This tutorial is about the true value and cost of diamond. The aim of this tutorial is to teach you more about the product that you are spending so much time learning about rather than simply teaching you how to select the perfect one. I also think it will be a nice break away from the technical topics. Let me take you through a journey of how a diamond gets to be on your fiancée’s ring. On the way, you will discover why diamond is so special, why it can be so expensive and why diamonds can cost differently depending on where they are from.
Diamond in Nature
Did you know the time it takes diamond to form in nature can be up to 3 billion years? Not only that, it takes high temperatures and extreme pressures (something like 1,300 degrees Celsius and 60,000 times atmospheric pressure). I think it’s safe to say that we can think of if it as if the earth is not making any more diamond naturally. Diamonds can also arrive from meteors, what are known as ‘impact diamonds’, these are generally of industrial grade quality. Remember last year (September 2012) when Russia announced they had trillions of carats worth of diamonds within its Popigai crater? Well I had just purchased my diamond ring and I was glad to learn that the find does not affect the price of gem quality diamonds. In fact, the retail price of gem quality diamond does not even correlate well with diamond rough prices. Great, so we conclude diamonds are rare in nature, but you already knew that.
rough
(The above image is a wiki commons image, a freely licensed media file repository)
Diamonds form at a depth of about 150km in the earth, basically nowhere humans can survive let alone mine so luckily they are brought to more accessible diamond mines by volcanic activity. Mining diamonds, like mining any gemstone, is a combination of hard work and luck. A rather sobering thought is that diamonds can be mined by children as young as seven years old; sometimes thousands of children working six to seven days a week. Out of all rough diamonds mined, less than 20% are gem quality, meaning that their clarity is high enough to be made into a gemstone. It is said that D-E color diamonds make up less than 2% of all diamonds mined. On top of this, only a very small percentage of diamond ore actually contains diamond rough. It is estimated that on average 250 tonnes (50 million carats) of ore has to be removed from the earth before a one carat diamond is found. The rarity of diamond in nature cannot be disputed, but its economic rarity is highly disputed, as it does seem like there is a huge surplus supply (just search on Blue Nile). But the reserves that the De Beers Company had are now all but expended and there hasn’t really been a major diamond find in years that have produced high quality gem diamonds. The fact is, the demand for the highest quality cut diamonds is increasing probably at a faster rate than the production of these highest cut quality diamonds.
Diamond Around the World
Botswana, Russia, Canada, Angola, Congo, and South Africa are the largest gem quality diamond exporters in the world and together make up 94% of the world’s entire output. Most of the diamond-exporting countries are relatively poor. The GDP of these countries are: Botswana ($17.6B), Angola ($118.7B), Congo ($17.7B), and South Africa ($384.3B). The United States in comparison is $15.7T and Google is worth around $280B. Many of these countries are also filled with conflict and diamonds have been used to finance many wars in the past and present. These diamonds are known as conflict diamonds, and the topic has inspired Hollywood movie “Blood Diamond (2006)”. The movie promoted widespread knowledge about conflict diamonds and sparked increased demand for ‘conflict-free’ diamonds sourced from countries like Canada. This is why Canadian diamonds can sell for a high premium, sometimes up to 20%. A diamond of Canadian origin will be inscribed with a maple leaf symbol on a GIA certificate. If you purchase a Canadian diamond, remember to ask your vendor for proof of origin documents. All of the above mentioned countries are participants of the Kimberley Process. I will quote from the Kimberley Process website:
“Under the terms of the KPCS, participating states must meet ‘minimum requirements’ and must put in place national legislation and institutions; export, import and internal controls; and also commit to transparency and the exchange of statistical data. Participants can only legally trade with other participants who have also met the minimum requirements of the scheme, and international shipments of rough diamonds must be accompanied by a KP certificate guaranteeing that they are conflict-free.”
“So far, South Africa, Canada, Russia, Botswana, the European Union, India, Namibia, Israel, the Democratic Republic of the Congo and the United States of America have chaired the KP”
India, Israel, and Belgium are the world’s major cutting centres. Over the years, there has been a shift in cutting volume from Europe to Asia. The reason the major source of cutting has shifted from Belgium, to Israel, and now to India and China is because of the increasing costs of cutting. I think it is a fair speculation that the cheaper a diamond is cut, the lower the quality we can expect. If I were buying blind, I would probably prefer a diamond cut in Belgium or Israel rather than India or China. However, unless you are purchasing from a trusted vendor or wholesaler, it is unlikely that you will know exactly where your diamond was cut.
The largest demand for the final product comes from the United States, Hong Kong, the UAE, and Singapore. Now being from Hong Kong, I can safely say that we are listed up there purely because the demand is coming from China but it is Hong Kong diamond companies that are buying all the diamonds. China is also becoming a major diamond-cutting centre in its own right.
Why Diamond is Special
So what is so special about diamond? Diamond appeals to a lot of people because of its various top-performing characteristics. Most people know it is the hardest material in the world. But it also has the highest thermo conductivity (about 2.5x that of copper) with a higher melting temperature than copper, and great electric resistivity, making it uniquely useful in some specialist electronic applications like semi-conductors used in transistors.
We of course, buy gem quality diamond for its optical properties. Pure diamond is transparent and colorless. Its lustre is described as ‘adamantine’, which literally means ‘diamond-like’ and is the highest description reserved for those materials with a refractive index of 1.9 or more. Diamond’s refractive index is 2.54. In comparison, cubic zirconia has a refractive index around 2.2 and sapphire has a refractive index around 1.7. Diamond also does not have a double refraction because it is an isotropic material. A light ray entering an anisotropic material like cubic zirconia will make the light ray split into two rays. The existence of double refraction is a dead give-away for many diamond simulants and we will discuss this more in a later tutorial.
So whether you are appalled by diamond’s history of conflict or how it is mined, or drawn to it by its rarity; whether you’re fascinated with its uniqueness as a material, or mesmerised by its beauty; I hope that having read this tutorial that you can better understand and appreciate the value and true cost of your diamond.
