Rapaport Magazine
Colored Diamonds

How Rare is Rare?

Colored diamonds are among the rarest and costliest of gems, but which are the rarest and why?

By Ettagale Blauer
RAPAPORT... When Larry West of New York– based L.J. West Diamonds Inc., one of the most prominent sellers of colored diamonds in the business, counts up his inventory of 5-carat-plus intense and vivid blue diamonds, he runs out of diamonds before he runs out of fingers. And Rahul Kadakia, head of jewelry for Christie’s Americas, says, “How much scarcer is the blue? If you ask me for a 10-carat D flawless, I can find you, after phoning around for one day, ten or 15 quite easily. If you want a 5-carat vivid blue, if in a week I find two or three, it’s good.”

As for the price differential, West says a comparable blue could easily be ten times the price of a D flawless diamond.

Blues could never be said to have been plentiful, but with the closing of the Premier Mine of South Africa — the source of nearly all blues — the supply of blues simply stopped. Dealers agree that the last influx of blues to the market was from 2000 through about 2002, when sight-holders last received deliveries of stones from that mine. Dealers differ as to whether De Beers, which owned the mine at that time, ran out of blues or is stockpiling them, to be released onto the market at a future date.
The scarcity of blues has pushed dealers to the secondary market, the auctions, where privates find that their rare old stones often achieve tremendous prices and only those bidders with the deepest pockets are successful. In the 2007 fall auctions, the scarcity of blue diamonds was a boon to the sellers. When dealers are eager to spend top dollar, it’s proof positive that scarcity rules the day. At Sotheby’s Hong Kong last October, a 6.04-carat, internally flawless fancy vivid blue diamond fetched $7,981,835, setting a new per-carat record of $1,321,590. You could hear the record crashing all around the world, and the price was paid by a dealer, Aliza Moussaieff for Moussaieff Jewellers. Even at that price, there was a fierce bidding battle, with at least seven telephone bidders hoping to buy this one gem.

The next month, Laurence Graff, Graff Diamonds, didn’t hesitate when a fancy vivid blue weighing 4.16 carats was offered at the November 2007 Sotheby’s Geneva auction. He bid well over the presale high estimate, buying the stone for $4,727,986. On a per-carat basis, the price was nearly as high, working out to $1,136,535 per carat.

Whether the blues are coming out of granny’s jewelry box or being released by the source, when it thinks the market is ready, bidders will have a chance at another extremely rare blue this spring at Christie’s May 2008 sale in Geneva. The auction house is offering what Kadakia calls an “exceptional” intense blue stone, weighing 13.39 carats, in a modified rectangular shape. The presale estimate: $6 million to $8 million.

The supply of pinks is considerably larger than that of blues but here, too, there is a diminishing amount of goods available. The main source of deep pinks over the past 20 years or so has been the Argyle mine of Australia. This mine virtually created this market by offering a small, but dependable, supply of deep pink and purplish pink stones, sold by tender. The rich colors of these stones have made them highly desirable, while at the same time, the small supply points up their rarity. Alan Bronstein of Aurora Gems, New York, has been at the forefront of acquiring, selling and publicizing the entire rainbow of colored diamonds. “Pink diamonds exist, but they are not plentiful,” he says. “In a carat or less, you should be able to find more than one example for comparison. Larger than 1 carat, it’s difficult.” The pinks coming out of Argyle were always small, and he says, “Argyle is really running out of pinks. When a mine is first beginning production, it’s easy to find diamonds close to the surface.” Even though Argyle has now made the decision to go underground, which is a much more expensive way to mine,

Bronstein believes they have “ten years left in the mine.” It’s all too easy to figure out just what that means in terms of supply. At each of Argyle’s tenders, the company releases about 65 of its deep pinks. Most of these are small, but Bronstein says, “Each one is a collectible gem.”

West, who says he is “probably the biggest buyer of Argyle pinks,” puts the output of pinks in perspective: “In the beginning, they had alluvial rough. There were more, larger and nicer stones. Those were gone by the early 1990s.” He calls the overall supply of pinks, “helter-skelter. There are deeper pinks from Brazil, light pinks from South Africa, purple pinks from Siberia. Indonesia has some pinks. These are scattered stones; they’re very rare, with no real direct supply. Here’s how rare they are: Argyle sells 65 stones in a tender with another 50 to 100 ‘good stones’ from 50 points and up. That is it for the whole world. It is a very rare commodity.” Even the supply from Brazil has been disrupted by management issues over the past year and a half, he says, with just a “dribble” of stones coming out. That’s hardly a dependable source, and so the price goes up.

Part of the price increase comes from a shift in the way stones make their way from the mine to the ultimate consumer. Dealers, including West, point out that the market has become more direct, with miners selling rough at the mine to buyers who want to polish the stone quickly and get it right to the retail market.

New superlatives have yet to be invented to describe the rarity of green and red diamonds. The greens present a unique problem: They get their color through natural radiation from the earth. Treated green diamonds get their color through radiation introduced in the laboratory. Sorting out which are real and which are not gives the labs perhaps their toughest challenge to date.
John Block, formerly head of the jewelry department at Sotheby’s and now co-owner of Block-Guest, says, “It can take a very long time to get a ‘natural’ certification for a green diamond from the GIA [Gemological Institute of America].”

Although the greens can be called the “rarest of the rare,” they don’t necessarily bring a higher price per carat and that has to do with market acceptance. In order to “make a market” and a market price, there has to be a certain quantity of stones. With greens, that market has yet to be made.

According to Kadakia, a “straight green” stone — one without any modifying colors — will be offered at Christie’s May 28 Hong Kong auction. The 10-carat fancy green Asscher cut has a presale estimate of just $2 million.

Blue-green stones are just “as rare,” notes West. “There are beautiful turquoise colors, and they bring the same price as a blue. Occasionally, stones that are rarer should sell for more, but they don’t get the price.” In part, that’s because right now, consumers want pure, unmodified colors, perhaps because they’re more easily described and compared.

As for the reds, there is actually nothing in the diamond world that can fairly be described as “red.” According to West, “They are never red, not the same range. The color is in the graining, in the growth lines; it’s not the same color as Burma red ruby.”

Whatever you call them, however, when these stones come to auction, they bring people to a stop, just as if they were traffic-light red. From the first stunner, the 0.95-carat purplish red known as the Hancock Red Diamond that was sold at Christie’s New York in April 1987, fetching $880,000 or $926,316 per carat, to the sale at Christie’s Geneva this past November of a 2.26-carat purplish red diamond for $2,667,567, even modified reds make headlines. Once again, dealer Laurence Graff was the buyer, setting a world record for a red diamond at $1,180,340 per carat.

The bottom line is that it’s probably a smart idea to follow Bronstein’s advice: “It’s never good to contemplate colors in terms of availability. Every time, it’s like looking for a needle in a haystack. If you can afford it and you want it, now is the time to buy it. You can’t look back and say you should have held it because now it’s worth more.”

Article from the Rapaport Magazine - April 2008. To subscribe click here.

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