DIAMOND INDUSTRY NEWS

Optionetics.com
Breakthrough in Diamond Industry , Jeff Neal
Tuesday October 11, 1:30 pm ET
 
Diamonds might be forever but they don't have to be necessarily dug out and cultivated anymore, they can actually be manufactured. In fact, a small start-up company called Apollo Diamonds is doing just that on a regular basis. These man made diamonds are virtually indistinguishable from the traditional kind formed by a billion years of intense pressure. The technology used to produce these diamonds promises to take us to another technological level with far reaching applications.
The diamonds are actually grown inside stainless steel-and-glass machines. Apollo is able to grow 2-carat diamonds right now and expects to be able to turn out 10-carat diamonds by the end of 2005. These diamonds are anticipated to begin entering the jewelry marketplace early in 2006. The prices are expected to be one-third of that of a comparable-mine! d diamond.
The implications of this new technology are widespread. Many believe this new breakthrough will change business, products and even regular daily life as much as the arrival of the steel era in the 1850s or the advent of the transistor in the 1940s. Diamonds are a unique material that is not just used in jewelry but they can also be used in computers that will increase the speed of current computers almost ten-fold.
In fact, there are a variety of applications for manufactured diamonds, which include magnifying the power of lasers, miniaturizing cellphones, increase the capacity if iPods, impervious coatings for cars even provide frictionless medical replacement joints. The applications are endless and have many scientists, technology developers and business leaders very excited. In the past, diamonds could not practically be used for various applications because of their huge expense. With manufactured diamonds that cost is dramatically reduced.
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The actual diamond development technology was discovered by accident. The developer, Bryant Linares, built machines in his garage by superheating carbon. He eventually developed a process that worked making very tiny diamond chips. He then started the company Apollo that led them down the road to industrial diamonds. During research one-day, Linares accidentally left a diamond piece in a beaker of acid over a weekend. The acid ended up removing excess carbon that stayed on the diamond. When he saw that the resulting diamond was colorless and pure that is when he realized that they could produce gemstones.
This ended up being breakthrough news for Apollo since the diamond jewelry market is about $60 billion globally and its growing even faster. Consider this: if Apollo just gets 2 percent of that market, it's worth more than $1.2 billion. This could fund other hi-tech diamond research products that the company ! wants to do. The market for the gems is now while the market for many of the other technological inventions coming from manufactured diamonds might be 5 to 10 years down the road.
The issue for Apollo is that their key personnel do not really know the gemstone business; they are scientists and technologists. They really don't know consumer marketing and as a result, plan to split the organization into a tech business and a gem business. Another issue is De Beers, who vehemently opposes what Apollo is doing. In fact, De Beers started a public relations project and an education initiative for jewelers, designed to portray mined diamonds as real and eternal and manufactured diamonds as being a fake portrayal. The problem for De Beers is that experts agree that it is almost impossible for highly trained experts to tell a manufactured diamond from a mined one.
Even though traditional jewelers might not be welcoming this new technology every other techno! logical company is very excited about its development. For instance, D ARPA, the biggest research entity in the military, has been funneling huge amounts of capital into the manufactured diamonds, or as they call it the chemical vapor deposition [CVD] type projects. Other companies, like Textron (TXT), are using Apollo's technology to develop super lasers that can be used in defense or the satellite industry. Going forward, look for the applications of manufactured diamonds to explode over the next decade providing profitable opportunities for the attentive investor.
Happy Trading.
Jeff Neal
Senior Writer & Profit Strategies Radio Show Market Correspondent


GIA Being Sued Over Alleged Grade for Payoff - Oct-2005

According to reports, the GIA’s diamond lab and the Vivid Collection are being sued after a grader was allegedly paid off to increase a grade. The suit is from Max Pincione, a former Harry Winston employee who says he lost a customer with the Saudi royal family because his stone was not accurately graded, allegedly because of a payoff. We have no idea if the charges are true or not. But the case has opened up many questions on subjects like the appropriateness of GIA fund-raising — which many people share. Even so, we have no question that the overwhelming majority of GIA employees are people of integrity — and there is no lab that has the reputation for integrity in the market that GIA has. Whatever happens with this lawsuit, we have no doubt that the GIA brand will survive. Perhaps the lesson to be learned here is that people who should trust their eyes more than a name on a piece of paper. That is why all labs (including GIA) have a disclaimer that grades are only an opinion. v


De Beers Expects More Price Increases This Year - Oct.2005

De Beers expects more diamond price increase this year if demand keeps increasing, said Gareth Penny, De Beers’ managing director designate, at an analyst seminar. But Varda Shine, soon to be managing director of the Diamond Trading Center, said they will be conservative. "We do not react to the market situation as quickly as other producers may," she said. "We are looking at long-term sustainable prices. "She expected demand overall to increase, although the impact of oil prices may hurt the U.S. market. But she said indicators from Japan and other markets looked favorable. Penny also addressed a question about synthetics. He noted that "of course it’s a challenge, but we have a fantastic team looking at this issue." He said they were studying how other industries dealt with this kind of challenge. "It’s very early days for synthetics," he added "They wouldn’t even register half a percent as far as availability. The question we are focussing on is to make sure the consumer understands that one of the real thing and the other isn’t."De Beers also announced the appointment of its first black executive. David Noko, currently operations manager for De Beers’ Kimberley Mines, will become managing director of De Beers Consolidated Mines. He will replace Jonathan Oppenheimer, son of chairman Nicky. The younger Oppenheimer will join his father in the chairman‘s office. v


How Do You Know When Pink Is Really Natural Pink? - Oct.2005

Christopher Smith, director of Identification Services at GIA, gave a presentation on the identification of treated-color pink-to-red diamonds at a recent conference organized by the Accredited Gemologists Association (AGA).
Smith explained the distinguishing characteristics of HPHT-treated diamonds produced by Lucent Diamonds. The characteristics are:
· Areas around the girdle/pavilion that are not repolished after treatment show evidence of severe etching. Etch features were also evident in surface-etching. How Do You Know When Pink Is Really Natural Pink? cleavages or fractures. Etching creates a coarse or granular appearance on the surface of the stones and along fracture walls.
· Surfaces of the diamond (both external and internal) surrounding included minerals along fractures to partially convert to graphite. The conversion to graphite requires about 30 percent more space, so internally, the resulting pressure it exerts may cause additional stress around included crystals or as extensions of existing fractures.
· Purple and pink-to-red color concentrations often occurred with brown concentrations and regions that were near-colorless. No color concentrations were observed at the culet.
· Most commonly banded strain patterns were observed.
· Chalky fluorescence is exhibited to long-wave UV, usually in combinations of yellow, green, and orange. Under short-wave UV, they showed medium to strong orange fluorescence, commonly with weak yellow zones. Prominent green visible luminescence was typical. Orange-red and yellow visible luminescence was also detected.v


Small Businesses Sues Credit Card Companies - July.2005

A law firm representing a group of small businesses has filed a class-action lawsuit against the nation's biggest banks charging them with illegally fixing prices of credit card transaction fees.
This issue is particularly important to people in the diamond industry because we are now working on margins in the low single digits so these charges are particularly significant.
The lawsuit, filed by the law firm Robins, Kaplan, Miller & Ciresi L.L.P, seeks injunctive relief to stop the alleged anticompetitive practices plus damages. It charges Visa, MasterCard, Bank of America, Citigroup's Citibank, JPMorgan Chase, and other leading banks with setting card interchange fees at "supra-competitive levels," which banks charge merchants every time a customer makes a purchase using a MasterCard or Visa card.
Merchants have little or no ability to negotiate with Visa and MasterCard for lower interchange fees, the attorneys charge. They noted that the issuing banks have the ability to set the interchange fees as high as they want, without any market force to restrain them.
In a statement, Visa denied any wrongdoing. v


Jewelry Consumer Opinion Council: Consumers Don’t Care About Brands - July.2005

According to a new survey conducted by the Jewelry Consumer Opinion Council (JCOC), consumers are "indifferent about diamond brands."
But more than half of the almost 500 men surveyed own diamond jewelry, with over half of them willing to buy it for themselves (up 23 percent over a September 2004 JCOC study).
In addition, women are not waiting for the men in their lives to buy them diamonds. Of the nearly 90 percent of female respondents who say they own diamond jewelry, almost 70 percent have purchased it for themselves in the past (up five percent over the same September 2004 JCOC study), and more than 80 percent are willing to buy more for themselves in the future.
Of those self-purchases, nearly 20 percent would likely buy diamond stud earrings, right-hand rings and other diamond fashion rings for themselves.
Just over 50 percent say they have purchased diamond jewelry for an engagement or wedding, 31 percent for Christmas, and 40 percent for birthdays.
Rings are the most popular category of diamond jewelry — including engagement, wedding, fashion, and right-hand rings. Nearly 58 percent own a pair of diamond stud earrings, and 36 percent own diamond earrings of other styles.
Yellow and white gold are the leading metal choices for diamond jewelry.
Price, style, design, and quality are the most important attributes when shopping for diamond jewelry. Over half of respondents rate a laboratory-grading certificate as somewhat to extremely important. But the overwhelming majority, 84 percent, believe the name of the laboratory is unimportant. More than half see a diamond with a certificate as more valuable than one without.


Diamonds in Alaska and Minnesota? - June.2005

Australian and Canadian companies are hunting for diamonds in Alaska and Minnesota.
There are currently no functioning diamond mines in the United States, but the success companies have had in Canada have made people wonder about whether there might be also diamonds in the U.S.
In Alaska, where there is similar terrain to the Northwest Territories, a gold miner has found garnets and other indicator minerals near Tapper Creek in Anchorage. Later, seventeen microdiamonds turned up. Two Canadian companies have invested $1 million in the drilling program.
The last diamonds discovered in Alaska were three stones discovered in 1980.
In Minneapolis, a team of University of Minnesota geologists and an Australian mining company are gathering soil samples and looking for minerals, and one of the things they are looking for is diamonds.
The scientists have high hopes because Minnesota’s geology is similar to Canada’s. "There’s no question that Minnesota would be on anybody’s list as a place to explore, as having reasonable potential," Brooke Clements, vice president of exploration for Ashton Mining, told the Associated Press.
The results of the search won’t be known for years. They are being analyzed by Australia's WMC Resources. v


What are the Reasons Behind De Beers’ Diamond Prices Increases? - May.2005

Today, prices are very strong, particularly on rounds and princess cuts, and particularly on larger stones, one carat and up. But demand is still not great, meaning that the price increases are still driven by supply (meaning scarce rough), rather than demand. And we are seeing considerable speculation, with many dealers keeping the better goods in their safes.
So why do prices keep going up? A possible reason was suggested recently by Business Day in South Africa. It says De Beers’ new contract with Botswana calls for the company’s profits to be dramatically slashed, by as much as 50%.
This comes from a combination of the decrease in De Beers’ ownership of Debswana, the joint De Beers-Botswana partnership, to 20% from 25%, and plans for a new "DTC Botswana," that will make less goods go through the DTC in London.
All this could be behind the new plans to both increase prices (De Beers already says it plans for several price increases over the next year; see next page) and to hit sightholders with a fee for "value added services." In many ways, this is similar to what banks do; when they can’t make money from high interest rates, they recoup it on fees.
This is a dramatic demonstration of how the balance of power is shifting in the industry. The producers are making new demands of De Beers; De Beers turns around and makes demands of their sightholders. The ability to supply is now paramount. It’s like the old parody of the "golden rule – "He who has the gold, rules." Today in the industry, he who has the diamonds, rules.
De Beers’ new annual report stresses "partnership." But we are seeing that some partners are more equal than others. v


Brides Calling the Shots In Diamond Ring Purchases - April.2005

Contrary to the quaint idea of shocking a bride-to-be with the ring of her dreams, most grooms go the safer route and consult with their future wives before making the purchase.
According to a survey of more than 32,000 couples by theknot.com, 64% of all engagement ring purchases involve direct input from the bride and 79% of all engagement rings purchased involve direct or secretly obtained information from the bride.
Brides not only influence the cut of the stone, the metal for the setting, and the size of the stone, but also where the ring is purchased. Brides conduct more hard research than grooms via the Internet and magazines.
Brides who visit a retailer without their fiance to research their preferences are significantly less satisfied with the retailer experience than grooms.
Brides are apparently partial to princess cuts and, not surprisingly, men shopping alone go for simple solitaire settings, while brides favor settings with more design elements to the ring.
The most popular price segment for an engagement ring is $1,500 to $5,000 v


Online Sales of Diamonds Jump On Valentine’s Day - Mar.2005

Online sales of diamonds for Valentine’s Day more than doubled over last year and posted the highest rise in all categories of gifts, according to Internet company VeriSign. VeriSign Payment Services processes more than 37 percent of North American e-commerce transactions.
The company said there a particularly strong rise in sales of big-ticket goods. At $427, the diamonds category recorded the highest single-item ticket price, with the average price for all categories of gifts being $144—a slight rise of two percent on 2004.
Online jewelry sales jumped 34 percent during the Valentine's Day period of February 1-14.
Although categories across-the-board increased during the Valentine's Day period v


Sierra Leone Makes Progress In Diamond Smuggling - Mar.2005

Sierra Leone, once the poster child for the problems of "conflict diamonds," has made substantial progress in its fight against diamond smuggling, according to a new report in the Financial Times.
The government said that its year-on-year revenues from official diamond exports have doubled to $126 million. Only a few million is smuggled. The country also mined 643,000 carats this year, and has attracted big names like BHP-Billiton to help it get up to two million carats a year it reached in the 1960s.
"Because of the Kimberley Process, it is no longer attractive for people who were doing the smuggling," said the country’s President Ahmad Tejan Kabbah.
There are also programs to "remove the cloud of mystique of diamonds" and have diggers get better prices for their goods. Also, the money from digging is going directly into Sierra Leone development. Diamond mining is now the third largest employer in the country, and a quarter of the revenues from diamond export taxes are reinvested into community development grants. v


GIA Issues Details on Cut Grade - Jan.2005

Says Cut More Than Table and Depth
The GIA slowly is leaking out news about its planned diamond cut grade. The new cut grade is scheluded to start appearing on reports next year. We discussed the issue of whether GIA should issue a cut grade last month (we’re still not convinced.) But let’s take a look at the research that led to the new grade, a lot of which is extremely interesting.
It was almost a century ago (1919) that a Belgian mathematician, Marcel Tolkowsky, wrote his PhD thesis on diamond design and invented what we now call the "Ideal Cut" in the process. The GIA’s effort is an attempt to figure out once and for all what constitutes a well-cut stones. Its findings are based on ten years of research, including 70,000 observations of nearly 2,300 diamonds by more than 300 individuals.
It starts by noting that there are three factors that contribute to a beauty of a diamond:
* brightness, or "brilliance" — the appearance, or extent, of internal and external reflections of "white" light;
* fire—the appearance, or extent, of light dispersed into spectral colors;
*scintillation—the appearance, or extent, of spots of light that flash as the diamond, observer or light source moves (sparkle), and the relative size arrangement, and contrast of bright and dark areas that result from internal and external reflection seen while that diamond is still or moving (pattern.)
No Ideal Cut
One thing that GIA has said all along is that there is nothing to back up the term "Ideal cut," and that other stones can be equally beautiful. In fact, it specifically notes that: "personal and international market preferences should be accounted for. Diamonds with different appearances can be found within each cut grade, so individuals need to look at the diamond itself, not just its grade, to choose the one they like best."
Because of this, the new grade is more complicated than the traditional method of cut grading, where one just judged if a diamond fell within certain parameters. In other words, judging a diamond’s cut is more than just knowing the numbers for tables and depth percentage, they say. "Proportions need to be considered in an interrelated manner," says an article in GIA’s Gems and Gemology. "The combination of proportions is more important than any individual proportion value."
Also important is the design of the stone (as evidenced by its weight ratio and durability) and its craftsmanship (as shown by its polish and symmetry.)
This can be seen in the five different categories of diamonds that are shown in the G and G article. In the fifth (lowest) category, you have stones with tables that range from 54 to 61. Some of them might be rated higher by traditional measures, but their extremely thick girdles and steep pavilion angles place them in the bottom categories of the GIA.
A steep pavilion angle can get a stone placed in the fourth category, and a steep crown angle gets into the third category. Darkness and higher crown height means a stone gets no higher than the second category.
In the first category, which is the best, the tables range all the way from 54% to 61%. It is one of the striking things that getting a top grade means not just having the right of set of numbers and angles, but on not having things that could possibly distract from the stone’s beauty a thick girdle or darkness in the pavilions. v


AGS Also Changes Cut Scale - Jan.2005

While the GIA does all this, the AGS has also been busy, updating their round brilliant grade and announcing plans for cuts for square princess cuts. There are also plans for grades for other fancy shapes.
As with the GIA, the AGS system uses up-to-date technology, including three-dimensional imaging and optical ray tracing. It did not, like GIA, do extensive studies on human observations — which may be lower-tech but we suspect pretty useful.
The last time the AGS announced a major change in their cut grading (which became the current zero to ten scale) was 1990. While their old cut grade system was built around the Ideal Cut as the top grade, the new system will allow a 37% growth in the amount of stones that could possibly get an AGS zero, although the Ideal is still in the top category.
Like the GIA, the AGS is moving away from the old proportion-and-numbers model and now includes three new subcategories that will designate an AGS Triple Zero: light performance, proportion factors and finish.
All in all, while we still have our misgivings about whether cut can really be graded, we do find the idea that these two institutions are moving together on this issue heartening.
AGS’ decision to grade square-cut princesses is more problematic. Many consumers don’t realize that the princess is not a set, fixed shape. Many cutters still experiment with what they consider a "princess." With that variation from the get-go, it’s hard to see how anyone could issue numbers that say that one princess is better than others.
Finally, all this emphasis on cut should not lead consumers to think that cut is the most important thing in grading a diamond. Cut is important. But so are the other three C’s. And consumers ignore them — just as they at one time ignored cut — at their peril.