Dr M'zée Fula Ngenge: Demand for considerable-sized diamonds stronger than ever

Lucara Diamond recently recovered a remarkable 2,492-carat diamond from its wholly-owned Karowe Diamond Mine in Botswana.

It is the largest diamond discovery in more than 100 years and the second largest ever found globally.

The African Diamond Council (ADC) chairperson Dr M'zée Fula Ngenge told Rough & Polished’s Mathew Nyaungwa in an exclusive interview that although overall global diamond prices have been somewhat soft, the demand for considerable-sized diamonds is stronger than ever.

He said natural diamonds with higher carat weights are rather difficult to encounter in the marketplace, which explains the reason for price increases, making them much more valuable than common goods.

Dr Ngenge said supplying larger diamonds possesses the recourse of being cut into several smaller-sized diamonds that are sold for premiums, especially when transformed into more exceptional or flawless diamonds.

The ADC chairperson said sizable polished diamonds fall into the priceless category and tend to do well when presented for auction, given that these extraordinary stones are highly sought-after by collectors and investors, which makes them valuable assets for the mining company that is responsible for discovering or extracting them.

Below are excerpts from the interview.

Lucara Botswana recently unearthed a 2,492-carat diamond from its Karowe mine in Botswana, considered the biggest diamond found since 1905. What does this mean about the mine, which has a history of recovering big stones?

The Karowe mine opened in mid-2012 and in recent years, it has been the generous donor of several significant diamond discoveries, producing large, high-quality Type IIA diamonds that weigh more than 10.8 carats. 

Karowe lies in the Orapa/Letlhakane kimberlite district of north-central Botswana and is the flagship asset of the Lucara Diamond Corporation, a diamond mining company based in Canada. The promising Karowe concession remains the focus of Lucara’s exceptionally administered mining operations and the mine has demonstrated great success in eliminating its debt within the first two years.

A feasibility study for underground (UG) operations to extend the life of the Karowe mine was completed in 2019 and construction of the UG plan commenced in 2020. The Botswana Government has also approved the mine’s future activities and development strategy until 2046.

Founded in 2009, Lucara's journey in Africa began with the aggressive acquisition of the AK6 kimberlite project in 2012, initially discovered by geologists of the De Beers Group in 1969. Since Lucara was mindful of AK6's potential values, the project would eventually evolve into what is known today as the Karowe diamond mine, which is now 100% owned by Lucara. Lucara’s prudent and progressive approach to diamond mining is focused first and foremost on diamond value preservation, with an admirable objective to recover diamonds that are fully intact and without ever putting the diamonds at risk of being damaged during the extraction process.

For quite some time, the African Diamond Council (ADC) has been eager to pinpoint courses of action that would successfully introduce X-Ray Transmission technology, (often referred to as XRT sensor sorting technology) directly into the rough-diamond final recovery, instead of at the bulk concentration stages. The rationale is that this is where the Dense Media Separation (DMS) modules exist to separate diamonds and other minerals from diamond-bearing material, such as kimberlite.

Lucara’s Mega Diamond Recovery (MDR) equipment launches a circuit that utilizes advanced XRT. The application scans objects for a specific atomic signature, rather than for a physical characteristic, such as luminescence or weight. Lucara’s MDR is positioned on the far side of the primary crusher, in front of the autogenous or AG mill and serves and the first opportunity for diamond recovery.

XRT is and has been incredibly effective in identifying and isolating precious gems based on their shape and more importantly, their density. It has been rather beneficial in facilitating forward-thinking mining concessionaires with profit-making extraction of large diamonds while minimizing the risk of those diamonds becoming fragmented and damaged during the extraction process.

The innovative and skilled workforce at Lucara Botswana is a direct reflection of its women-dominated executive team. The leadership has gone above and beyond to unlock the full economic potential of their systematic operational activities and should be applauded for that. Fortunate for the industry, Lucara Botswana possesses an elevated level of understanding of how important it is to lead by setting a suite of mine optimization and strategic mine planning products in place.

Lucara demonstrated more presence of mind by approaching TOMRA, which is a leading pioneer of sensor-based sorting technologies, based in Norway. This unique collaboration effort was intended to devise increased productivity in mineral processing, where exceptional diamonds could be extracted in a much more efficient manner, which in turn would maximize the value of the diamond while minimising the impairment of the goods.

What was rapidly witnessed from both sides at the outset was a genuine readiness and desire to work together in providing industry solutions. Lucara and TOMRA Sorting Mining struck a deal in 2014 to collaborate and while efforts to improve exploration technologies were maturing at an admirable pace, this collaboration led to large diamond recovery circuits being introduced and installed in 2017.

The Letšeng open-pit diamond mine situated high in the Maluti Mountains of Lesotho, which is operated by Gem Diamonds, this particular mine has recovered more than 15 times the investment value within four years after their TOMRA Mining installation was implemented.

Just like the Cullinan underground diamond mine located in South Africa, which is owned by Petra Diamonds, the Karowe mine in Botswana routinely produces exceptional quality diamonds over 100 carats.

The Karowe mine has made Lucara the leading independent producer of large exceptional quality Type IIa diamonds and has consistently proven itself as one of the most prolific diamond mines in the entire world.

What is known about the quality of the diamond?

The recently discovered 2,492-carat diamond is undergoing a rigorous assessment and evaluation process, which could require anywhere between 90 and 365 days to determine its actual value.

The analysis of this epic diamond must be carried out deliberately and meticulously, given that the second largest diamond ever discovered could provide much-needed evidence that it just may be more valuable in its rough form or undamaged natural shape, rather than selling it to the highest bidder, only to be cut into smaller polished diamonds at a later date.

Either way, short and long-term strategy development is extremely critical and must prove to be equally rewarding for all the involved parties, especially the natives of Botswana.

How did other big diamonds that were recovered by Lucara fare on the market?

Lucara possesses a truly attractive working environment and the company has technically established itself as the experts in the quest to uncover Africa's biggest diamonds. Lucara is also in a position to integrate proprietary technologies that would lead the African diamond industry through forward-thinking implementation of traceability solutions that escalate the effectiveness of public blockchain as well as highlight the necessity of certificates of origin and titles of ownership via their Clara platform.

To provide an interesting and exciting backdrop for their success with Big Stone, I shall highlight three of their awe-inspiring finds.

·        The 1,758-carat Sewelô (which means 'rare find' in Setswana, the local language in Botswana), was sold in 2021 to French fashion brand Louis Vuitton for an undisclosed amount. This diamond was later analysed and cut for Louis Vuitton by HB Antwerp, a European diamond manufacturing and technology company based in Belgium.

·        The Constellation, an 813-carat diamond was found in November 2015 and was purchased for a record $63.1 million ($77,000 per carat) in May 2016 by Nemesis International, a rough diamond trading company based in the United Arab Emirates. Since then, The Constellation has increased in value to more than $68 million.

·        The 1,109-carat Lesedi La Rona was discovered in November 2015 and was initially valued at $70 million. It was later acquired by Laurence Graff, the chairperson of Graff Diamonds in September 2017 for $53 million.

As the weight of a diamond increases, so does its price per carat, leading to a considerable escalation in overall value.

What are the advantages of unearthing big diamonds?

Other than being very photogenic and looking attractive in photographs or films, large, high-quality natural diamonds are rather challenging to detect and unearth. Natural diamonds with higher carat weights are rather difficult to encounter in the marketplace, which explains the reason for price increases, making them much more valuable than common goods.

In a trade that tends to attach more importance to carat weight over the cut, sizable and exceptional natural diamonds are inflation-proof, which makes them a remarkable investment option amid economic downturns. Almost as convertible as gold and when economic conditions are satisfactory, high-quality, special diamonds usually offer a sound return on investment over extended periods.

Even though overall global diamond prices have become a bit soft, the demand for considerable-sized diamonds is stronger than ever. Supply shortages continue to keep companies on the De Beers Global SightHolder Sales (DBGSS) list and long-established diamond dealers from taking full advantage of the unexpected upsurge.

Larger diamonds possess the recourse of being cut into several smaller-sized diamonds that are sold for premiums, especially when transformed into more exceptional or flawless diamonds. ADC believes that massive diamonds possess the same opportunity to yield higher returns when displayed or exhibited in their rough form, allowing spectators to participate in a once-in-a-lifetime experience to view important diamonds before being sold, cut and polished.

Sizable polished diamonds fall into the priceless category and tend to do well when presented for auction, given that these extraordinary stones are highly sought-after by collectors and investors, which makes them valuable assets for the mining company that is responsible for discovering or extracting them. Special diamonds also increase in value at a much faster pace than smaller diamonds of the same colour and quality.

In Botswana, which is Africa’s diamond industry economic heavyweight, diamonds are a major source of fiscal revenues and contribute more than 90% of the nation's total exports. The real advantage that Africa possesses is that a large diamond can surface in any of Africa's top five diamond-producing countries.

What is the market for big diamonds?

Big diamonds are big business and the United States is the world’s leading market for big diamonds. The market for “Special” diamonds is and continues to remain exclusive to industry insiders. “Specials” are gem-quality diamonds that weigh more than 10.8 carats and a “carat” refers to the weight of the stone, rather than the size. It is important to impart that one standard carat in mass and weight is universally equivalent to 200 milligrams (mg) or 0.2 grams, which is the average weight of a carob seed. A diamond's weight is measured in carats and early diamond traders used carob seeds when weighing the diamonds that they traded.

Karowe has produced at least 19 special 100+ carat stones, increasing the average run-of-mine price to over $425 per carat. The exceptional stone diamond tenders that take place 3 times a year benefit from an average of $37,000 per carat and rare coloured stones that have included uncommon blue diamonds have enjoyed prices of $477,272 per carat.

What determines the value of a diamond?

The value of a commercial diamond is determined by a combination of its physical characteristics, market conditions and other subjective factors. Gem-quality diamonds are high-quality stones that are clear and, in most cases, very well-cut.

They are graded based on the “Four (4) Cs": 1) Carat (weight), 2) Clarity (the presence of blemishes and inclusions), 3) Color (ranging from colourless to light yellow), and 4) Cut (how well the diamond has been shaped), which all exhibit a level of brilliance that makes them suitable to be used in jewellery. Gemologists use precise tools and techniques to evaluate these attributes and this is what makes up this universally accepted grading system after the diamond is polished.

First and foremost, these precious stones must be verified that it is an actual diamond. Moreover, it must be determined whether the stone is a natural or lab-grown diamond (LGD). Synthetic, man-made and lab-grown diamonds can be detected through state-of-the-art devices that employ short and long-wave ultraviolet (UV) light, which functionally reveals the fluorescence and phosphorescence traits. When it comes to commercial-grade polished diamonds, it is best to subject the diamond to advanced lab equipment to uncover if a diamond has been colour- or clarity-treated.

The body colour of the diamond also impacts the value and when it comes to premium-grade colourless diamonds that range in classification from D to F colour. Common-grade diamonds fall into a category that ranges from G and J in colour and is considered to be near colourless, while K to M-colored diamonds are labelled and placed in a category of "faint tint". Any diamond that falls between M and Z in colour would be considered "industrial grade" or labelled as unsuitable to be a gemstone. Following that step, clarity must be established to identify that the diamond is free from inclusions or to determine if the imperfections inside the diamond are visible.

The cut quality of a polished diamond can also impact its price, depending on the proportion, symmetry and skillfulness of the final polish. Very strong fluorescence can and does negatively impact the visual appearance of the diamond from time to time, while some diamond connoisseurs may welcome diamonds with mild fluorescence. Checking and confirming trade prices will also assist in attaching the proper value to a diamond, while diamonds that are accompanied by laboratory reports from a gemological institute can also positively impact its value.

Rough diamonds are normally purchased at tenders—invitation-only auctions, where clients are invited to view the stone for a few hours and then decide how much to bid. Within half a day, a prospective buyer is asked to imagine the potential outcome of cutting a stone across various planes, to maximise its value. Once a stone has been purchased, the software can help with such geometric considerations, whereas the calculations made at a tender must be made by eye alone.

Given the current market downturn, how best can Lucara derive maximum value from this diamond?

On occasion, when an epic or record-breaking diamond is left in its original rough or uncut state, it could prove to be more beneficial than selling it or auctioning it to be cut into smaller polished diamonds. In addition, diamonds that surpass values of $10 million fall into an impressive category of “legacy diamonds”, which would serve as the ideal foundation to globally set African diamond tourism in full swing.

Construction and establishment of the first African Diamond Museum must now be seriously considered and put into motion to exhibit such rare diamonds. Regardless of what the stone is valued at in terms of millions of dollars, that revenue could be generated through exhibitions, which would contribute to the overall profitability of the diamond following extraction.

The Cullinan diamond, for example, was discovered in South Africa and put up for sale in London in April 1905, however, it remained unsold for two years, despite considerable interest at the outset.

As far as I know, Sotheby’s, one of the world's largest auction houses and brokers of jewellery, will no longer offer rough diamonds at auction, so when more big diamonds enter the market, they must find a home to exhibit their beauty in a museum setting to generate revenue for government and mining companies involved in its extraction. Lucky for many of the producers such as Lucara, any diamond of this sort can and will easily become a museum’s premier attraction and part of a permanent collection.

Lastly, African diamond producers can now launch a successful diamond tourism initiative through efforts to construct and establish a museum in Africa and a world-class auction house, with no better place to establish such a structure than Botswana or Lesotho.

Mathew Nyaungwa, Editor in Chief, Rough&Polished