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Are diamonds really rare? Myths and misconceptions about diamonds

Are diamonds really rare? Myths and misconceptions about diamonds

Diamonds are our most popular gemstone. That hasn’t always been the case. It was only in the the last century that diamonds became regularly available. Prior to that, rubies and sapphires were the most popular gems, especially for engagement rings.

The popularity of diamonds is due primarily to the DeBeers organization. They set up the first large scale diamond mines in South Africa. Then they began one of the most successful advertising campaigns in history, convincing consumers that engagement rings should have a diamond.

With proper encouragement, the movie industry displayed their most glamorous women, draped in diamonds. They soon became a top status symbol for the rich and famous. This peaked with the Marilyn Monroe movie, Diamonds are a Girls Best Friend.

Even after winning the consumers admiration, DeBeers continued their advertising. With the discovery of diamonds in the Soviet Union, a new campaign was created to sell anniversary bands. These made good use of the small, but nice quality diamonds the Soviet Union produced.

While they have done wonderful things for the diamond industry, not everything about DeBeers is nice. As diamonds were discovered in other parts of Africa and South America, DeBeers managed to get control of the rough diamond supply. The tactics used to gain control of these rough diamond supplies are alleged to include murder and kidnapping.

DeBeers maintained monopolistic control of the diamond market for several decades. They carefully released only enough rough for current demand, while continually adjusting the degree to which the rough was made available. This caused continually escalating prices, and of course, it increased the perception of rarity. DeBeers actually mined considerably more rough diamonds than they sold and they have a large warehouse of uncut diamonds in London. As a result, they were not allowed to do business in the US, Canada, and a few other countries.

In the last couple decades of the 20th century, things began to change. Satellite technology, that was designed to find likely oil reserves, also showed the geology likely to hold diamonds. As a result, new discoveries began to multiply. Australia was one of the first developed nations to discover major diamond resources. DeBeers was able to make a deal with them do distribute all the rough, except for the very rare pink diamonds.

They also made a deal with the Soviet Union to distribute their rough diamonds. However, shortly after the break up, the Russians let their contract expire and began to sell the diamonds themselves.

The latest major diamond reserve was found in Canada. DeBeers could not make a deal with the Canadians, who are cutting and selling the stones themselves.

It is difficult to tell what the future will hold. Several sites are being explored and it is likely more diamond deposits will be found in the near future. DeBeers still controls approximately 75% to 80% of the diamond rough. The other suppliers have so far been content to sell at the same prices as DeBeers. However, if the law of supply and demand ever catches up to the diamond market, prices are likely to drop considerably. It is difficult to tell how this would play out, but DeBeers has a large inventory of uncut diamonds and would be in an excellent position for a price war.

Myths and Misconceptions

Here are some popular myths that you need to be aware of.

MYTH: Diamonds are rare.

Diamonds are the hardest material found on earth. Other than that, they hold no unique distinctions. All gem grade materials are rare, composing just a tiny fraction of the earth. However, among gems, diamonds are actually the most common. If you doubt this ask yourself; “How many women do you know that do not own at least one diamond?” Now ask the same question about other gems.

While we are still learning about the interior of the earth, current information shows that diamonds are likely the most common gem in nature. (See “Gem Formation” in our Reference Library.)

Outside the earth, diamonds are also common. A recent discover shows that some stars collapse on themselves, creating giant diamond crystals. In the constellation Centaurus, there lies a white dwarf, that has crystallized into a diamond 2,500 miles in diameter and weighing 10 billion, trillion, trillion carats.

MYTH: Diamonds are the most valuable gem.

You cannot say that one species of gem is the most valuable. To do a comparison, you need to judge gems according to size and quality. This chart is based on top quality gems in different sizes. However, note that pure red rubies are so rare there is no trade data available. The prices listed are for Burmese rubies.

Species            ½ carat        1 carat       >1 carats
Diamond        $4,300/ct    $13,600/ct    $44,500/ct
Ruby              $5,050/ct    $9,500/ct     $100,00/ct
Emerald         $5,470/ct    $9,030/ct     $23,000/ct
Sapphire      $10,000/ct    $16,000/ct    $34,000/ct
Alexandrite    $3,600/ct    $15,000/ct    $1,000,000/ct

As you can see, diamonds are very costly, but not the most expensive gem in any size. If you were to do a comparison of other qualities, the results would be similar. If you are looking to “invest in gems” you should read our article on the inner workings of the gem trade.

MYTH: Diamonds are precious.

Precious means valuable. In the 18th century a French jeweler began describing gems as either precious or semiprecious. The categories are still used in merchandising, but are frowned upon by professionals as they are nearly meaningless distinctions.

For example, garnets are considered semiprecious, but tsavorite garnets have sold for as much as $10,000 per carat. That seems pretty “precious” to me!

On the other hand, diamonds are only very valuable in their better grades and medium to large sizes. Small, low quality diamonds are available in quantity for just $1 a piece. A quick search of eBay and you will find several diamonds under $20. These are far from precious.

MYTH: Diamonds are the most brilliant gemstone.

Brilliance is determined by the cutting and the refractive index of the material. Diamonds have a very high refractive index of 2.41. Diamonds have the potential, if properly cut, to be exceptionally brilliant. However, this is nothing compared to the 2.9 RI of rutile. Not counting synthetics, there are at least 15 minerals with a higher refractive index than diamond!

MYTH: A person can make a lot of money selling diamonds.

As the Internet has continued to proliferate and GIA has established well accepted grading standards for diamonds, margins on cut diamonds have continued to be thin.

MYTH: Diamonds have more “fire” than any other gemstone.

Diamonds are know for their fire, or dispersion. This is the ability to separate white light into the color of the rainbow. Diamond has a dispersion of .044, which is quite high. However, it is a far cry from gems like rutile with a dispersion of .330!

What is a Diamond?

Diamonds are a natural mineral and they are also produced in the laboratory. Lab made diamonds are primarily used as abrasives, but they are beginning to make their way into the jewelry industry. (See “Understanding Gem Synthetics” and “Identification of Synthetic Diamonds” in our Reference Library.)

Gemologically speaking, diamonds are a mineral with a chemical composition of C, (carbon,) that crystallize in the isometric system. (See “How Gems Are Classified” in our Reference Library.)

With a hardness of 10, diamonds are the hardest substance in nature. Harder substances have been created in the laboratory, but they are extremely brittle and have no practical use. If a harder substance is ever found that does not break down so quickly, it will greatly reduce the time need to cut diamonds.

Diamonds have a refractive index of 2.41, which is very high. Being as they form in the isometric system, they do not have any birefringence or pleochroism. They have a specific gravity of 3.51 to 3.53, which is a bit more than average.

The De Beers Diamond Cartel

The Diamond Cartel

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History

De Beers is a private cartel of companies that dominates the entire diamond supply from mining to manufacturing to shops. De Beers was founded in 1888 by Cecil Rhodes, a British businessman. In its heyday, De Beers was active and dominant in every category of diamond mining and manufacture. They utilized open pit, underground, large scale alluvial, coastal, and deep sea mining in Botswana, Namibia, South Africa, and Canada. The company had essentially a global monopoly on the diamond industry for many decades. This lead to many allegations of price fixing and antitrust behavior that were undoubtedly true.

Cecil Rhodes got swept up in the diamond rush of 1871 in South Africa, and began buying up land claims of small mining operators. With additional British funding support, he was able to eventually become the sold owner of all diamond mining operations in South Africa.

In 1889, Rhodes negotiated with the London Diamond Syndicate, who agreed to purchase fixed amounts of diamonds at an agreed upon price. This strategic plan regulated diamond output and maintained diamond prices in London. By controlling all supply, De Beers maintained complete control of diamond prices, and could maintain them at an artificially high price level. Cecil Rhodes died in 1902, when De Beers controlled 90% of the world's diamond production.

Also in 1902, the Cullinan Mine was discovered in South Africa. This new large diamond source threatened to weaken the De Beers monopoly. The new Cullian Mine was able to produce as many diamonds as all of the De Beers mines combined, and also yielded the largest diamond ever discovered (the Cullinan Diamond, now part of the Crown Jewels of the United Kingdom).

Ernest Oppenheimer, a major force in the Cullinan Mine venture, took over chairmanship of De Beers in 1927, finally absorbing the Cullinan Mine into the De Beers fold. Oppenheimer understood the core principle of controlling the supply chain that precipitated De Beer's success, and continued running the diamond cartel with that principle in mind.

"Common sense tells us that the only way to increase the value of diamonds is to make them scarce, that is to reduce production." - Ernest Oppenheimer, 1910

Monopoly

De Beers has been using its dominant position to manipulate the international diamond market throughout the 20th century. The company has been able to successfully pressure independent producers to join its diamond monopoly. When producers refuse to join the cartel, De Beers would simply flood their local market with diamonds to drive down the price of competitor diamonds to an unsustainable level, forcing the competitor to join or go bankrupt.

De Beers additionally will purchase diamonds from other manufacturers and stockpile them in further efforts to control supply.

Changes in Business Model

After decades of control, the De Beers monopoly has begun to weaken. New diamond mines were discovered in Russia, Canada, and Australia, and these producers have decided together to distribute their diamonds outside of the De Beers cartel.

Additionally, increasing public awareness of "blood diamonds" has forced De Beers to change their business tactics to avoid bad publicity. The De Beers monopoly that was over 90% up until the 1980s has fallen to around 50% as of 2012.

The De Beers Family

The De Beers Family of Companies is involved in most parts of the diamond value chain. Companies are as follows:

  • De Beers Canada – mining

  • De Beers Consolidated Mines – mining

  • De Beers Diamond Jewellers – retail

  • Debswana – mining

  • Diamdel – trading

  • Diamond Trading Company – trading

  • Diamond Trading Company Botswana – trading

  • Diamond Trading Company South Africa – trading

  • Element Six – Advanced Materials / industrial diamonds

  • Forevermark – retail

  • Namdeb – mining

  • Namibia Diamond Trading Company – trading

De Beers is involved in every step of the supply chain from mining to trading to the retail sale of diamonds and diamond jewelry.

Advertising

De Beers has over the last century been highly successful in manipulating consumer demand for diamonds. Its most effective marketing strategy has been the marketing of diamonds as a symbol of love and commitment.

A copywriter coined the famous line "A diamond is forever" in 1947, which has been named the Best Advertising Slogan of the 20th Century. The ad campaign is regarded as one of the most successful in history and changed the general public’s perception of diamonds. No longer were diamonds seen as a gem reserved only for Royalty and the highest of society, they came to represent love, affection and faithfulness.

The Diamond solitaire is now pretty much synonymous with engagement rings 

The Diamond solitaire is now pretty much synonymous with engagement rings 

The "A diamond is forever" campaign greatly increased consumer demand for diamond engagement rings, especially large diamond solitaires. The prevailing fashion at the time was a single large diamond. However, De Beers had recently acquired mines in Russia that produced smaller diamonds less than 0.25 carats.

Faced with the problem that large diamonds were selling, but smaller diamonds were doing comparatively poorer, De Beers came up with other advertising campaigns designed to sell more diamonds, in particular the small "accent diamond." They began marketing the "eternity ring" in the 1960s. This is thin precious metal band with a continuous line of similar sized small diamonds along the circumference. The Eternity ring was marketed as symbolizing never ending love.

 
An Eternity Ring, with a continuous line of small diamonds

An Eternity Ring, with a continuous line of small diamonds

A Trilogy Ring, with a large diamond flanked by two medium sized diamonds 

A Trilogy Ring, with a large diamond flanked by two medium sized diamonds 

Another ring style popularized by De Beers, the "Trilogy Ring," consists of one large diamond flanked by two smaller diamonds, meant to represent the past, present, and future of a relationship. De Beers also introduced the idea of the "Right Hand Ring," bought and worn by women as a symbol of independence. All of these advertising campaigns had a single goal - sell more diamonds.

The De Beers advertising campaigns over the last century have been overwhelmingly successful at altering public opinions of diamonds. De Beers is the only reasons diamonds are associated so strongly with engagement rings, love, and marriage.

Traditionally, plain gold bands were used for the symbol of a wedding union. But this all changed after the DeBeers "A Diamond is Forever" campaign. Now it is expected that men propose with a Diamond engagement ring, and anything different is highly uncustomary. Diamond engagement rings are not only glamorous they have a very special meaning attached to them, they symbolise commitment and the next chapter in a couple’s life, which combined with their beauty is why they are so desirable.

‘Diamonds are a girl’s best friend,’ a phrase and song made famous by the 1949 movie Gentlemen Prefer Blondes in which Marilyn Monroe first performed the song, shows how deeply ingrained the idea behind diamonds has become in society. De Beers was not involved in the song, but I'm sure they were thrilled that the glamorous Marilyn Monroe was helping them promote diamonds.

Diamonds had attained a life of their own. They do not need De Beers marketing anymore because it was originally so successful, diamonds have become a societal norm. People unconsciously associate diamonds with love, women expect diamonds as engagement gifts, men are expected to buy diamonds. Diamonds have become so deeply ingrained, that the diamond is now self sustaining in our culture.

Although the De Beers monopoly has broken up, the company still retains 50% control of the diamond supply, and the De Beers legacy lives on.

Please feel free to leave comments or thoughts you have on the De Beers Diamond cartel. Does it make you want to look for diamond alternatives? My next post will be on sapphires and other gemstone alternatives for engagement rings!

Bonus Facts

  • Cecil Rhodes was the founder of the south African territory of Rhodesia, which was named after him in 1895. He was an ardent believer of British colonialism.
  • Rhodes University in South Africa is also named after Cecil Rhodes
  • The Rhodes Scholarship, a prestigious international postgraduate award for selected foreign students to study at the University of Oxford, was set up and funded by his estate

Interesting Article on Lab Synthesized Diamonds

This is a good article discussing Lab grown diamonds. It's a little dated, but still pretty good.


The ability to grow true gem-grade diamonds in a lab has been a long standing goal of science and industry, and one that has been achieved on a limited basis over the past five years.

Unfortunately most media publications are usually designed to sell articles, and thus often do not provide consumers with a true picture of the commercial reality and availability of lab-grown diamonds. Further, many sellers of diamond simulants (stones that look similar to diamond, but are not real diamond) exploit this knowledge gap as a way to deceptively sell their simulants as ''lab-grown diamonds''. As the president of a company that has been involved with both lab-grown diamonds and diamond simulants for over seven years, and having seen the confusion many of these less than factual articles have caused, I wanted to help provide customers with an industry insider assessment of what is and is not commercially available, and help educate those who are indeed looking to purchase a true lab-grown diamond. Thus, we begin a short tour of myth vs. reality in the lab-grown diamond market (circa 2007).

First and foremost, lab-grown diamonds (real diamond, but not mined) are in fact available for jewelry purchase, but on a limited basis. The significant catch though is this - when most people think of a diamond, they automatically think of white diamonds. As of October, 2007, no one is currently able to offer white (colorless) lab grown diamonds for sale on any type of production basis. Regardless of what various reporters write, the reality is only fancy color diamonds (predominantly yellow, and to a much lesser degree, pink and blue) are available.

The reason for that gap between what consumers want (white lab-grown diamonds) and what labs can deliver (mostly yellow lab-grown diamonds), is due to both commercial value and natural barriers. Lets discuss the natural barrier first - yellow diamonds are yellow because they incorporate nitrogen into their crystal structure. White diamonds are white (or clear) because they have much less nitrogen in their crystal structure. When growing diamonds, however, nitrogen is a catalyst - it significantly speeds up diamond growth, and in addition reduces defects. Thus, you can grow a 1ct (finished) yellow in roughly one week, versus growing the same size white (by restricting nitrogen) can take you 4-6 weeks (using BARS method, the default method currently). In other words, nitrogen can help you grow up to 6x as much yellow diamond as white in the same amount of production time. That''s a tough natural barrier.

The commercial barrier, is that yellow natural diamonds are worth much more than white natural diamonds. In nature, there are roughly 10,000 whites for every fancy yellow. Thus, fancy yellows command a much higher price per carat. Lab grown diamonds typically sell at a discount but are still pegged to their natural counterparts, and since yellow diamonds are worth more than whites, the absolute selling price for lab grown yellows is higher than what the market will pay for lab grown whites.

Now, if you combine the fact that labs can grow yellows much more quickly and easily than whites, and that yellow diamonds (lab grown and natural) further command higher prices than whites, you can see you have a severe dis-incentive to produce white diamonds with the current technology. White diamonds can and have been produced by labs (we have some sample photos on our website) but they are not price competitive with natural white diamonds at this time. Hence, a very big reason for why there are currently no white diamonds available for commercial sale.

These fundamental reasons are typically not explained in most published articles about lab grown diamonds, and many articles typically leave the reader with the exact opposite impression, that white lab grown diamonds are plentiful and cheap (remember the $5/ct quote from Wired magazine?). Various unethical simulant (CZ) makers have utilized this confusion to deceptively advertise their imitation diamonds as being "flawless man-made diamonds", "perfect lab-grown diamonds", etc. all for the low price of $100/ct. And based on emails we''ve received from customers, people have been tricked into buying plain CZ, after being told it was a ''lab grown white diamond'' and having seen articles discussing the advent of lab-grown diamonds being available.

There are two easy ways to avoid being suckered into unethical advertising like that. First of all, the price. To cut a 1ct finished diamond, you need between 2-3 carats of rough diamond to start. Cutters charge by the carat for their cutting work, and $100-$150/ct is a common rate. That means even if the diamond material were free, a seller would still have to charge at least $200-$450/ct just to break even on the cutting cost. And obviously, the lab grown material is not free and the seller would like to make a profit instead of break even, so if you see a seller selling ''cultured diamonds'' or ''man-made diamonds'' for less than several hundred dollars per carat, you can be assured it is not real lab grown diamond, regardless of what claims they make. Currently, lab-grown yellow diamonds are selling for around $4,000/ct. And remember, yellows are produced up to 6x faster than whites, so you are unlikely to see lab grown white diamonds selling for much less than that in the future unless someone figures out a much faster way to grow diamond.

The second way to protect yourself, for lab-grown diamonds of any size (i.e. .30ct and higher), is to only buy a lab-grown diamond that comes with a certificate from an independent lab. Just like natural diamonds, virtually all major gem labs now offer grading reports for lab grown diamonds (including, as of this year, the GIA). They are basically the same reports as they issue for natural diamonds, but with the origin listed as "lab-grown". If there is no certificate with a ''man-made diamond'' of any real size (i.e. .30ct or larger), and the seller declines to provide one when asked, then you can also be pretty sure its a simulant being called a lab-grown diamond.

Checking for the price and the grading certificate can ensure you are dealing with an ethical seller of lab-grown diamonds. We''ve seen many a customers whose hopes were dashed after we explained that the $150 pair of ''man-made diamond'' earrings they bought were in fact nothing more than deceptively advertised CZ. Don''t fall into that trap.

Another common myth about lab-grown diamonds is that all lab grown diamonds are ''perfect'' or flawless. As noted, the current default technology for growing diamonds (BARS method) is simply replicating the high-pressure and high-temperature present under the earth, and doing it above ground (sometimes with additional catalyst to lower the necessary temperature/pressure required). And just as diamonds from under the earth have flaws, diamonds grown above the earth also have flaws. It is a more correct analogy to think of growing diamonds (using current technology) as diamond-farming, rather than diamond manufacturing. Just like farming, you plant a seed, and try to optimize the growth conditions, but you no more get a perfect diamond than a farmer always gets a perfect tomato. In fact, sometimes after a week is up, the chamber is opened and no diamond has grown at all...so it is no where near the ''push a button, out pops a perfect diamond'' that many people think. Similarly, labs cannot customize how the diamond grows to be a specified shape (i.e. pear or emerald cut) - you get what you get, and cut to optimize the yield of each crystal.

That being said, it is true that most lab grown diamonds (especially yellow diamonds) are slightly harder than their equivalent natural diamonds. In yellows, this is due to the nitrogen being more perfectly dispersed, and Carbon-Nitrogen bonds are slightly stronger than Carbon-Carbon bonds. This is also one way labs with Raman equipment can detect man-made versus natural yellows - in yellow naturals, nitrogen is clumped, versus it is quite evenly dispersed in lab-grown yellow diamonds.

The next myth - lab grown diamonds can always be produced, so their prices will continue to drop vs. a natural diamonds will keep going up. Currently, gem grade, lab-grown diamonds are in fact substantially rarer than natural diamonds if you compare yearly production. While white diamonds are being mined in tens of millions of carats per year, lab grown whites are virtually non-existent except for research samples, and yellow lab grown diamond production is measured in thousands of carats. And because growing lab diamonds is still hard, prices for lab grown diamonds have slowly gone up, not down because there is only so much production available even as demand has increased due to public awareness.

One more reality about lab grown diamonds - size. Currently, most diamond growth chambers are unable to grow larger than 3ct piece of rough (sometimes 4ct) and thus, after cutting, most lab grown diamonds are 1.5ct or smaller (frequently smaller after accounting for flaws being cut out). The reason for this is that in order to grow a diamond using the standard HPHT (high pressure, high temperature) technology, you have to place an area under extremely high pressure and temperature. The larger the area you are trying to maintain these extreme conditions, the harder it gets..exponentially harder, in fact, because the pressure at the center is magnified due to leverage. The parts applying the pressure themselves have a limited lifespan, as they will eventually crack and fail, and require constant replacement. Thus, most labs have not tried to go beyond the 3ct size growth chamber as it does get exponentially harder to maintain the same pressure for a larger area, and that is one reason why no one is offering 6ct finished yellow diamonds for sale.

With the reality check done, we''ll end this article on a positive note - even with all the problems, costs and issues that still hamper lab-grown diamond production, colored lab-grown diamonds do offer people the ability to own and wear extremely high-end, fancy color, real diamonds at a fraction of the natural price. We''ll emphasize that these are still real diamonds - chemically, optically, physically, and of course will pass any test for being diamond (since it is diamond, the place where it was grown is the difference). Most lab grown colored diamonds are vivid in color, meaning they are among the most valuable color grades as compared to natural colored diamonds. For example, one of the first lab-grown diamonds we ever sold was graded a ''fancy vivid orangy yellow'', and was initially appraised as a natural diamond, valued at $65,000 by a major lab (we had informed them we were submitting a lab grown diamond btw). We then received a very panicked call the next day from the same lab, who after running a Raman analysis on it realized it was a man-made and not natural diamond (due to the nitrogen being so perfectly dispersed). We sold that same diamond for $3500. Similarly, most of our pink lab-grown diamonds also grade fancy vivid pink, and if they were mined instead of lab-grown, could sell for as high as $150,000/carat...we sell them for around $5,000/ct, but unfortunately due to low supply (production difficulties) are sold out most of the year. Nevertheless, the lucky few customers who do buy a lab-grown pink have a lot of fun walking into their neighborhood jewelry store and seeing the jaws drop. It is also usually the first time their jeweler has seen a real lab-grown diamond in person, again due to the relative rarity of true lab-grown diamonds. They are very beautiful and leave most natural fancy color diamonds (who are normally less intensively colored) looking pretty bland by comparison.

Technology continues to improve, and hopefully over the next few years, there will be additional breakthroughs in lab grown diamond technology. One of the most promising areas is growing diamonds by mimicking how they (theoretically) grow in outer space. This is by using ultra-low pressure, plasma and high temperature, often called plasma vapor deposition. Because it does not require the high pressure, chamber sizes are much larger and in theory, much larger pieces of diamond can be grown. Conditions are more controllable as well, due to the diamond growing by in a more nano-technology like environment (carbon-rich gas is shredded at the molecular level, and the carbon atoms then reassemble on the diamond seed below). The trade off is the machines to do this often run between $500,000-$800,000 each, and a host of additional problems not present in high pressure growth regimes come into play in this new growth environment..but hopefully in the future these will offer a new method for growing lab-grown diamonds.

Now that you are armed with industry insider knowledge, you''ll be able to readily avoid the scams that so many unethical diamond simulant sellers use by playing on the publics (and even the medias) ignorance of the realities of man-made diamonds. Hopefully, you''ll also realize that the constant claims that DeBeer''s or other forces are to blame for the lack of lab-grown white diamonds are not true (there are in fact real natural and commercial barriers to it). Finally, you''ll hopefully have an appreciation for the hard work and effort that many scientists have put into turning the former dream of lab grown diamonds into reality on your finger, even if it still has many constraints as to what types, sizes and colors of lab-grown diamonds are available.

Less P. Wright is the president of http://BetterThanDiamond.com an industry leader in white diamond simulants using lab-grown, amorphous diamond coatings, and its subsidiary, http://TakaraDiamonds.com the first to offer true lab grown diamonds to the public via the web. He is a recipient of the Gemological Institute of America''s diamond certificate.

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