An announcement in February that the International Institute of Diamond Grading and Research (IIDGR) has launched its generic diamond grading program surprised very few, but was noteworthy. Through it, the De Beers Group entered what arguably is the most contentious space in the diamond distribution chain where concerns have grown over grading consistency and standards, or lack thereof, in the past few years.
IIDGR’s foray into diamond grading is an extension of its activity for the Forevermark brand, while the business unit is also responsible for developing De Beers synthetic detection machines – DiamondSure, DiamondView, DiamondPlus, and Automatic Melee Screening (AMS) machines.
Jonathan Kendall (pictured), president of IIDGR, expects to draw from those other activities as the new grading business develops, while keeping focus on what he claims is his core mandate: to maintain confidence in diamonds.
Rapaport News: What is the background of the IIDGR?
Jonathan Kendall: IIDGR effectively became a fully-fledged business in 2011 when we started in-house marketing of our synthetic detection equipment. Until then, the equipment was sold by a third party, but we felt it lacked the required focus to get the equipment into the broader market that would ultimately encourage confidence in diamonds.
What is the relationship between IIDGR and Forevermark?
JK: The Forevermark brand and IIDGR work together but offer different products and services. IIDGR does all the selection and diamond activity for Forevermark, making sure the appropriate diamonds are chosen that fit the brands’ parameters.
We’ve been grading diamonds for Forevermark since 2004 when the brand was being tested in China and Hong Kong. We also started grading and inscribing diamonds for De Beers Diamond Jewelers around 2010. While we were supporting De Beers branded programs, people started to ask us for generic grading of diamonds. It seemed a logical extension to what we do as we already had in place the systems, the people and the exclusive equipment.
What added value does IIDGR bring to the grading environment?
JK: We offer a significant improvement in accuracy and consistency because of the technology we deploy.
A lot has been said recently about a lack of consistency in some laboratories which has made cross-border purchases of a graded diamond a difficult experience. Our technology ensures consistency in grading across our labs in the UK, Antwerp and Surat.
Explain your use of technology in the grading process?
JK: We currently deploy four to five steps to determine the color and clarity of a diamond, which are the most difficult inputs in a grading decision. Technology is used to make a call on color and clarity in the first stage and our graders then work to confirm that decision.
We’ve analyzed and compared our equipment’s grading with that of tens of thousands of results from the Gemological Institute of America (GIA). We’re getting so accurate with color that soon we’ll be using the color grading machine plus a final grader to validate the decision, cutting the process to just two steps.
It will take a few years for us to get to that same position on clarity but, in the meantime, we’re using technology to assist graders to the extent we can. The technology on clarity provides a map, or a grader aider, which gives a picture of all the inclusions in a diamond. The grader can use that to analyze a stone rather than having to only use a microscope and their eyes.
The equipment also has the capability to highlight concerns. So, if the color or clarity machine detects an anomaly, it will alert the grader for a closer review.
Is the equipment available for sale to other labs?
JK: We made a conscious decision not to sell our equipment because we’re concerned that it can be misused, undermining the trust customers place on it. This equipment has to be managed, operated and calibrated every day.
What grading standard and language does the IIDGR lab use?
JK: We use the same grading standard as the GIA. We’ve analyzed their results and used those to develop our own master set. We don’t have a strong emphasis on the master set because all the algorithms in our equipment are in a sense their own master set.
We were absolutely sure that using GIA standards was the right thing to do. We’re determined to avoid the issues that came up in the past year or two with labs that were using the GIA language but not grading to its standards. It’s critical. You can’t use a language and then provide something that’s lighter on standards than expected.
How has the launch been?
JK: It’s very early days. We’re promoting the business at trade shows and so far the response has been very positive. We’re also starting to recruit retailers that want to use our reports, getting them to talk to diamantaires and order goods through them.
IIDGR offers a very tight technological approach to grading in which there is a significant human involvement. Our approach also ensures that a grader cannot trace the goods back to a certain client, which might introduce bias in the grading.
It takes time and we want to make sure that we don’t stretch ourselves. The key thing for us is to deliver what we promise and the service meets the industry’s requirements. We’re not looking for ridiculous growth. We want to build a solid base and continue to develop over a number of years.
What markets are you targeting?
JK: Our primary focus is on the Far East, particularly China, Japan and Taiwan. Then we’re targeting Europe, mainly the UK, Italy, and Switzerland and we’re beginning to look at Canada as well. We can do business in the U.S. but we’re not pushing it as we’re currently focused on the rest of the world.
Can a member of the public submit a diamond for grading?
JK: We haven’t got plans for that at the moment. Right now we’re focused on the trade.
How does a member of the trade in other locations such as Israel, Mumbai, or Southern Africa submit a stone for grading?
JK: Diamonds can be sent direct. Clients can sign into our website where we have a quick response to queries. We’re also setting up windows around the world and we’re in final discussions with a number of potential partners who are very keen to work with us.
What level of activity are you expecting this year?
JK: We can handle around half a million diamonds this year. We can increase that capacity significantly with greater investment in technology. In terms of physical space, we’ve got the capacity to double that very rapidly.
We don’t expect huge volumes of goods overnight. We started with Forevermark in exactly the same way. It takes time to build awareness and support from members of the trade, and then consumers, who believe in what you’re doing.
What is your turnaround time?
JK: It’s currently around a week. Our aim at full capacity is not to go over 15 days.
Regarding your detection machines, are you seeing an increase in undisclosed mixing of synthetics?
JK: We haven’t found quantities of undisclosed synthetics mixed with natural diamonds lately but there are issues. We do find stimulants in melee goods and there have also been quite significant reports in countries such as China where there have been high-pressure, high-temperature (HPHT) enhanced diamonds mixed in with natural diamonds. There’s no doubt the issue exists and testing needs to become part of the normal business practice in the industry.
Our machines pick up everything, including synthetics and enhancements, which is important because there are machines being marketed that claim to do everything but they actually don’t. People sometimes complain about the price of our machines but it’s like everything else in life – you get what you pay for.
What is your view of the melee market?
JK: I think the future of melee will be very interesting and we’ll see in the next year or two more retailers, jewelry manufacturers and diamond dealers buying sealed packages of melee so they can be confident of their purchases. There has to be a multi-dimensional approach to the risk of contamination of undisclosed synthetics with melee goods.
Our view is people will need their own equipment because often they have to buy melee to fill an order. It would be best to have their own equipment to test the melee goods they’re buying.
Are you working on an upgrade to your detection machines?
JK: The upgrades we’re working on mainly focus on speed because we already have the requisite accuracy. We’re also looking to develop a service to test jewelry. It’s a big challenge to develop the equipment for jewelry testing but we think it will be ready next year.
How was IIDGR’s revenue growth in 2015?
JK: Our growth is very good in percentage terms but we’re obviously a very small business in relation to the De Beers mining operation.
We see our role as not being about revenue, but making sure the industry is doing well in terms of maintaining the utmost confidence in diamonds. Everything we do comes right back to confidence, which ultimately underpins our ability to sell rough. That idea is central to our entire business model whether it relates to our detection equipment or grading services.