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Zimnisky talks about pink diamonds, De Beers’ Lightbox

22 october 2018

paul_zimnisky_xx_excl.jpgAn independent diamond industry analyst and consultant said although exceptional and ‘one-off’ diamonds are hard to assign a value to them, the Pink Legacy will likely fetch $2.64 million per carat when it goes under the hammer next month in Geneva.

Paul Zimnisky, CFA told Rough & Polished’s Mathew Nyaungwa in an exclusive interview that the 18.96 carats stone was one of the most extraordinary diamonds due to the quality of its colour.

His comment dovetails with Christie’s auction, which projected the fancy vivid pink to fetch between $30 million and $50 million.

Meanwhile, Zimnisky said De Beers’ Lightbox had registered an initial demand for the larger-carat sized products than anticipated.

The company’s 1-carat solitaire pendants and some of the 1-carat total weight stud earing sets that had sold out days after its launch were now being restocked.

NB: Zimnisky has a monthly industry report called "State of the Diamond Market":

http://www.paulzimnisky.com/products

Below are excerpts from the interview.  

Christie’s has projected that the Pink Legacy will fetch between $30 million and $50 million. Do you think this is achievable?

This is one of the most extraordinary diamonds in the world due to the quality of the color. With these truly-exceptional, “one-off” diamonds it’s almost impossible to assign a fundamental value to them. A lot of times the final price is set by how the buyers are feeling in the moment. That said, the high-end of the range is certainly achievable, which equates to $2.64 million per carat. For comparison, in 2010 the Graff Pink sold for $1.86 million per carat, which equates to $2.15 million in 2018 dollars, and last year the Pink Promise sold for $2.14 million per carat. Hopefully the diamond does not self-destruct like the Banksy work at Sotheby’s a few weeks ago!

Prices for top-quality large pink diamonds are said to have increased exponentially over the years driven by collector demand. Where is this demand coming from?

The buyers of these diamonds tend to be people or companies that have hundreds-of-millions or billions of dollars, so even though these diamonds cost millions of dollars they represent a relatively small percentage of the buyer’s net worth. Diamonds like this can provide some diversification to portfolios that already hold everything else you can imagine.

Do you consider a diamond as a form of investment?

Not really, especially not for most people. The minimum price point of an “investment-quality” diamond is in the hundreds-of-thousands or millions of dollars in my opinion. In addition, the transaction costs are very high, the liquidity is low, and the holding period necessary tends to be quite long.

What is your recommendation, should one decides to invest in a diamond?

I would say if you are going to invest in a diamond, a nice pink is probably the way to go. There just always seems to be demand for nice pinks, and relatively speaking, there are very few of them. As mentioned above, the world’s primary source of pink diamonds, the Argyle mine in Australia will be ceasing production within the next few years as the mine’s economic resource has been exhausted. This will keep supply limited. Blue diamonds have also done well, as have reds, but reds are extremely rare.

Are there any prospects of new mines that produce fancy pinks as Rio Tinto’s Argyle mine in Australia, which is the main producer of quality fancy pinks, is set to close by 2020?

Argyle produces the majority of pink gem-diamonds globally in volume and value terms, and pretty much all of the red diamonds in the world, which are even exponentially rarer than pink diamonds. However, there are other mines in the world that have produced pink diamonds. In recent years, ALROSA’s Almazy-Anabara mine in Russia, Lucapa’s Lulo mine in Angola, and Petra Diamond’s Williamson mine in Tanzania have all produced pink diamonds.

De Beers’ Lightbox started trading last month and some items have already sold out. What is your take on this development?

So, to be specific, the items that sold out were the 1-carat solitaire pendants and some of the 1-carat total weight stud earing sets (1/2-carat each). As of the second week in October, some of these items have been restocked. I recently spoke with a Lightbox representative and my understanding is there was more initial demand than anticipated for the larger-carat sized products, but more are being produced as we speak, and most items should be fully restocked within a few weeks.

Skeptics suggest the ‘sold out’ items don’t necessary reflect demand as this was a marketing gimmick by Lightbox. Do you accept this school of thought?

It’s understandable that some would suspect that given how steep the Lightbox price discount is relative to other lab-created diamonds on the market, however I don’t believe that to be the case. The Lightbox representative that I spoke with described the company as a relatively small “e-commence startup,” with just a few employees, and despite being owned by De Beers, the company is being run as an independent entity, so it will take some time to get fully up and running. More diamonds are currently being produced at the factory in Ascot, England and production will be augmented by the new factory in the western United States when construction is complete.

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished