The traditional system of selling diamonds through tenders and auctions is opaque, inefficient, and needs an overhaul if producers are to survive the current price slump, according to a leading gem trader.
Oded Mansori, co-founder and managing partner of Belgian gem trader HB Antwerp, said on Thursday that producers are bearing the brunt of inefficiencies in the diamond industry as it struggles through one of its deepest crises in history.
Global demand has weakened due to economic uncertainty and the growing popularity of lab-grown stones, hitting producer countries such as Botswana with declining revenues.
Mining companies including Burgundy and Lesotho’s largest diamond mine, Letseng, have also been forced to cut jobs.
“For years, miners relied on tenders and auctions, systems that look efficient on paper but in practice resemble a casino,” Mansori said in a statement.
“Rough stones are pushed into opaque markets where value is anyone’s guess. When global demand softens, as it has in cycles over the last decade, producers are left exposed. Workers pay the price, while shareholders watch assets decline.”
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Rough diamonds are generally sold through competitive bidding, with buyers submitting confidential offers on individual stones or parcels. Mansori argues that producers would fare better if revenues were tied to the eventual polished value of stones rather than “gambling on rough sales in opaque auctions”, Reuters reported.
HB Antwerp has implemented this approach through its partnership with Lucara Diamond Corp (LUC.TO), purchasing stones of 10.8 carats and above from the company’s Karowe Mine in central Botswana at prices linked to their estimated polished value. Under this model, producers can earn up to 40% more revenue, Mansori said.
HB Antwerp was responsible for 72% of Lucara’s $74 million in diamond revenue in the first half of the year, an increase from 65% in the same period a year earlier.
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Image Credit: Minning Weekly
