Unique gem produced by ALROSA not allowed to Sotheby's
The plans cherished by ALROSA to sell premium polished diamonds at Sotheby's are under threat, Elena Kiseleva says in an article published by the Kommersant. According to the daily, Gokhran has put freeze on the very first transaction planned by ALROSA to be made through Sotheby's. Gokhran’s experts attributed a polished diamond weighing 47.48 carats as belonging to the category of unique gems, the export of which is prohibited by Russian law. Earlier, the same experts refused to recognize the rough diamond of which it was made to be equally unique.
The fact that ALROSA had a conflict with Gokhran when trying to sell a large polished diamond via the auction house of Sotheby was evident from the letter of Fyodor Andreev, the president of the diamond mining company, to Vladimir Rybkin, the head of Gokhran (the Kommersant has a copy of this letter). The letter requests to re-examine the diamond weighing 47.48 carats, which was classified by the expert subcommittee chaired by Andrei Kutepov, the first deputy head of Gokhran, as falling in the category of unique gems. Meanwhile, this polished diamond was manufactured out of a rough diamond weighing 128.44 carats, which was studied by this subcommittee and was not classified as a unique stone, Mr. Andreev said in his letter. Despite the fact that the polished diamond is quite large, it has a pretty average grading - 7/3A, he noted.
The controversial diamond was manufactured by Brillianty ALROSA, the diamond miner’s subsidiary, within an experimental program to produce and sell polished diamonds made of very large rough diamonds. As it was further explained by Fyodor Andreev, all the works under this program were sanctioned by the Supervisory Board of ALROSA, which also includes the representatives of the Ministry of Finance and Gokhran. In particular, the program involves “manufacturing of high-quality and large polished diamonds out of very large rough diamonds recovered by ALROSA Group for sale at auctions held by the famous British auction houses, Sotheby's and Christie's.” As it was previously reported by the Kommersant, ALROSA is currently preparing to sign a memorandum with Sotheby's, under which the auction house will not only sell premium diamonds, but will promote ALROSA in the U.S. market (see the Kommersant issue dated March 14).
This is not the first time that Gokhran froze the sale of premium-class gems. Since the late 1990s, the agency attributed seven diamonds weighing over 50 carats each to the category of unique gems. None of them has ever been sold, because under the Federal Law "On Precious Metals and Precious Stones" the owner has the right to sell them or use them for manufacturing purposes only if they are officially rejected by Gokhran of Russia and then once again by the authorized body of the Russian Federation province, in which the unique stone was found. "In practice, the main problem is to determine the contract price of unique gemstones," Mr. Andreev believes. According to him, the total benchmark value of the above seven diamonds is $ 7.21 million, but their market value if they are put on auction will be "many times higher compared with their benchmark price," which is calculated based on the price list of the Ministry of Finance.
On Monday, ALROSA confirmed its plans to carry out sales of large high-quality diamonds through international auction houses. "ALROSA ran into a problem when a polished diamond was considered unique, though it had been made of a rough diamond, which had not been attributed to this category. We believe that this is a contradiction, which prevents the company from implementing its commercial projects, and together with the Ministry of Finance and Gokhran we are trying to solve this problem," ALROSA’s spokesperson told the Kommersant.
In turn, Gokhran believes that if the rough diamond, which was used to produce the controversial polished diamond, was not classified as unique, this cannot be a reason to refuse the latter’s examination "in accordance with the procedure established by law." While making the decision to attribute the polished diamond to the category of unique stones, the members of the subcommittee (a total of nine persons) voted unanimously and this was recorded in a special protocol,” a source in Gokhran told the Kommersant. In this case, an additional argument in favor of this decision was the fact that "the State Fund and the Diamond Fund of Russia had no diamonds bearing a similar set of characteristics." Vladimir Rybkin has already informed the management of ALROSA that Gokhran refused to re-examine the disputed diamond, the source added. Mr. Rybkin was unavailable for comment on Monday.
Sergei Goryainov, an expert of the Rough & Polished news agency, stressed that the current practice in Russia to attribute gems to the category of unique stones is not transparent. "There are no clear criteria and Gokhran does not publish anything, so it is a purely administrative decision. You will not see anything of this kind anywhere in the world. For example, extremely rare pink diamonds mined at Argyle in Australia are used to be regular highlights at auctions run by Rio Tinto. The lack of clear rules on the unnecessarily bureaucratic diamond market in the event ALROSA will go in for an IPO may result in excessive volatility of its equities," he said. In his opinion, a gem may be recognized as unique if it has a fascinating historical trail. "For example, the Orlov Diamond kept in the Diamond Fund can be considered a national treasure, or the stones, which served as attributes of coronation regalia," the expert said. He recalled that in the Soviet period Gokhran itself was pro-active in selling historical gems: "It is a well-known story that Gokhran sold truly unique imperial jewels of the 18th century at Christie's in March 1927."
