Argyle diamonds: Pretty in pink

A secretive viewing of Argyle's pink diamonds reveals some true gems.
Pink diamonds became widely known after the 1963 movie "The Pink Panther" in which Inspector Jacques Clousseau (immortalised by Peter Sellers) sets out to recover the Pink Panther diamond.

More recently, the gemstone was in the limelight in 2006 when the movie "Blood Diamond" used an extremely improbable 100 carat stone as the cornerstone of its plot that Africa is being exploited for its diamonds. Improbable because less then one hundred such stones are produced annually and thus they command a scarcity premium which drives prices to astronomical levels û consider that a one carat, good quality white diamond costs around $20,000 while the equivalent pink diamond could cost up to $400,000. ThatÆs 20 times the price of the white stone based primarily on the colour.

Pink diamonds refer to diamonds which range in colour from those with a hue of the pink shade to raspberry coloured and deep purple-reds. Around 90% of the worldwide production of pink diamonds is produced at the Argyle mine in Western Australia. The mine is wholly-owned by Rio Tinto Diamonds, an international mining group which is headquartered in the United Kingdom.

Pink diamonds comprise less than 1% of ArgyleÆs annual diamond production. The Argyle mine accounts for about 20% of world diamond supply, or around 30 million carats annually.

Since 1965, the Argyle mine has sold its best pink diamonds û defined as those which are largest in size as well as deepest in colour û by private tender. The mine accumulates the stones over the course of a year and stones of half a carat or larger in size are unveiled at annual invitation only viewings. Typically a tender will comprise 60-100 carefully selected diamonds.

Viewings are held in central locations where buyers are situated. Hence past venues have included Tokyo, London, Geneva and Antwerp. The 2007 viewings were held in Perth, New York and Hong Kong û the inclusion of the latter in the select group of only three is testament to the growing wealth in the region and the Asian love of jewellery.

As an invitee to the Hong Kong viewings, I was exposed firsthand to the cloak and dagger nature of the operation. I was informed that I would be given a one hour viewing slot. Not surprisingly, my time slot was quite early in the morning û presumably the tai tais who are likely to be viewing with an intent to purchase get the afternoon slots. I was told to meet the coordinator in the lobby of a well-known luxury hotel but given no further details of the venue (all would be revealed when we met was the limited information shared).

I half expected I would be blindfolded and bundled into a car to be whisked to a venue I would never again be able to locate.

But the James Bond movie scenario did not (fortunately or unfortunately) materialise. I was only escorted to a suite in the same hotel. The door was opened by two gun-bearing security guards and my polite hello to the two elicited no response. From the foyer I was led into the room where the diamonds had been laid out.

Gavin Pearce, Rio Tinto's senior marketing executive, introduced himself û and then the rocks on display. Pearce has about 15 years' experience in the diamond industry, including a stint as the owner of a Chinese diamond polishing facility. He worked with Rio Tinto early in his career and rejoined the firm in 2003 to focus on pink diamonds.

The 2007 tender comprised 65 stones with an aggregate carat value of 62.02 carats. The largest stone was a 2.02 carat deep pink stone cut in an octagonal shape. But size is not the only driver of value for diamonds and pink are no exception. Pearce was loathe to speculate on prices as the diamonds are auctioned without any floor/reserve price or indicative range, but he reckoned a 1.74 carat oval could command the highest realisation.

Variations in the offering annually are part of the mystique of the tender. In 2006 the largest stone was a 4.15 carat intense pink so the largest stone in the 2007 tender is significantly smaller. But 2007 has four red stones of which two are larger than one carat.

ôThe colour saturation in the reds is outstanding,ö explains Pearce. The two purplish red colour stones include the aforementioned 1.74 carat and a one carat.

I learn that the 1.74 carat stone took about four months to cut, polish and produce and is the type of stone seen once in a decade û or maybe even less frequently than that. Pearce hazards a guess that this stone will be one of a select handful of the most valued pink diamonds worldwide.

The oval shape of both stones is outstanding as is the colour and both these are expected to be in high demand at the auction. Indeed, the one carat oval stone is my favourite of all on display û the colour is a shade deeper than the bigger stone.

I am informed by Pearce that I have impeccable taste as the one carat stone is likely to command a "very healthy price."

PearceÆs own favourite, however, is a 1.22 carat emerald cut diamond in a purplish-pink colour. Pearce notes that the shape of the stone with its high shoulders is unusual and indeed, developed by the Argyle team.

Another unique stone is a 0.77 carat dark grey-violet cut in the shape of a shield. ôArgyle is the dominant producer of stones of this colour,ö adds Pearce. The colour is indeed unusual, and the cut of the stone so deep it seems to twinkle like slate grey eyes.

For coloured diamonds itÆs all about the colour and the top three determinants of value are colour followed by size and shape. The clarity factor which drives pricing of white diamonds is of secondary importance for coloured diamonds.

Inclusions in pink diamonds are high and the nature of the stone and its molecular structure result in an average clarity lower than that of white diamonds.

Fancy cuts are a trademark of the Argyle production and another reason the stones are so highly sought after. In addition to the standard ôround brilliant,ö tenders routinely comprise marquise cut, oval, pear-shaped, emerald cut and occasionally shield type highly-unusual cuts. Argyle cuts all its stones in-house and has a team of six polishers. Pink diamonds are difficult to cut and the hardness of the material means they take longer to polish as well.

ôI recognise most of my stones personally,ö comments Pearce. The statement may sound immodest but with the small quantity of pink diamonds produced it is no doubt true. So, Argyle knows when some of the stones sold in a limited tender come up again in auction. But Pearce makes no comments on prices, citing confidentiality between Argyle and customers.

The stones are typically set in rings and pendants and occasionally in pearl clasps or inside watches. It is rare to have pairs of stones û so earrings are less common. A recent Asian buyer reportedly purchased one for her belly button piercing.

Pink diamonds are coveted by those who want to make a subtle display of extreme wealth so, for example, Japan is a big market for the stones. In terms of profile, buyers are normally high net worth individuals in their thirties or older who have graduated from traditional white stones to coloured.

Demand for the stones is far in excess of supply as the world is growing richer and buyers value the rarity, exclusivity and glamour associated with being the owner of a pink diamond.

With all the hype surrounding the stones, itÆs not surprising that a number of celebrities have been spotted wearing them. Victoria Beckham is reported to own a ring and earrings set with pink diamonds. Ben Affleck famously gave Jennifer Lopez a six carat intense pink stone designed by Harry Winston in 2003 when he proposed to her. When the engagement went belly-up in 2004 it was reported that Harry Winston bought back the stone and put it back on the market.

Pink diamonds have also recently started attracting interest from investors who see an opportunity to ride the appreciation. As the Argyle mine is likely to close in 2019, there is just about a decade more of pink diamond production. This makes them an attractive investment option for investors who want to diversify their portfolios into gemstones.

As someone who loves jewellery, the idea that the stones could be locked up in some Swiss bank is unappealing. I may not be able to afford my favourite one carat oval stone myself but I hope it ends up set in a ring adorning the highly manicured hands of someone who can û rather than in a cold, dark vault. Because, whether pink or white, the age old adage about diamonds being a girlÆs best friend is still reality for meà

This story first appeared in the Private Capital supplement that was published with the November issue of FinanceAsia.
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