown diamonds<br />

and an industry savior appearing at the last minute.<br />

The significance of this move is light-years greater<br />

than (ill-fated) strategies such as Supplier of<br />

Choice. In Supplier of Choice, clients were required<br />

to make major investments in advertising, jewellery<br />

ventures, and so on, which, at the end, did not<br />

serve the clients – except for eroding their equity.<br />

De Beers honestly believed in the correctness of<br />

that strategy and it didn’t intentionally deceive<br />

anyone. The clients made the mistake of ‘not<br />

thinking it through’, sufficiently trusting that De<br />

Beers knows what is best – for itself and for them. It<br />

cannot afford to make that error again.<br />

In all fairness, the policy enunciated by the<br />

Lightbox announcement, from a De Beers<br />

perspective, seems like a brilliant move.<br />

Undoubtedly, brilliant for De Beers and its<br />

shareholders!<br />

One can argue with the ways - and the timing<br />

before the JCK show - the announcement was<br />

made. In spite of many months of preparation, the<br />

credibility of De Beers has taken a serious knock.<br />

Seasoned politicians and business executives<br />

know that the perception of a leader’s intentions<br />

is always more important than their ineptitude/<br />

actual delivery. What is De Beers’ ultimate<br />

intention? How can midstream and downstream,<br />

the manufacturers and retailers, make it a win-win<br />

for them as well? Can they?<br />

As De Beers now plays on both sides of the playing<br />

field, from now on, one can never be certain of<br />

De Beers’ intention when it takes any action in the<br />

future. That’s reality; this must be recognised and<br />

not be lamented. Every action by them can be<br />

questioned as to whether it is really meant to help<br />

the diamond business or the lab-grown business,<br />

especially when it calls for sightholders to take on<br />

significant additional costs. For example, one can<br />

question whether other unilateral action, like, say,<br />

the blockchain initiative, is really meant to help the<br />

diamond industry or whether it will simply add to<br />

its costs without too much benefit.<br />

Everyone will need to make his or her own call on<br />

this. Lightbox is a game changer – but the new<br />

game hasn’t started yet, and the new rules haven’t<br />

been set. It might become a win-win for both<br />

De Beers and downstream – depending how the<br />

game evolves. In the disruptive years, ahead of us,<br />

midstream and downstream company heads must<br />

become, as McKinsey calls them, ‘transformational<br />

leaders’ to navigate effectively through a turbulent<br />

transition.<br />

ABANDONING DEROGATORY NOMENCLATURES<br />

Policy U-turns require extraordinary public relations<br />

skills. While maintaining propaganda slogans<br />

for many years and unfounded theories that<br />

diamond consumers only want the ‘real thing’,<br />

and by threatening clients to stay away from ‘near<br />

worthless synthetic pebbles’, the natural diamond<br />

producers led their clients to believe that labgrown<br />

diamonds were not a ‘legitimate’ diamond<br />

jewellery product. They felt that lab-grown<br />

diamond producers must, at all costs, be denied<br />

participation in industry conferences, congresses,<br />

and bodies; they were also presented as the<br />

industry’s pariahs. Millions of dollars was spent on<br />

having regulators adopt unfriendly ‘derogatory’<br />

language for usage in nomenclature describing<br />

lab-grown diamonds.<br />

Diamond-terminology guidelines ostensibly meant<br />

to encourage full, fair and effective use of a clear<br />

and accessible terminology for diamonds and<br />

synthetic diamonds were embraced by virtually<br />

all sector bodies, organisations and traders .1 The<br />

term ‘cultured diamond’ was prohibited and the<br />

unfriendly name ‘synthetics’ was to be used – until,<br />

after court cases in the US – the Federal Trade<br />

Commission (FTC) had second thoughts about it.<br />

De Beers Best Practice Principles (BPP) does not<br />

sanction the abbreviated term ‘LGD’ (lab-grown<br />

diamonds), until the present policy U-turn. The<br />

head of BPP uses the term in her own published<br />

letters. [A US industry leader marveled recently<br />

that the term LGD so quickly gained acceptance in<br />

the market.] Well over US$100 million was poured<br />

in the Diamond Producers Association to fight<br />

synthetics. And, absurdly, synthetic diamonds<br />

were kept out of the specific diamond antimoney-laundering<br />

(AML/CFT) regimes because<br />

of the argument that these are ‘not diamonds’.<br />

Meanwhile, not a single customs officer could<br />

see the difference. Clearly, the natural diamond<br />

producers led a war against the gem quality<br />

synthetic producers.<br />

The leader of the pariahs<br />

In fact, De Beers invested directly and indirectly<br />

in great efforts to make these synthetic diamond<br />

producers viewed as some kind of industry<br />

pariahs. DTC sightholders would conduct synthetic<br />

diamond activities through non-group companies,<br />

with the lowest of visibility. Now, De Beers has<br />

unashamedly and unapologetically crowned itself<br />

as the leader of these pariahs. It has, overnight,<br />

legitimised a business whose legitimacy it had<br />

been fighting tooth and nail against, for decades.<br />

This is a level of arrogance only De Beers can<br />

display – and can also get away with. One cannot<br />

help but admire them.<br />

To avoid losing its market credibility forever, De<br />

Beers has launched a sophisticated information<br />

campaign to minimise the impact of its Lightbox<br />

synthetic brand on the natural diamond business.<br />

Totally ignoring what its lab-grown diamonds will<br />

do to the natural diamond world, it claims that “the<br />

38 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


Lightbox will transform the lab-grown diamond sector by offering<br />

consumers a lab-grown product they have told us they want but<br />

aren’t getting: affordable fashion jewellery that may not be forever,<br />

but is perfect for right now.”<br />

First of all, if a diamond lasts forever, it doesn’t matter whether it<br />

was mined or laboratory created. It’s the same product. To claim<br />

that it discovered that “consumers regard lab-grown diamonds – as<br />

a fun, pretty product that shouldn’t cost that much – so we see<br />

an opportunity here that’s been missed by lab-grown diamond<br />

producers” is taking a swipe at other lab-grown producers and<br />

hundreds of retailers selling successfully lab-grown diamond<br />

jewellery. It’s more than a swipe —its “transformation of LGD<br />

market” is a euphemism for ‘regime change’. Here we are; we<br />

shall take over!<br />

To claim that teenagers had hitherto been left out and this<br />

‘untapped’ market provided the opportunity – or the trigger – for<br />

De Beers to make a U-turn on synthetics seems like alternative facts<br />

creation. Yesterday’s truth is today’s fake news.<br />

De Beers wants us to believe that just because consumers asked for<br />

the affordable jewellery product, De Beers will now create a new<br />

market that all of the ill-informed existing lab-grown producers<br />

never realised could exist. This is rubbish.<br />

Any way one looks at it, every sale of a quality lab-grown diamond<br />

in a diamond jewellery retail store represents a natural diamond<br />

that was left unsold. Natural producers, including the mining<br />

partners of De Beers, know that. At a meeting in Mumbai, De Beers<br />

said it had a study showing that currently some 500 stores are<br />

carrying lab-grown diamonds. This is a figure, it said, that could<br />

reach 1,000 by the end of the year. These stores embraced the labgrown<br />

product even without the existence of this so-called, new<br />

untapped market De Beers will create.<br />

The Lightbox launch illustrates that the ferocious fights by the<br />

natural producers to marginalise, delegitimise, or even ostracise the<br />

lab-grown producers have dismally failed. In an odd twist of history,<br />

the end-consumers who desire synthetics are the very same<br />

consumers who, we were always told, would ‘lose its confidence in<br />

diamonds’ if synthetics were to allowed to make an inroad into the<br />

diamond jewellery market.<br />

THE TRUE COLOURS OF DE BEERS<br />

Historically, De Beers optimised its profits when it held a solid<br />

monopoly over its product. It has lost that position – or is in the<br />

process of losing it – in natural diamonds. This is the case in both in<br />

diamond mining and marketing. Undoubtedly, getting a monopoly<br />

position has now also become its long-term strategy in lab-grown<br />

diamonds. De Beers, having superior technology and hundreds of<br />

patents to help it exclude others out of the lab-grown market, will<br />

try to corner the lab-grown business in the decade ahead. Most<br />

likely, it will become successful.<br />

De Beers must be careful in its narrative – one doesn’t want<br />

to wake up the US Federal Trade Commission or European<br />

Competition Authorities too early. Setting up a lab-grown<br />

diamonds factory in Oregon is a brilliant move: By undercutting<br />

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most protracted of several separate law suits. De<br />

Beers challenged the originality of GE’s discovery<br />

and the accuracy with which they had described it.<br />

To make their case, De Beers engaged a number of<br />

expert witnesses to discredit General Electric in the<br />

eyes of South African law.”² At the end, the parties<br />

settled (they agreed on some royalty regime), but<br />

essentially De Beers won.<br />

Fast forward to today. De Beers, in 2016, filed a<br />

number of patent infringement cases in the<br />

High Court of Singapore against IIa Technologies<br />

Pte Ltd, which is currently the dominant market<br />

player in gem-quality lab-grown diamond<br />

production. IIa Technologies markets its lab-grown<br />

polished output under the brand name of Pure<br />

Grown Diamonds.<br />

CHAIM EVEN-ZOHAR WITH HIS WIFE TAMAR AT THE SCIO FACILITY IN THE US.<br />

the prices of competitors within the US, De Beers<br />

won’t be seen as ‘dumping’ from an overseas lowlabour-cost<br />

country, but rather serving the very<br />

best interest of American consumers by forcing<br />

down consumer prices. The very same company<br />

that for well over a century has espoused the<br />

virtues of ever-higher values of diamonds will now<br />

simultaneously espouse the virtues of the very<br />

lowest possible prices!<br />

De Beers CEO Bruce Cleaver justifies this<br />

expected near-collapse of current lab-grown<br />

prices by arguing that they discovered that<br />

consumers want “affordable fashion jewellery that<br />

may not be forever, but is perfect for right now.”<br />

We would argue that a lab-grown diamond will<br />

undoubtedly have the same life span as a natural<br />

diamond, either both are forever, or both are not…<br />

Actually, when one comes to think of it, if the wife<br />

doesn’t last forever, why buy her a natural stone?<br />

Lightbox will ‘just do’ – and there is money left for<br />

the honeymoon.<br />

Though one would suspect that De Beers has<br />

done extensive modeling and simulations, no<br />

one truly knows how this Lightbox launch will<br />

impact the prices of natural diamonds. Anyone’s<br />

forecast depends on one’s faith in the various<br />

product differentiation strategies. A DTC broker in<br />

a report cautiously noted his clients’ concerns that<br />

Lightbox “may [have] unintended consequences,<br />

such as loss of share of wallet for natural, or at least<br />

cannibalisation of that market” and that it may<br />

have “an impact on the price of small, coloured and<br />

brown goods.” That’s just one reaction for starters –<br />

and is still fully based on faith in successful product<br />

differentiation strategies. In that strange belief,<br />

I am an atheist.<br />

STRIVING FOR DOMINANCE, AGAIN.<br />

Essentially, De Beers has a proven record in fighting<br />

defections from cartels or forcing adherence<br />

to its policies mostly in two ways: by spending<br />

literally billions to undermine competitors’<br />

prices (i.e., prevent defections from the cartel –<br />

remember Argyle? Remember Zaire?) or if that fails,<br />

bankrupting the competitors in other ways. (Bain<br />

& Co. found the decision to fight Argyle one of the<br />

company’s gravest mistakes.)<br />

Any student of De Beers’ history will recognise<br />

that the company only truly flourishes when it is<br />

the dominant player in the market and can carve<br />

for itself the role of price-setter. As much as the<br />

law will allow, it excels when it can function as a<br />

monopoly. They have now publicly embarked on<br />

a policy – and displayed the audacity to publicly<br />

imply so – to force the other lab-grown producers<br />

into near-bankruptcy.<br />

Actually, in the synthetics business, De Beers has<br />

done this before. In its press releases, De Beers<br />

proudly (and rightfully) calls Element Six “a world<br />

leader in lab-grown diamond technology for more<br />

than 50 years.” What it doesn’t say is that some 50<br />

years ago, it actually had ‘missed the boat’ when<br />

General Electric had beaten it in filing patents for<br />

its gem-quality diamond synthetic invention.<br />

Recalls diamond historian Robert Hazen: “In<br />

the early 1960s De Beers and General Electric<br />

commenced a mammoth six-year legal battle<br />

costing many millions of dollars – at the time the<br />

Just as it did 50 years ago, De Beers is again<br />

investing millions of dollars in synthetic patent<br />

litigation. If it wins or makes some kind of<br />

settlement – which is kind of expected – it might<br />

force this competitor out of the market. Doing so<br />

would establish Element Six unchallenged as the<br />

dominant player in the lab-grown gem-diamond<br />

business. This would also put other lab-grown<br />

companies on notice. No one has as many<br />

CVD and HPHT gem-diamond related patents,<br />

registered in so many national jurisdictions, or has<br />

as much experience in successfully arguing these<br />

extremely complex issues before a judge or jury<br />

as De Beers. What patent-owners will learn the<br />

hard way, in these wars, at the end of the day, it is<br />

quite irrelevant who is right but rather who is left<br />

standing.<br />

ELEMENT SIX: LOWEST COST PRODUCER?<br />

And the betting is solidly on De Beers for being<br />

the one ‘left standing’. Noted mining analyst Des<br />

Kilalea sums it up as follows: “Some manufacturers<br />

of lab-grown diamonds have suggested that it is<br />

not possible to make a return [on consumer sales]<br />

at US$800 per carat, suggesting that the business<br />

will be a loss leader to damage the lab-grown<br />

diamond market. De Beers says it will make a ‘good<br />

return’ on the US$94 million that it is investing<br />

in Lightbox [factory] in Portland. Our view is that<br />

other lab-grown diamond makers may well not be<br />

able to compete on cost, as they do not operate<br />

on the scale which Lightbox proposes (500,000<br />

carats of lab-grown rough converted into 200,000<br />

of polished),” concludes Kilalea, who is apparently<br />

unaware of the output levels and efficiency of<br />

some of the other lab-grown producers.<br />

“Besides,” says Kilalea, “competitors do not have the<br />

diverse product range of E6 (products supplied<br />

40 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


to military, high tech and other sectors) over which to amortise<br />

development costs and overheads. So, we believe the marginal<br />

cost of making lab-grown diamonds is likely to be significantly<br />

lower than for other lab-grown diamond makers, and improving<br />

technology should see further reductions. It is worth noting that<br />

BHP Billiton investigated entering the lab-grown market and one<br />

of its executives told us several years ago they declined because<br />

barriers to entry were likely to fall, which did not justify investment.”<br />

We are not now arguing the point made by Kilalea, though we<br />

don’t underestimate the resiliency of some of the lab-grown<br />

competitors, but we are thinking about the ‘morning after’. What<br />

will De Beers do when it has secured its monopoly position? When<br />

it becomes the lab-grown diamond price setter? Will it suddenly<br />

move the lab-grown price up to the natural price? Will it produce<br />

also ever larger lab-grown diamonds? Have one price? Or may it<br />

withhold the lab-grown diamonds from the market to support the<br />

natural product? The answers are far beyond me – and it may take<br />

still a few years to get there.<br />

IT’S ALL ABOUT PATENTS: THE SKY IS THE LIMIT<br />

The Lightbox announcement came at the end of May. Around<br />

the same time a few CVD-related patents, which Element Six had<br />

applied for in late 2017, were published. Removing all the scientific<br />

language, it shows that Element Six has the know-how to grow<br />

CVD layer on layer. In this process, the very thick (high) stone is<br />

synthetised as one diamond and, apparently, no ‘dividing lines’<br />

are visible. This literally means that, in terms of size potential of<br />

stones, the sky has become the limit, subject to available capacity<br />

of the growers.<br />

Many producers, not only Element Six, possess know-how that<br />

they keep to themselves, and patent it only at the last moment,<br />

only when the product hits the market. This is done to prevent<br />

patent theft – as it is impossible to take a CVD diamond and ‘back<br />

engineer it’ to arrive at how the processes work. On the other hand,<br />

the main advantage of patenting the technology is to be able to<br />

go after other CVD producers accusing them of infringing your<br />

patent. De Beers has done that before, it is doing it now, and may<br />

well do so in the future.<br />

Though the market reacted sceptically to statements about<br />

Element Six’s ability to sell at discounts of 75 per cent to the<br />

prices of other lab-grown producers, and below 90 per cent<br />

of comparable natural stones, my scientist friends tell me that<br />

these figures are attainable. Element Six would not be ‘dumping,<br />

i.e., selling at prices below production cost. But the issue for the<br />

diamond market is sizes.<br />

Somehow, Element Six is suggesting jewellery with anywhere<br />

between 0.25 carats to 1-carat sizes. But Element Six has the knowhow<br />

to grow large or even very large stones. One of my friends<br />

says: “Once certain barriers were overcome in CVD, the sky has<br />

always been the limit. Given the size and power of your growth<br />

chambers. Crystals don’t have a ‘memory’ per se, so growing on a<br />

substrate 1mm thick is no different than one of 20mm. It’s just a<br />

matter of feeding gases into the growers.” If Element Six can make<br />

good money producing beautiful fancy coloured or pure white


large stones, will it leave that part of the<br />

market to other lab-grown producers?<br />

Don’t bet on it.”<br />

De Beers has, over many years, prepared<br />

itself for the day it would join – and<br />

ultimately lead. When announcing its<br />

Lightbox branded line of lab-grown<br />

jewellery, whose registered trademark it<br />

interestingly applied for only in late 2017,<br />

De Beers observed that “any Lightbox labgrown<br />

diamonds of 0.2 carats or above will<br />

carry a permanent Lightbox logo inside<br />

the stone.”<br />

Let’s again turn the clock back some 14<br />

years. Diamond Intelligence Briefs reported<br />

that Element Six had just (2004) applied<br />

for a patent registration for “a method of<br />

incorporating a mark of origin, such as a<br />

brand mark, or fingerprint in a CVD single<br />

crystal diamond material.” Much of the<br />

research, and many of the patents, had no<br />

use for industrial diamonds. However, the<br />

gem-quality CVD market was always<br />

on its mind.<br />

One of the recently published patents also<br />

indicates methods to grow stones that<br />

can be converted into blues and pinks at a<br />

much faster rate. In these Lightbox colours,<br />

Element Six may indeed have a lower cost<br />

advantage over other producers.<br />

As a matter of fact, Element Six has<br />

patented ways of colouring the lab-grown<br />

diamonds to brown, pink, blue, yellow<br />

and more. These are all quite different and<br />

complicated processes, and enormous<br />

resources have been invested getting<br />

to this technology. One of Element Six’s<br />

recently published patents also indicates<br />

methods to grow these coloured stones<br />

at a much faster rate, giving it a lower cost<br />

advantage over other producers. These<br />

patents weren’t needed for industrial<br />

applications – this was mostly done to ‘get<br />

ready’ for the inevitable day. That day has<br />

now arrived.<br />

IMPACT ON NATURAL PRODUCERS<br />

Though the eventual entry of De Beers<br />

into the lab-grown diamond business<br />

was never doubted, the timing caught<br />

most of us by surprise. Maybe it shouldn’t<br />

have. The parent company of De Beers,<br />

Anglo American (85 per cent owner),<br />

had identified synthetics as a “principal<br />

risk to our natural diamond business.”<br />

Anglo American, in its 2016 annual<br />

report, concluded that “technological<br />

developments are making the production<br />

of man-made gem synthetics commercially<br />

viable and there are increased distribution<br />

sources. The marketing of synthetics seeks<br />

to place them as being environmentally or<br />

socially superior”.<br />

Anglo American summarises the impact<br />

of synthetics on the natural diamond<br />

business as representing a “potential loss<br />

of polished and rough diamond sales<br />

leading to a negative impact on revenue,


cash flow, profitability and value.” Anglo<br />

American realised that, at the end of the<br />

day, any consumer buying a lab-grown<br />

diamond is a consumer who did not buy<br />

a natural diamond. It is as simple as that<br />

– and it isn’t without solid reasons that in<br />

our annual Tacy Diamond Pipeline we have<br />

incorporated the lab-grown production<br />

on the supply side and thus also on the<br />

polished demand equations. It is not that<br />

the threat materialised out of thin air. It was<br />

incorporated into the pipeline quite a few<br />

years ago. So, what made Anglo suddenly<br />

recognise the threat and then for De Beers<br />

to rapidly act on it?<br />

TURNING THE ‘THREAT’ INTO A ‘STAR’<br />

We think the credit should go to Cleaver.<br />

It is probably no surprise that the strategic<br />

‘threat’ was recognised by Anglo American<br />

Cleaver, who has a legal background and<br />

is an outsider to the industry, took over<br />

the reins at De Beers. Many of the current<br />

executives ‘don’t come from diamonds’.<br />

They don’t have the emotional attachment<br />

to the product. They have one task: deliver<br />

return for shareholders. Other stakeholders<br />

are less important. De Beers, in the last few<br />

years, noticeably relied on the strategic<br />

advice of the Boston Consulting Group<br />

(BCG). It was BCG that designed the<br />

blockchain strategy for De Beers. Some<br />

Forevermark executives occupied positions<br />

at BCG before joining De Beers.<br />

The group is also famous for the BCG matrix<br />

that helps companies to analyse their<br />

portfolio of specific products based on the<br />

market share and growth rate. At De Beers,<br />

lab-grown diamonds for the jewellery<br />

market can quickly capture a high market<br />

share in an otherwise slow-growing and<br />

grow the product industry demand.<br />

Such products are called by the BCGmatrix<br />

‘Stars’.<br />

Natural diamonds represent an industry<br />

where they currently have a high market<br />

share, but it is a low growing or stagnating<br />

market. BCG views these as ‘cash-cows’<br />

which typically generate cash in excess of<br />

the amount of cash needed to maintain the<br />

business. According to the BCG matrix, ‘cash<br />

cows’ are to be ‘milked’ continuously with as<br />

little investment as possible. (Investments<br />

would be wasted in an industry with low<br />

growth; they are worth it if high growth<br />

and high market-share are assured, since<br />

such investment would be wasted in an<br />

industry with low growth.) Classic strategy<br />

talks about ‘milking’ the cows and feeding<br />

the ‘stars’.<br />

LIGHTBOX: THE FUTURE CASH-COW<br />

Following the BCG logic, Lightbox wouldn’t<br />

have been done just to remain a fringe<br />

product serving the ‘fun jewellery’ teenager<br />

market. In the BCG matrix Lightbox is a ‘star’.<br />

It can gain quickly enormous market share<br />

in the still-infant gem quality synthetic<br />

diamond market. Therefore, it had to be<br />

linked to an ‘undercutting competitors’<br />

pricing strategy that would force other<br />

producers out of the market. De Beers<br />

expects its lab-grown business to go from<br />

strength to strength. Lightbox is the least<br />

‘painful’ way to communicate the U-turn to<br />

the market. Lab-grown diamonds are ‘stars’<br />

that will lighten the De Beers firmament.<br />

With the almost hysterical efforts to<br />

convince the trade that through product<br />

differentiation the industry can sustain<br />

two ‘different’ markets, at the end of<br />

the day, and with due respect to all the<br />

sophisticated detection equipment, it<br />

doesn’t make a difference to the consumer.<br />

Consequently, it doesn’t make a difference<br />

to the retailer either. The retailer will sell<br />

the product on which it makes the highest<br />

profits. It can sell the ‘diamond dream’ just<br />

as easily with lab-grown diamonds as with<br />

natural diamonds. Have no illusions: they<br />

will and they do.<br />

Pranay Narvekar and I visited a jewellery<br />

store in the US that only sold lab-grown<br />

diamonds. On the walls of the store there<br />

were huge posters depicting pictures from<br />

satellites showing the massive disruptive<br />

environmental footprint of the Jwaneng<br />

mine in Botswana. There were also pictures<br />

of child labour involved with mining and<br />

manufacturing natural diamonds. Actually,<br />

all the materials produced by the natural<br />

diamond NGOs (Global Witness, or what<br />

was Partnership Africa-Canada) were<br />

thoroughly put to good use by this store’s<br />

lab-grown promotion efforts.<br />

However, what was most impressive<br />

was that over 95 per cent of this store’s<br />

lab-grown diamonds were sold to young<br />

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couples, as wedding and engagement symbols.<br />

The soon-to-be newlyweds were actually seeking<br />

these lab-grown diamonds and they were willing<br />

to pay top dollar, as well. They saw it has an<br />

‘American-made’ product, as an ecologically green<br />

product, American labor, American love! This is<br />

not what De Beers has been telling us – emotional<br />

wedding jewellery was supposed to be only for<br />

natural diamonds. With the Millennials, this is<br />

wishful thinking, bordering on self-delusion.<br />

Back to the Anglo American corporation: Risk<br />

management is a continuous process, conducted<br />

on top corporate levels. Strategic decisions are<br />

made on levels beyond that of De Beers. The term<br />

used is ‘risk appetite’. Whether the company can<br />

carry the risk, whether the risk mitigation efforts are<br />

working, or not. If the principal risk in any business<br />

cannot be addressed, such business would either<br />

be closed or disposed. I am not privy to internal<br />

Anglo American discussions, but if the company<br />

would control the gem-quality synthetic business,<br />

it surely could mitigate the damage to the mining<br />

business, but only up to a point.<br />

EXPLORATION FUNDING WILL DRY UP<br />

Narvekar and I are quite tuned-in to the sentiments<br />

of mining community. What we discovered in<br />

recent years at the world’s largest mining and<br />

exploration show in Canada (PDAC) was that<br />

money for diamond exploration is drying up.<br />

Why spend tens or hundreds of millions of dollars<br />

searching for new deposits, while – after finding<br />

a deposit – more millions would be needed on<br />

resources estimation, getting bankable feasibility<br />

studies, getting environmental approvals for<br />

developing a mine, permitting, licensing, if you don’t<br />

know what the price and demand for the product<br />

will be 10 years or more down the road?<br />

It’s a vicious circle. When existing deposits are<br />

depleted, when mines close, when no new mines<br />

are put into production, the further growth of the<br />

industry will solely come from lab-grown diamonds.<br />

Kilalea observed that following the Lightbox<br />

announcement, existing mines may well increase<br />

their cut-off sizes, they will not bother to mine<br />

rough in sizes of less than a few millimetres, as<br />

there won’t be demand for these smalls. That part<br />

of the market will be taken over by synthetics - if it<br />

hasn’t been already.<br />

That by itself would trigger a reduced volume<br />

production of natural diamonds. This would<br />

greatly impact Russia. In a private communication,<br />

we learned that Alrosa, at the highest levels, was<br />

furious with the De Beers Lightbox announcement.<br />

Alrosa consciously decided to show constraint in<br />

its public utterances, so as not to upset the market<br />

too much, but it is fuming. It probably realises what<br />

is happening here. It may herald the beginning of<br />

the end to natural diamond mining. If mining cost<br />

exceeds achievable market price, mines are closed. It’s<br />

that simple.<br />

DE BEERS AS DIAMOND TRADER AND RETAILER<br />

Alrosa is quite different from De Beers. Alrosa is a<br />

pure diamond mining company, with almost no<br />

midstream or downstream exposure. It owns its own<br />

mines (with exception of an Angola joint venture).<br />

De Beers ceased to be a true diamond miner a long<br />

time ago and is more of a trader. In Botswana, it owns<br />

50 per cent of the Debswana mines, and it earns<br />

a margin as a trader of most of the output. It’s the<br />

same story in Namibia and South Africa, where it has<br />

few remaining mines; these are also joint ventures.<br />

It owns mines in Canada – and I am sure there are<br />

many executives at De Beers who wished they had<br />

never touched that continent. Billions of dollars was<br />

wasted there.<br />

In contrast, De Beers has become a fully vertically<br />

structured diamond trader – except for polishing,<br />

because there is no money to be made in the<br />

midstream sector. (It knows that better than anyone<br />

else – after all, they are sector’s main rough supplier.)<br />

Even for Lightbox jewellery, it has already announced<br />

plans to outsource the polishing in India – as if to<br />

support my views that lab-grown diamonds are truly<br />

good news for this manufacturing country. De Beers<br />

is involved in polished recycling, polished grading,<br />

franchising its Forever brand, and operating its own<br />

jewellery stores. In none of these areas does it hold a<br />

competitive advantage or is it particularly successful.<br />

But, looking at their activities, they can hardly still be<br />

viewed as a true mining company.<br />

For now, De Beers is playing down the Lightbox<br />

impact. It says it will only start producing in Oregon,<br />

US by 2020 and will produce 500,000 carats of<br />

rough (generating 200,000 carats of polished). There<br />

are currently some 15 lab-grown gem diamond<br />

producers in the world and their output is limited.<br />

(We are not talking about the billions of carats of<br />

mainly Chinese made industrial synthetics, which is<br />

increasingly having an overspill into the gem market.)<br />

Only Singapore’s IIA Technologies is producing<br />

significant volumes, which we currently estimate<br />

at around 400,000 carats annually – and increasing.<br />

The present sales of Lightbox lab-grown diamonds<br />

will come from De Beers’ UK production and from<br />

its stockpile. Nobody knows how much there is out<br />

there. As it will start selling shortly, it must have the<br />

critical mass to sustain an effective launch.<br />

To sooth the industry’s anxieties, De Beers says that<br />

“this Lightbox is just a US$200 million business;<br />

our natural business is US$6 billion.” First of all, that<br />

statement isn’t accurate – it views joint ventures’<br />

output as part of their own. On the sales to the<br />

sightholders, they are allowed a certain margin. It’s<br />

not the turnover that is relevant – but rather the<br />

margins realised. That is as true for De Beers as it is<br />

for Indian traders. De Beers will earn 100 per cent of<br />

the Lightbox profits – at margins it can, eventually,<br />

fully control. Moreover, if it can produce US$200<br />

million, it can also produce US$2 billion or more.<br />

UNDESIRED SPILLOVER EFFECTS<br />

One of the more predictable spillover effects of<br />

the trade war announced by De Beers against the<br />

other lab-grown producers is for the endangered<br />

companies to resort to – or condone their clients<br />

to – selling undisclosed synthetics. The fact that De<br />

Beers has ‘legitimised’ lab-grown diamonds in a big<br />

way may makes it easier to ‘forget’ the origins of the<br />

stone. It doesn’t really matter. Or does it?<br />

What it does illustrate is that if and when De Beers<br />

becomes the dominant producer and the pricesetter<br />

of the lab-grown market, it will undoubtedly<br />

capture the monopoly of profits such production<br />

allows. Bankrupting the smaller players may not<br />

be as easy as one might think. The Lightbox<br />

promotions of the lab-grown product will, in fact, be<br />

beneficial for all lab-grown producers.<br />

What seems certain is that for quite a while,<br />

consumers and traders will be confused. The<br />

Lightbox entry offers challenges and opportunities –<br />

and was unavoidable in any event. In the short run,<br />

De Beers will be seen by its own clients as unreliable,<br />

disloyal and untruthful suppliers, however few<br />

clients will say so aloud.<br />

ELUSIVE LIGHTBOX: OUT OF STOCK ALREADY<br />

While most of my observations for this article were<br />

formulated in July (shortly after De Beer’s May<br />

announcement) now, six months later, we review<br />

some of the subsequent industry.<br />

For example, one well-established labgrown<br />

supplier confided that “after De Beers<br />

announcement in late May, days before the JCK<br />

show, this caused serious disruption among our<br />

customers, to wit: ‘unless you drop your prices to<br />

$800/carat, cancel my orders’. The following week<br />

I pre-ordered a 1-carat pendant from Lightbox.<br />

Nothing. After their belated roll out in mid-<br />

September, I again ordered a 1-carat white<br />

44 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


stone in a pendant... Lightbox informed me<br />

“sold out”. In October I tried again to order<br />

a 1-carat stone pendant, again ‘sold out’. I<br />

wrote to them under a fake name asking<br />

why I could not get my order filled, “new<br />

stock coming in every day”...was the reply.<br />

I tried to reorder...’sold out’, was the<br />

Lightbox reaction….”<br />

One must pay De Beers their dues! This<br />

is simply genius; De Beers seems to<br />

have its cake and is eating it too. By their<br />

very announcement, it has succeeded<br />

in disrupting the market of the existing<br />

lab-grown diamond suppliers forcing their<br />

prices down – and then Lightbox seems to<br />

be ‘slow’ on delivering its own product –<br />

while protecting their natural business at the<br />

same time. Maybe it is planning a campaign<br />

saying Lightbox diamonds are rare? Just as<br />

natural diamonds?<br />

LOOKING AHEAD<br />

In any event, many diamantaires (and De<br />

Beers’ clients and partners) suffer from<br />

selective amnesia in anything involving<br />

De Beers, and disloyal acts will be quickly<br />

forgotten. They will swallow their pride and<br />

set aside their anger and happily apply for<br />

even more natural rough – maybe in the<br />

hope to get a Lightbox franchise as well. “De<br />

Beers still does continue to try and ‘appear’<br />

like a custodian, even when it is not. [It<br />

prefers to be seen as the industry’s ‘leader’.] It<br />

is like an overprotective mother who wants<br />

the child to be a ‘mama’s boy’ while also<br />

complaining about the son not moving out,”<br />

concludes an astute industry observer.<br />

Kilalea stresses that De Beers had no choice<br />

– it had to do this to protect the natural<br />

diamond business: “De Beers has been<br />

considering and developing this strategy for<br />

several years and the inroads of lab-grown<br />

diamonds into the market for natural stones<br />

made this move inevitable,” he notes. Here,<br />

I totally disagree. De Beers had to do this to<br />

protect its own business. It made a brilliant<br />

move, as we said already, for its own benefit.<br />

All others, including mining companies,<br />

must now consider their own responses<br />

to the challenge; it goes beyond that.<br />

Strategically, this little Lightbox ‘dynamite’<br />

explosion heralds the renewed lease on life<br />

for De Beers – it will probably still be the<br />

world’s leading diamond supplier long after<br />

all of its natural diamond deposits have been<br />

exhausted. De Beers will adapt and reinvent<br />

itself – forever. u<br />

Footnotes<br />

1 The nomenclature guidelines are built on<br />

two internationally accepted standards: the<br />

ISO 18323 Standard (“<strong>Jeweller</strong>y – Consumer<br />

confidence in the diamond industry”) and the<br />

CIBJO Diamond Blue Book.<br />

2 See: Robert M. Hazen, “The Diamond<br />

Makers: A Compelling Drama of Scientific<br />

Discovery,” Cambrdige University Press,<br />

Cambridge, UK, 1999. Page 172<br />

In his 45 years as diamond trade journalist and industry consultant, Chaim Even-<br />

Zohar has now retired. He is an Honorary Life Time Member of the diamond<br />

bourses in Israel, South Africa, Dubai and New York in recognition of his service to<br />

the industry. He has authored several books, published magazines and served as<br />

editor of the Diamond Intelligence Briefs.<br />

Pranay Narvekar is an independent consultant who focuses on demand and<br />

supply, strategic, financial, and structural problems of the diamond industry


INTERNATIONAL FAIR<br />

India International <strong>Jeweller</strong>y Show<br />

SHINES IN TOUGH TIMES<br />

DESPITE SIGNIFICANT DISRUPTIONS TO THE GLOBAL DIAMOND<br />

INDUSTRY THIS YEAR, GJEPC’S INDIA INTERNATIONAL JEWELLERY<br />

FAIR SHOWED NO SIGN OF SLOWING DOWN. ANGELA HAN REPORTS.<br />

his year’s India International <strong>Jeweller</strong>y Show<br />

(IIJS) reported a 14 per cent increase in<br />

traffic from 2017, welcoming over 40,000<br />

registered visitors from 80 countries.<br />

Announced by official organiser the Gem and<br />

<strong>Jeweller</strong>y Export Promotion Council (GJEPC), the<br />

attendance is an all-time visitor record for the<br />

five-day event, which took place at the Bombay<br />

Exhibition and Convention Centre from August 9<br />

to August 13.<br />

A Preview Day was held before the opening<br />

for select international buyers, leading retailers,<br />

chains and industry leaders to conduct priority<br />

business and experience the new layout of the floor<br />

where over 1,800 exhibitors presented across the<br />

62,000sqm trading space.<br />

To accommodate the size of the growing show, the<br />

GJEPC increased the total trading floor with Hall 7A,<br />

10,800sqm of additional space that accommodated<br />

800 more exhibitors and multi-storey booths. As a<br />

result of a bigger show, tighter security checks and<br />

measures increased, which created unintended<br />

bottleneck traffic when visitors transitioned<br />

between halls.<br />

In his opening address, GJEPC chairman Pramod<br />

Agrawal explained why he believes there’s<br />

been an increase in traffic: “India is the leading<br />

diamond manufacturing centre; the fourth largest<br />

jewellery supplier to the world and a renowned<br />

centre for coloured gemstones,” he said. “[The IIJS]<br />

flagship show demonstrates that India’s jewellery<br />

manufacturing has come of age and is widely<br />

acclaimed as a reliable and competitive source for<br />

retailers and consumers from across the world.”<br />

Agrawal stated that the gem and jewellery<br />

export contributes seven per cent to India’s<br />

GDP, which totals $US41 billion with over five<br />

million people currently employed in the sector.<br />

The Council predicts that exports of completed<br />

jewellery and loose stones and diamonds will grow<br />

46 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


etween 15 and 20 per cent by end of <strong>2018</strong>.<br />

He also highlighted that the Council was working<br />

closely with the government to achieve its vision of<br />

adding two-million jobs in the sector and increasing<br />

exports by six to seven per cent each year to reach<br />

$US70 billion by 2022.<br />

DUSTING OFF AFTER A FALL<br />

Earlier this year the GJEPC predicted that a 10<br />

per cent decline in bank finance to the gem and<br />

jewellery sector would adversely impact industry<br />

exports, highlighting that exports in the April/June<br />

<strong>2018</strong> quarter stood at $US10.1 billion as compared<br />

to $US11.1 billion in the same period in 2017, an 8.8<br />

per cent decline.<br />

“Bank finance is the lifeline of the industry and any<br />

decrease would see a decrease in gem and jewellery<br />

exports as well,” GJEPC vice chairman Colin Shah said<br />

in a statement back in July. “Post the recent incident,<br />

banks and other financial institutions have become<br />

stringent and are insisting on much higher collateral<br />

security against bank finance.”<br />

Since the show, however, Shah has been more<br />

upbeat, describing the event as a reflection of “the<br />

definite vibrancy in the market at present”.<br />

“With the Indian economy performing well, there is<br />

a strong hope that the industry is entering a period<br />

of prosperity,” he said at the event.<br />

When asked about whether banks are less willing<br />

to finance the diamond sector since the Modi<br />

scandal, Dharmanandan Diamonds sales director<br />

Vipul Sutariya told <strong>Jeweller</strong>, “The banking problem<br />

primarily affects smaller and newer players with<br />

little financial history or time in the market. On the<br />

other hand, it improves long-term prospecting since<br />

banks will be more honed to finance businesses on<br />

profitability. So in the longer term, it is a good move.”<br />

Sutariya believes a weaker rupee to the dollar has<br />

helped stimulate export adding, “If you see the<br />

export figures, the market growth is not bad. We<br />

export 90 percent of our production – less than ten<br />

per cent is consumed locally. In these terms, it’d<br />

favour us if the rupee goes down since local labour<br />

is paid in rupees. A weaker rupee could be seen as<br />

an opportunity for both the local and global market.”<br />

While the local industry might still be recovering, its<br />

consumers are on the rise, with the reported growth<br />

of India’s middle-class. The Diamond Producers<br />

Association (DPA), an international organisation<br />

aiming to maintain and enhance consumer demand<br />

and confidence in natural diamonds, has recognised<br />

this as an opportunity and launched a $US70 million<br />

global marketing campaign targeting India, China<br />

and the US as its main strategic markets.<br />

Working with the GJEPC to launch the DPA’s most<br />

recent diamond campaign in India is DPA CEO Jean-<br />

Marc Lieberherr.<br />

“Our role is to make everyone’s investment [into<br />

these campaigns] work a lot harder,” he said in a<br />

press conference at the event. “It’s not the amount<br />

[of money] in itself but it’s also our ability to amplify<br />

everything that we’re doing and to speak with one<br />

voice with retailers.”<br />

According to the DPA, fewer than ten per cent of<br />

women in India own a diamond compared to 20 per<br />

cent of Chinese and 70 per cent in the US. Owing to<br />

a recovering economy and a growing Indian middle<br />

class , the DPA remains confident it can increase the<br />

local diamond market over the next decade. Given<br />

India’s history as the first place of diamond discovery<br />

and central point of diamond manufacturing,<br />

Lieberherr believes that the time for this<br />

opportunity is right.<br />

“Polished prices are growing,” he added. “If we look at<br />

India specifically, the best possible proxy is the share<br />

of India as part of the total market, which is seven<br />

per cent today. We know that emerging markets are<br />

usually going to become the price leaders.”<br />

INITIATIVES TO STRENGTHEN INDIA<br />

With the global trade still suspended in uncertainty<br />

and India’s domestic diamond trade stabilising, the<br />

GJEPC has focused on cultivating local industry and<br />

talent. At the IIJS, the Council designated exhibition<br />

space for start-ups and local female entrepreneurs,<br />

including an area to celebrating the history and<br />

heritage of jewellery artistry in India.<br />

Colin Shah said, “GJEPC is poised to give and sustain<br />

a positive momentum that the gem and jewellery<br />

sector is in need of at this point of time. We are<br />

launching an international campaign, featuring<br />

India’s skills and capabilities in manufacturing world<br />

class jewellery.”<br />

He unveiled the GJEPC’s new promotional campaign<br />

featuring images of people in the jewellery<br />

workforce and key facts about the local trade such<br />

as its contribution to the GDP, employment rate<br />

and welfare schemes. This initiative was designed to<br />

communicate lesser known but important aspects<br />

of the industry.<br />

Recently the GJEPC surveyed its local industry<br />

to better understand the workforce across key<br />

jewellery and gemstone manufacturing districts<br />

across India. The aim was to develop action<br />

plans to stimulate the industry. The Council has<br />

now taken steps to enhance the educational<br />

infrastructure by developing a chain of training<br />

institutions, participating in a global campaign for<br />

the promotion of natural diamonds and engaging in<br />

extending invitations for trade.<br />

Agarwal shared a larger vision to establish common<br />

facility centres and jewellery parks at all major gem<br />

and jewellery districts throughout India, which<br />

would help boost export trade and improve the<br />

living standards of workers within the industry.<br />

Rong Julius Zheng, vice president of the Shenzen<br />

Rough Diamond Exchange, signed an MoU with<br />

GJEPC announcing that it will also set up an office<br />

in Shenzen. Zheng emphasised that China, as the<br />

second largest consumer of diamond jewellery,<br />

looked to India to source a lot of products<br />

of the industry.<br />

GJEPC’s executive director Sabyasachi Ray<br />

provided some insight into how he hopes they’ll<br />

work together: “India and China have a very close<br />

relationship in the diamonds and jewellery areas. In<br />

diamonds, India and China complement each other;<br />

we are not competing with each other in the kind of<br />

product being worked in the two centres.”<br />

The GJEPC also organised the fourth <strong>Jeweller</strong>s for<br />

Hope charity dinner in association with De Beers<br />

and the Gemological Institute of America (GIA),<br />

donating a total of Rs 1 crore ($US143,000) to three<br />

not-for-profit organisations that have served social<br />

justice causes in India. Fund recipients include<br />

Nobel Prize winner Kailash Satyarthi for his work to<br />

<strong>December</strong> <strong>2018</strong> <strong>Jeweller</strong> 47


INTERNATIONAL FAIR<br />

end child exploitation and trafficking in India and<br />

surrounding regions.<br />

Gaetano Cavalieri, president of World <strong>Jeweller</strong>y<br />

Foundation CIBJO, acknowledged the efforts<br />

of the GJEPC on opening day and affirmed that the<br />

organisations would continue working<br />

closely together.<br />

“[The Council’s] activities are very central to<br />

India’s unique position globally in the business of<br />

gem and jewellery,” Cavalieri said. “We cannot go<br />

forward without India and hence look forward to<br />

fostering and maintaining a deep engagement with<br />

the GJEPC.”<br />

IS IT STILL MINED OVER MATTER?<br />

Only a week before IIJS, the US Federal Trade Council<br />

(FTC) stated that a diamond was a diamond whether<br />

it had developed naturally in the earth’s crust or<br />

was created in a lab. Lieberherr told reporters at the<br />

show that he disagreed with the FTC guidelines.<br />

“We just asked for clarity because we saw that<br />

there was a lot of confusion and the limit between<br />

confusion and deception sometimes very thin. We<br />

got the opposite of clarity; we now have potentially<br />

a lot more confusion and that is what is concerning,”<br />

he said, adding that the ruling would “give marketers<br />

the opportunity to test the limits”.<br />

“These kind of decisions like the one from FTC just<br />

reinforce the need for us to communicate effectively.<br />

A diamond is not just a molecular composition; it is<br />

billions of years in the making. Billions of years have<br />

meaning, especially in a time where we exist in a<br />

world where all we want is instant gratification and<br />

replication of everything, be it artificial intelligence<br />

or virtual reality.”<br />

Lieberherr emphasised that the guidelines should<br />

be considered a loose framework that is meant to<br />

guide marketers with two primary objectives: to<br />

prevent consumer deception and to promote a<br />

competitive landscape.<br />

“We think that it is not correct to say that they<br />

[natural and lab-created diamonds] are identical<br />

products. The fact that they can be distinguished<br />

with the right equipment, by looking at the growth<br />

structures and the nature of the inclusions make<br />

them inherently different products,” he added.<br />

Liebherr believes there are bigger issues<br />

surrounding retail diamond sales, since luxury items<br />

are now competing with holidays and electronics.<br />

The main challenge remains how retailers can create<br />

a sensory experience around diamonds that appeals<br />

to all of a client’s senses.<br />

“The biggest challenge for jewellery is that<br />

you’ve got a product that is small and expensive,<br />

and you’ve got to put it in a case,” he explained.<br />

“Diamonds are transparent, and the same colour<br />

as the glass that’s on it. Unless you find a way to<br />

create a retail environment that really magnifies it,<br />

you’re separated by these blockades so the sensorial<br />

experience is very limited.”<br />

When asked if Dharmanandan Diamonds plans to<br />

enter the lab-created diamond market, Sutariya<br />

strongly declined but understands that there is a<br />

market in the future for lab-created diamonds in<br />

India and sees that the two will exist alongside<br />

each other for different markets: “We are more<br />

concerned about our people – there are about<br />

one-million people dependent on the current<br />

natural-diamond industry.”<br />

In a volatile market with uncontrollable obstacles<br />

in the way of global trade and a hard-to-read<br />

projection for the future of the diamond industry,<br />

the GJEPC appears to be gauging problems as<br />

opportunities and focusing on strengthening India’s<br />

local industry, using the IIJS event to leverage<br />

momentum.<br />

The next IIJS show will be held in February 2019. u<br />

Angela Han attended the fair courtesy of GJEPC as an<br />

accredited media representative.<br />

48 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


DIAMOND AWARDS<br />

BEN PRESTON BLACK, FANCY COLOUR WINNER OLIVAR MUSSON, RED CARPET WINNER BRETT WOOD, DIAMONDS FOR MEN WINNER<br />

Diamond Awards<br />

showcase brilliant design<br />

he Diamond Guild Australia <strong>Jeweller</strong>y Awards<br />

celebrated “exemplary workmanship and<br />

creative integrity of Australian jewellery<br />

design” at its Gala in October.<br />

Finalists from six categories had their work showcased<br />

at the event with winners selected by the esteemed<br />

judging panel comprising interior designer Greg<br />

Natale, actress April Rose Pengilly, Good Design<br />

Australia general manager Rachel Wye and jewellery<br />

designer John Calleija.<br />

Musson <strong>Jeweller</strong>s designer Olivar Musson took out<br />

the Supreme Award, which is selected from winners<br />

of each category. His ‘Aella’ earrings featured 36<br />

Forevermark Black Label ideal square cut diamonds,<br />

totalling more than 32 carats set in 18-carat white<br />

and rose gold.<br />

No stranger to the Awards, Musson said he was<br />

pleased to take home his first Supreme win: “I was<br />

first a finalist in 2005 when I was a very young chap,<br />

I missed out on the win then. I have been a finalist<br />

quite a few times before but in the 2015 awards I was<br />

very fortunate to win two categories; I won fancy<br />

colour and fancy shape with two quite avant-garde<br />

pieces,” he said.<br />

“This year I won the Red Carpet and the Supreme<br />

Award, so it was a nice big step up.”<br />

Musson has been heavily involved with Diamond<br />

Guild Australia over the years and has sat as chairman<br />

for more than six years.<br />

“What I love about the Diamond Guild Australia<br />

<strong>Jeweller</strong>y Awards is they’re geared to promotion to<br />

the end consumer. So in previous years we’ve been<br />

aligned with Harpers Bazaar and Qantas, national<br />

publications with amazing coverage. This year saw us<br />

aligned with the Australian Financial Review. So the<br />

finalists were featured in a 14 page in the AFR, which<br />

is absolutely phenomenal,” Musson said.<br />

“All of the finalists and winners will get promotion<br />

and credibility to the end consumer. And for retailers,<br />

that’s what everyone looks for. I mean it’s great to win<br />

an award and get a pat on the back from your peers,<br />

but to be able to get cut through to a consumer<br />

marketplace and hopefully get clients to come in the<br />

door is why we always enter.”<br />

The Awards, established in 2005, were hosted<br />

in Melbourne for the first time with television<br />

host Jessica Rowe the master of ceremonies for<br />

the evening.<br />

WINNING DESIGNS<br />

Ben Preston-Black of Creations <strong>Jeweller</strong>s took home<br />

the Solitaire Award with his ‘Brilliant’ ring, a handmade<br />

platinum diamond set ring inspired by the shape of<br />

the round cut brilliant diamond.<br />

Jeff Einstein from Jeff Einstein <strong>Jeweller</strong>y and Athena<br />

X Levendi from Levendi were also finalists for the<br />

Solitaire Prize.<br />

Black also won the Fancy Colour Award for “Fanciful”<br />

with Wisan Sarji. The sculptural ring “takes the<br />

eye on a visual journey across the swirls of metal<br />

interweaved with alluring colourful diamonds”<br />

and featured brilliant cut natural punk, white and<br />

champagne diamonds.<br />

Jake Coughlan from Refraction Manufacturing<br />

<strong>Jeweller</strong>s and Jewels of the Kimberley’s Jodi Penfold<br />

were recognised for their respective Fancy entries and<br />

were also named finalists in the category.<br />

MJS <strong>Jeweller</strong>y’s Matthew Staff took out The Diamonds<br />

for Everyday category with his ‘Flame’ drop earrings;<br />

pair of black rhodium and rose gold earrings with a<br />

single diamond in each. Miraj <strong>Jeweller</strong>y’s Matthew<br />

Townsley and Creation’s Preston-Black and Sarji were<br />

recognised for their designs and were named finalists<br />

for the section.<br />

Brett Wood of Brett’s <strong>Jeweller</strong>s won the gong for the<br />

Diamonds For Men award with ‘Grill’ ring, a yellow<br />

gold and platinum grill design featuring a central<br />

baguette cut diamond creating a stylish balance of<br />

masculinity and extravagance.” J Farren-Price designer<br />

Niki Jackson was runner up for the award with her<br />

“Night and Day” necklace.<br />

<strong>December</strong> <strong>2018</strong> <strong>Jeweller</strong> 49


DIAMOND AWARDS<br />

Wood’s entry was his first into the Awards and the<br />

Geelong jeweller said he was thrilled with his “100 per<br />

cent hit rate”.<br />

“The inspiration came from the baguette cut<br />

diamond. I’d bought it a while ago and it appealed to<br />

me so much I had to have it,” he said.<br />

“To win a category in this award thrills me to core.<br />

Being alongside some very inspirational jewellers<br />

is such an honour and in turn I hope I will be an<br />

inspiration to someone in return one day.”<br />

The Emerging Talent prize recognised the work of<br />

up-and-coming young designers and showcased the<br />

work of MDT Design’s Leah Straughair and Stephen<br />

Dibb <strong>Jeweller</strong>y’s Brock Hodgson. It was Jewels of the<br />

Kimberley’s Hannah Alexander who won the award<br />

with ‘Vogue’, a ring featuring coloured diamonds<br />

and pearls, encasing several small round cut brilliant<br />

diamonds “in a refined cocktail ring design.”<br />

Alexander said the win was her first entry into the<br />

awards and “will definitely be doing so again in the<br />

future, although this year will be pretty hard to top.”<br />

“This win means everything to me, it’s a reward and<br />

HANNAH ALEXANDER,<br />

EMERGING TALENT<br />

WINNER<br />

MATTHEW STAFF ,<br />

EVERYDAY WEAR WINNER<br />

reassurance that all of the hard work, training and<br />

dedication over the past years has put me at the<br />

top of my field. It wasn’t just a win for me but also<br />

for my family, friends and most importantly my<br />

teacher, Jodi Penfold, who have all supported me<br />

throughout my journey in the jewellery industry,”<br />

Alexander said.<br />

“It has been such a confidence booster and is<br />

affirmation that the sacrifices I have made to pursue<br />

my career path in the industry has all been worth it. I<br />

am still on cloud nine and can’t believe I won.”<br />

The aforementioned ‘Aella’ earrings was awarded the<br />

Red Carpet prize which also celebrated the works<br />

of Rohan Milne from Rohan <strong>Jeweller</strong>y and Levendi’s<br />

Mike Levendi and Burt Muller.<br />

Musson’s prize-winning earrings were sold prior<br />

to the event and were displayed in Sydney for<br />

the weeks following. The designer said he was<br />

“heavily influenced by architecture and sculpture” in<br />

designing the shield-like earrings.<br />

“The placement of the diamonds and the studs<br />

that fix them in place was inspired by a commercial<br />

building with massive oversized panels of glass fixed<br />

in their corners with heavy fixtures,” Musson said of<br />

the rose gold stud setting.<br />

“The diamonds are very unique; they’re Forevermark<br />

Black Label ideal squares. This is a diamond brand<br />

and cutting style that we’ve been associated with<br />

for half a dozen years or so. They’re absolutely<br />

extraordinary and when I first saw this octagonal<br />

shaped diamond, I had heard about it but I hadn’t<br />

seen one, the brilliance of them is just incredible. To<br />

have Forevermark and the Black Label team to be<br />

able to put 32 carats for me is something I’m<br />

very thankful for.”<br />

Diamonds bring<br />

At the conclusion of the event, Diamond Guild Australia executive officer Melissa James<br />

announced the launch of a charitable project in support of mental health awareness.<br />

The Hope Will Catch Our Tears Initiative<br />

will produce 100 specially created pendant<br />

necklaces, which will be sold by Guild<br />

members to raise funds for Beyond Blue<br />

Australia and advocate for mental health<br />

resources and support.<br />

James unveiled the ‘Hope Will Catch the Tears’<br />

pendant designed by Niki Jackson from J Farren-<br />

Price; $2,000 from every one sold will go directly<br />

to Beyond Blue.<br />

“The pendant features a single pear-shaped<br />

diamond ‘tear drop’ below which two curved<br />

gold sections represent a pair of hands.<br />

This reflects the idea of being supported<br />

through depression and anxiety, the idea of<br />

acknowledging the difficulty for those who<br />

suffer from mental health challenges but also the<br />

importance of those around them that are their<br />

support network,” James announced at the Gala.<br />

“We will be offering a limited edition of 100 of<br />

these pendants through our Guild members<br />

stores over the next 12 months and hope to<br />

generate a $200,000 donation Beyond Blue to<br />

support their much needed work, but also to<br />

honour the many individuals and families<br />

that have suffered the effects of depression<br />

and suicide.”<br />

James Thredgold of James Thredgold <strong>Jeweller</strong><br />

inspired the campaign through his mental health<br />

advocacy efforts. Thredgold lost his wife Holly to<br />

depression in 2016 at the age of 42 and said she<br />

was “amazing and wanted to be an advocate for<br />

mental health.”<br />

“While I was on holidays my amazing kids,<br />

Melissa and the team had come up with the idea<br />

which almost brought me to tears,” he said.<br />

Thredgold has been a long-time supporter of<br />

mental health resources and is a Breakthrough<br />

Mental Health<br />

Research<br />

Foundation<br />

ambassador where<br />

he gives presentations<br />

about destigmatising the<br />

conversation surrounding mental<br />

health and provides advice for seeking support<br />

based in his 15 years with Holly.<br />

“I think if we see people talking about it in all<br />

different walks of life and they see that just like<br />

cancer or any other disease, it doesn’t choose<br />

people according to race colour or wealth,<br />

then we can raise funds to find triggers,”<br />

Thredgold said.<br />

“One day I hope that we can at least help reduce<br />

the number of people who suffer form it. If we<br />

can raise awareness for mental health I think<br />

people will listen.” u<br />

50 <strong>Jeweller</strong> <strong>December</strong> <strong>2018</strong>


Where passion meets creativity<br />

Immerse yourself in a world of spectacular, original jewellery at the 2019 International <strong>Jeweller</strong>y & Watch Fair.<br />

Be inspired by excellence in creativity of the latest designs and the passion in workmanship. See the latest global<br />

trends, seek new business opportunities and gain knowledge from industry insights. Talk with the experts and<br />

select from thousands of stunning pieces, just right for your business. Save the date.<br />

INTERNATIONAL<br />

J E W ELLERY & WATCH FAIR<br />

August 24 > 26, 2019<br />

ICC Sydney > Exhibition Centre > Darling Harbour<br />

Organised by<br />

WWW.JEWELLERYFAIR.COM.AU


ARGYLE PINK DIAMONDS<br />

SAMS GROUP<br />

AUSTRALIA<br />

www.PinkKimberley.com.au<br />

E pink@samsgroup.com.au W samsgroup.com.au P 02 9290 2199

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