It was on 18 November, 2015 when Lucara Diamond announced that it had recovered a large gem-quality diamond at its Karowe mine, in Botswana.
The 1,109-carat stone was first said to be an 1,111 carat Type IIa diamond and the world’s second largest diamond found since the discovery of the 3,106-carat Cullinan diamond in 1905.
“The significance of the recovery of a gem quality stone larger than 1,000 carats, the largest for more than a century and the continued recovery of high quality stones from the south lobe, cannot be overstated,” Lucara chief executive William Lamb said.
It also announced the recovery of two more large diamonds, including an 813-carat stone, again from the Karowe mine.
This was a day after the company had announced the recovery of the 1,109-carat stone, which was later named “Lesedi La Rona” or “Our Light”.
Seven months later, Lucara said that it had partnered with Nemesis International DMCC and sold the 813-carat diamond – named “The Constellation” – for $63,1 million.
"We are very pleased with the result from the sale of this magnificent 813 carat diamond as well as the opportunity to further participate in profits earned when the polished product is sold,” said Lamb.
“The sale of the 813-carat diamond is the highest price ever achieved for a rough diamond, breaking all records.”
Next to go under the hammer was Lesedi La Rona.
This time Lucara engaged Sotheby's to conduct a public auction on June 29, 2016 in London, which was unique as diamonds were largely sold through a sealed-tender system.
Buoyant
I recall talking to the company’s former chief operating officer Paul Day in Gaborone in June 2016 where he sounded confident that the diamond would shatter records for diamond sales.
He said Lesedi La Rona had generated interest not only from traditional diamond buyers, but also from individual collectors of high net worth artifacts.
“That was the reason [we decided] to take it to an open auction rather than having a closed tender, which typically only attracts [traditional diamond buyers],” said Day on 13 June 2016.
The stone had at the time been taken to the Far East, Dubai in the Middle East, New York and Antwerp ahead of the London auction.
Day said then that some diamond brokers had sarcastically said that with a 1000 carat plus stone, the best thing they could do was to hit it with a hammer and smash it into smaller stones to easily sell it.
He thought otherwise.
“We do not believe in that… [as] we have seen a massive interest in the sale of our stones as they become progressively bigger,” said Day.
“We feel that we are getting to understand this market and we see continued interest in high value stones. As soon as we recovered that large diamond, Lesedi, we had expressions of interests from various individuals and bodies interested in purchasing the stone for a higher value.”
This was the level of confidence the company officials had at the time.
No one had been in a similar position for the past century and they had every reason to believe in what they were doing.
But a reality check was in the offing.
The public auction for the 1,109-carat diamond took place as planned in London, but failed to meet the reserve price.
The diamond company released a very brief statement, which lacked detail of what had transpired in London.
“Lucara Diamond reports that the Company will be retaining the exceptional 1,109 carat Type IIa Lesedi La Rona diamond as bidding did not meet the reserve price at the auction held this evening at Sotheby's in London,” was all they could say on 29 June, 2016.
The stone was said to have been valued at $70 million, with others claiming that Sotheby's had anticipated bidding to reach $150 million, but it stalled at $61 million.
With the company’s 813 carat stone having achieved a sale value of $63 million in May at a closed auction, this outcome was disappointing to say the least.
It’s something that Lucara officials didn’t expect given that they had budgeted for a windfall.
Undesirable
Matthew Hart wrote in a very revealing article in the Vanity Fair on August 5, 2016 that he called Laurence Graff – the man who ironically bought the stone recently for $53 million – on the morning of the London auction and he had no kind words for Lucara from France where he was.
“It’s not nice,” Graff was quoted as saying. “We don’t like it, what they’re doing. It’s just not how it’s done. We don’t want to have to expose ourselves in public [at an auction]. To contend in the open arena, we find it undesirable.”
Hart went on to comment: “Let me be plain about why I found these remarks so chilling, and why, as I heard them, I feared for Lamb. The high-end diamond game is played on a very small field by only a few players. Not many diamantaires have the financial muscle or the nerve to cut big diamonds.”
While Lucara officials were anticipating a bumper harvest, some diamantaires were busy “trash-talking” Lesedi even before they had seen it.
“I had heard the talk myself—the street was awash in poisonous gossip,” wrote Hart.
“I had always thought that the diamond itself would silence such talk, issuing into the world armed in its own magnificence. But in speaking with Graff, I now understood the enormity of the peril faced by Lamb and his jewel.
“For it did not matter what most people thought. It only mattered what these people thought, what Graff thought, and the few other diamantaires able to buy such a diamond. Even a collector not planning to cut it—some oligarch or sheikh—would want to know first how such men judged it: what they saw inside the stone.
“Lamb did not have these people at his mercy; at the auction, they had him at theirs.”
However, Hart, who had an emic view of the auction, said that Lamb whose eyes were “little bloodshot” after the June 29 auction, dismissed the trash talk with “contempt”.
Lamb even said at the time that the failure of the diamond to sell in London was not influenced by the economic uncertainty caused by Britain’s decision to leave the EU or the state of the global economy.
"What really frustrated me was that minutes after the auction ended I was surrounded by three or four people saying, ‘We really need to talk’. They should have rather put their hand up in the auction, but it does show that there is a lot of interest in buying Lesedi," he said.
"If you look at the bidding, you could see people were placing a value on the polished outcome of Lesedi, which we didn’t consider to be a viable option for a diamond of Lesedi’s stature."
Lamb perhaps didn’t understand that the traditional diamond buyers were against the idea of a public auction, hence some approached him after the auction for a “talk”.
He should have eavesdropped Hart’s call with Graff when he said, “it’s just not how it’s done” and “we don’t want to have to expose ourselves in public [at an auction]”.
Oh Graff, lots of bull
So, given the fact that the man who ultimately bought the stone, albeit at a much lower price than what Lucara got from its 813ct stone, complained about the public auction, can we conclude that the diamond producer could have easily achieved the reserve price had it not experimented with a public auction?
I am convinced the outcome could have been different had they gone for the usual way of selling the stones, notwithstanding the trash-talking of Lesedi and the fact that diamond dealers are largely skeptical of big stones, as Graff indicated to Hart.
“When we polish these big stones, we never know what we are going to get,” he was quoted as saying.
“The larger the rough, the greater the chance that there’s a defect. It can ruin your hopes by as much as 40 percent…We are not even a hundred percent sure of the color.”
Lamb thought they were disingenuous about the colour.
“They knew the color was D,” he was quoted as saying. “That was just total bullshit. If it wasn’t a D, how did it get to $61 million? With the buyer’s premium, that means someone in the room was ready to pay $68.3 million. Who’s paying that if he’s not sure it’s a D?”
The company then decided not to place the stone on auction again after the London setback.
“We have not yet determined the best mechanism for the sales event. It will not be an auction,” Lamb was quoted as saying Rapaport News last year.
“The most likely format will be a single bid offer, which may or may not be sealed…We have had a significant number of people continue to show interest in the stone.”
Although the company was considering establishing a partnership to sell the stone, it announced on 25 September that it had sold the 1,109 carat Lesedi La Rona diamond for $53 million or $47,777 per carat to Graff Diamonds. Yes, to Graff!
The sell came days after reports that Botswana was amending its law to give the government the first option to buy diamonds that are unusually large or have other unusual features found in its mines, such as the 1,109-carat diamond.
Graff wants to cut the stone, unlike Lamb who appeared against that.
"It's only the second stone recovered in the history of humanity over 1,000 carats. Why would you want to polish it?" Lamb was quoted as saying by Reuters earlier this year.
"The stone in the rough form contains untold potential...As soon as you polish it into one solution, everything else is gone."
However, it was not his call to make, as the new owner, Graff, said the stone would tell its story and dictate how it wants to be cut.
“We will take the utmost care to respect its exceptional properties,” he said.
“This is a momentous day in my career, and I am privileged to be given the opportunity to honour the magnificent natural beauty of the Lesedi La Rona."
Lesedi was indeed expected to illuminate a lot of light for Lucara, but the end of its journey with the diamond miner, was somewhat dim.
All those road-shows and public auction, brought nothing, but grief.
Certainly not for Graff!
He was destined to have the stone as Lucara head of sales Steve Lincoln and Hart prophetically showed in their chat last year prior to the London auction.
“I get four calls a day,” said Lincoln.
“From whom?” asked Hart.
“From everybody,” Lincoln retorted.
“From people like Graff?” Hart asked. “I mean, it’s a Graff stone.”
“Yes…,” said Lincoln
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
