Russia’s State Repository of Precious Metals and Gems (Gokhran) will carry out an auction to sell special-size diamonds from the State Fund on March 20, according to the Rossiyskaya Gazeta (RG) at www.rg.ru. Reportedly, buyers will be offered 556 gems totally weighing 12,595 carats. Demand is expected to be feverish. Even before the official announcement of the auction potential buyers flooded Gokhran with applications, the daily says.
The sale conducted by Gokhran is not like a traditional auction. Experts working in the public "treasury" say that it is more like a contest. Stones are displayed at the Gokhran premises during one month, so that customers have an opportunity to have a closer look at diamonds. Those interested start then filing applications. On the D-day, the auctioneer, who runs the bidding, declares auction lots and opens envelopes with the names of buying companies on them. The one which offers the highest bid takes the stones away. Applications are allowed to be sold only to companies incorporated in Russia. These are mainly diamond cutting factories. Foreigners are not allowed to bid. But they are not particularly regretful about it, since the entire amount of gems purchased from Gokhran is anyway resold abroad.
Diamonds of special sizes are the stones that weigh more than 10.8 carats. The peculiarity is that there is no uniform yardstick to determine their value, so they are evaluated in a specific way. Gokhran’s experts set their own price, while the experts of the companies taking part in the auction offer their own. If some buyer gives more than the price set for a particular stone by Gokhran, the diamond is sold. If not, it remains in the repository.
Gokhran auctions are held every year following a long-established pattern. But this year, the "rules of the game" have been slightly changed.
“Previously, every lot contained several stones, but this year it will have only one,” Vyacheslav Ivanov, Chief of Planning and Distribution at Gokhran, said to RG. “The point is that our customers often complained that, for instance, there was only one stone out of three which they deemed good. So in this case they had to take the remaining two as captive products. This is why they requested to make adjustments. We decided to meet their needs.”
So far it is not clear whether the March auction will be the only one this year or whether Gokhran will carry out others. "Last year, we wanted to hold two auctions, but having run just one we made so much money that exceeded all the quotas assigned by the State Duma, although we sold less than expected,” Ivanov explained.
Launching actions to sell special-size diamonds, Gokhran puts up for sale stones kept in its stock since the Soviet time. Last year, having sold just 986 gems Gokhran gained nearly $58 million. At that auction buyers, who had to "tighten their belts" during the crisis and slow down purchasing, seemed to have decided to reward themselves.
This year, demand is expected to be no less strong. "If the crisis is already being felt elsewhere, we are not exposed in terms of demand for diamonds,” the source told RG.
In addition to diamonds of special sizes Gokhran also sells regular stones, but this is taking place at other tenders. For example, these are diamonds supplied to Gokhran by Russia’s major diamond miner, ALROSA. During the crisis, the State had to buy billions of rubles worth of diamonds from the company to rescue it.
"Last year we sold a little bit of this kind of rock. But so far, we are not in a hurry. First of all, we have to accept such goods, that is to weigh gems and check the quality of sorting and evaluation. So far, the bulk of ALROSA diamonds is still stored in bags," Ivanov said.
Gokhran runs auctions to use the proceeds for replenishing the State Fund with more liquid valuables. Mainly, the agency buys gold and platinum as these metals have always been a "safe haven" in times of crisis. However, it is not so simple. "We would be pleased to buy more gold than now, especially since this is a task set by the government,” Ivanov commented. “But it is not so easy to buy. For instance, we can make an advance payment covering only 30 percent of the purchase price. And only now. Whereas our competitors - the banks – used to give 50 percent upfront starting from November. Therefore, gold mining companies are working with them. So, we are able to buy 3 to 4 tons per year. This is, of course, a sheer trifle."
