For the first installment of our new series, “Through the Loupe”, that will deliver insightful analysis from a broad selection of diamond industry insiders, The Diamond Loupe sat down with Peter Robinson to talk about Gem Diamonds - miner of some of the largest and highest quality diamonds in the world - and its Baobab manufacturing facility in Antwerp, the current state of diamond miners, investment diamonds, consumer demand and the art of polishing large, high-value diamonds.
On Baobab and Antwerp
“The skills level in Antwerp is really what sets it apart.”
Most manufacturing facilities around the world work with smaller diamonds. Baobab specializes in high-value, high-quality diamonds and uses technology to achieve the best results possible from the rough. It is not a mass production facility. It is a high-tech, high-quality polishing facility. We selected Antwerp for two reasons: firstly, our tender facility is here; secondly, because of the skills available.
You work differently when manufacturing an expensive stone because it is not about volume; it is about value. Every point you keep on a really expensive stone is a lot of money. The value difference of a single weight category can be 45%, so we work extremely carefully and get the most value out of every rough stone. The skills level in Antwerp is really what sets it apart. Also, there are highly intelligent people here that have the ability to go beyond just normal manufacturing, and that care about what they are doing. That is really important to us.
On miners manufacturing their own rough diamonds
“When a stone goes for 25-30% below value on tender, it makes no sense to let that value go when you could realize it yourself.”
Gem Diamonds has been a pioneer in creating the market for large diamonds. Our mindset changed when we saw the value that could be added by manufacturing selected stones that didn’t hit their prices on tender, but had reasonable upside. We started polishing our own goods when the prices achieved on tender did not match the value of the stone. Everyone is entitled to a reasonable profit. You want those buying through tender to make money so that they come back again. But when a stone goes for 25-30% below value, it makes no sense to let that value go when you could realize it yourself.
On miners and the challenges of 2015
“The price of our rough is absolutely transparent. It is absolutely open. It is the fairest way to do it.”
The root of the problem is liquidity. The global economy and major markets have slowed, but people still need to buy food, pay their mortgages; they need to live before they have the disposable income to buy luxury items like diamonds. The super-wealthy still buy and the higher-end category of investment diamonds still sell. But the smaller goods, the mom & pop stores, are becoming a problem.
Liquidity is an issue on the other end as well. Not all miners can be blamed for pushing prices on the rough. Obviously, every business is profit-driven, and Gem tries to squeeze out as much as we can. But we sell our stones on tender – so it is a ‘willing buyer, willing seller’ situation. If somebody is prepared to pay the price, we sell it. So we are not guilty of pushing prices at all. It’s a competition. It’s an open market. Gem Diamonds sells every stone on tender. The price of our rough is absolutely transparent. It is absolutely open. It is the fairest way to do it. We publish the prices afterward. So no, we are not one of those that are responsible for creating the squeeze in the middle.
On the investment market and investment diamonds
"If you look at the price per carat for Letšeng rough, it is consistently higher than any other mine in the world. So when it comes to investment-quality diamonds, our situation is fairly exceptional.”
Commodity share prices are down across the board, but I would absolutely put my money down on a Gem recovery. Ours is one of the most unique resources on this planet. Diamond miners like Lucara have started finding some really big stones, but the rough diamonds coming out of our Letseng Mine in Lesotho have a provenance that everybody understands, and it’s predictable.
When we recover a type IIa diamond, your D-color material, it’s usually clean. People are prepared to pay top dollar for that. And the resource will continue to produce big diamonds, which is unique. If you look at the price per carat for Letšeng rough, it is consistently higher than any other mine in the world. So when it comes to investment-quality diamonds, our situation is fairly exceptional. In the long-term, this provides us some immunity from market fluctuations.
The tremendous value of investment-quality stones is due to their rarity. It is like an artwork. The more singular it is, the higher value it has. We saw the blue diamond that sold for 48 million dollars. It is all about rarity. Go find another one.
People are now realizing the investment potential of diamonds. Some are being sold for really high prices on auction, and that information is publicized, so people start recognizing the value in diamonds. An investment-quality diamond is also a major hedge against currency fluctuations; they are traded in dollars everywhere in the world, and are the most portable, high-value asset anywhere. Diamonds appreciate in value because there are only a certain number of these stones available. That is why they fetch high prices.
On Millennial consumers
“People usually get engaged at the point in their lives when they have the least finance available. Later on in life they want to upgrade, and I think they will upgrade.”
We learn many things in life by example. Our parents bought diamond rings when they got engaged. Many societies still buy diamonds as gifts. If the Millennial market dries up, it will not be because we are unable to attract them, but because of necessity. People have to pay for their living costs, which are increasing all the time. They have less disposable income. As they mature and start becoming financially secure, I think you will find them going back to what they have learned from their parents. People usually get engaged at the point in their lives when they have the least finance available. Later on in life they want to upgrade, and I think they will upgrade.
On polishing and future polishers
“We have highly skilled, very imaginative people that are able to use the technology and get results that are better than anywhere else in the world. Most of the world’s big diamonds still get manufactured in Antwerp.”
It takes years of experience and exposure to the intricacies of natural diamonds to become a master polisher. You must have a desire to learn about them, to understand what you are looking at, and not just accept what you see. If you don’t understand what you are looking at, you don’t know how to deal with it. There is always a better way. It’s a quest for knowledge. It helps when it is a passion.
All our engineers have been in the trade for over seven years, and are really good with the big stones, using the technology we have to get the most out of every single stone. It is complex technology, and not every factory has it. Nor does every factory have the ability to manufacture these big stones with the same level of care and safety that we have. Our polishers care about what they do and want to be the best at what they’re doing. They’re competitive. They want to learn and improve. When you have people that want to excel, it makes a huge difference, because you can achieve a hell of lot like that.
Most of our polishers have been in the trade for 30 or 40 years. They learned their skill from their fathers. It used to be a family thing. These are highly skilled people that are able to complete a rough diamond from start to finish. Obviously we study the stones. The analysis of a rough diamond is where your money is made or lost. That is the most important part – having the special understanding to know where the polished diamond is going to fit within that rough stone to get its maximum possible value. We use very sophisticated technology in order to do this, and we employ highly skilled and highly intelligent people.
One of the sad things about this industry is that the skills are not getting passed on. We have to bring in young people to be able to transfer these skills, because the vessels that these skills are held in are getting older and older. It is going to become a crisis, especially with the big stones. It is not an issue for the small stones. You have operators that just do one thing over and over, repetitive work, and that’s all they do.
When it comes to high-value stones, if you don’t have somebody that is highly skilled and that understands how to manipulate a diamond, you’re going to lose money because they are not going to be able to get the optimal value out of that stone. So where Antwerp has a big advantage, and needs to keep that advantage, is with the high-value stones. We have those skills currently.
You will not find too many places in the world that manufacture and use the technology that a couple of companies are using here in Antwerp to manufacture their big stones. If you don’t have highly skilled, very imaginative people that care about what they are doing, then the technology will just be a tool. But we have that here. We have people that are able to use the technology and get results that are better than anywhere else in the world. Most of the world’s big diamonds still get manufactured in Antwerp.
Peter Robinson is a 36-year veteran of the diamond industry. He has managed diamond-grading laboratories and factories from South Africa to Antwerp, and knows the trade inside & out. Diamonds are his passion. He is currently Diamond Manufacturing Manager at Gem Diamonds Technical Services, and manages Gem’s specialty manufacturing facility in Antwerp, Baobab Technologies. Baobab is one of the world’s leading technologically advanced diamond polishing facilities. It specializes in rough analysis, valuing and manufacturing special diamonds.
Source: The Diamond Loupe