Following their recent collaboration, Perry notes the importance of expanding the industry’s provenance capabilities and highlights how technology can enable better storytelling. He outlines some of the benefits from the De Beers-GIA cooperation, which taps both organizations’ resources to inspire trust among consumers.

Listen to the podcast here:

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The Israel-headquartered company bought 70% of GCAL for $5.65 million, it announced Tuesday. The New York-based lab’s existing management team will continue to run the business for at least three years, Sarine added. The merged entity will carry the name GCAL USA but will operate under the brand GCAL by Sarine, which replaces Sarine North America.

The deal, which closed on Tuesday, will increase Sarine’s profitability by around 7% and provide additional cost savings, executives projected. “Substantially all” GCAL employees will remain. The agreement contains a “put-call” arrangement enabling Sarine to acquire the remainder of the company — or GCAL to divest the entire business — at a later date, according to a stock-exchange filing.

The transaction will enable GCAL to expand its services globally using Sarine’s automated grading system, known as e-Grading, the companies explained. It will also give Sarine a route into the US market.

“By leveraging Sarine’s advanced AI [artificial intelligence] grading technology, we can extend our grading services worldwide while preserving the accuracy and precision our customers have come to depend on,” said GCAL USA president Angelo Palmieri.

In January, the parties revealed they had reached a nonbinding agreement. They then conducted due diligence before completing the deal.

Image: Sarine’s Galaxy rough-scanning machine. (Sarine Technologies)

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Is it possible to analyze a diamond and determine where it was mined? It would be ideal if a quick and non-destructive measurement could reveal the geographic origin of any diamond. In principle, this is feasible for some gemstones, but the prospect is considerably more difficult for diamonds. Here is a brief overview based on a recent article that explored this topic in detail, entitled Methods and Challenges of Establishing the Geographic Origin of Diamonds, published in Gems & Gemology, Fall 2022 (link)¹.

It seems reasonable to expect that gems formed in different places should be slightly different. This could mean different types of inclusions, growth patterns, features in spectroscopy, or variations in trace element chemistry (small amounts of impurities, likened to a “chemical fingerprint”). Trace element analysis can be a powerful tool for determining where a gemstone, such as a ruby or a sapphire, comes from². The concentrations of many trace elements in gems such as rubies, sapphires, and emeralds exceed one part per million (ppm) by weight, often reaching tens to hundreds of ppm. We can imagine a concentration of 1 ppm as a drop in a bucket (Figure 1). It may not sound like much, but concentrations in this range can be measured easily with modern techniques used in gem labs worldwide. The two most used techniques are LA-ICP-MS (laser ablation inductively coupled plasma mass spectrometry) and LIBS (laser induced breakdown spectroscopy).

In diamonds, however, the concentrations of most trace elements are far lower and consequently more challenging to measure. A key reason for this relative purity is that a diamond is made up of closely-packed and strongly-bonded carbon atoms that tend to exclude other elements as the crystal grows. Trace element concentrations can fall in the range of parts per billion (a single drop in an above-ground swimming pool) or parts per trillion (a drop spread across 20 Olympic size pools) (Figure 1).

With more specialized techniques, it is possible to measure the ultra-low trace element concentrations in diamond. The most promising technique is a modified “offline” version³ of LA-ICP-MS. However, this technique is slow, expensive and damaging, with single analyses taking days, costing thousands of dollars, and sometimes requiring destruction of millimeters of the diamond surface. Normal LIBS and LA-ICP-MS analyses take seconds to minutes, with costs from dollars to cents, and the analyses are so small that they are barely visible to the unaided eye. Because of these limitations, fewer than 100 high-quality trace element analyses of gem diamonds have been made to date. The results are complex but show striking similarities and overlap between diamonds from different deposits⁴. It is not an encouraging sign for the prospect of origin determination.

The analytical challenge of measuring trace elements in diamond is certainly a major barrier in the pursuit of diamond origin determination, but it is not the final hurdle. Even if future technological improvements were to make the analysis simpler and cheaper, the way in which diamonds form within the earth presents a challenge as well. The geological processes and ingredients involved in diamond formation are remarkably similar around the world. Of course, there are unusual and exceptional diamonds that appear to be associated with individual mines. Moreover, if given the opportunity to examine and compare large parcels from different mines, their average properties may differ. But on an individual basis and in general, the majority of diamonds share similar geological characteristics regardless of origin.

Most mined diamonds originally formed 150-200 km below Earth’s surface, in the oldest and thickest parts of continents, within mantle rocks called peridotite and eclogite^5-7. Pieces of these mantle rocks are occasionally captured inside diamonds as they grow (Figure 2). We encounter the same kinds of mineral inclusions at most diamond deposits worldwide, reflecting similar diamond growth in peridotite and eclogite rocks. Given what we know about how similar the geology of diamonds can be from one mine to the next, it comes as no surprise to geologists that we also observe similarities and overlap in trace element chemistry.

While the earth’s mantle is quite similar around the world, the rocks close to the earth’s surface, in the continental crust, show huge variations. Colored gemstones, such as rubies and emeralds, form in the crust under more variable geological conditions. The chances are greater that the conditions of colored gemstone formation will exhibit clear and systematic differences between different deposits. Adding the fact that these minerals can typically accommodate much higher concentrations of trace elements than diamonds, the result is that colored gemstones are more likely (though not guaranteed) to inherit trace elements, inclusions, and other characteristics with geographic distinctions.

Consider for a moment three basic requirements that must be met for geographic origin determination to be possible:

• First, we need to have characteristics that are distinct between different origins. Trace element analysis is regarded as the most promising for diamonds, but existing data suggest this first requirement might not be met. Ultimately, it is difficult to conclude whether or not this requirement can be met without first collecting many thousands of measurements from diamonds of known origin and applying advanced statistical methods.
• Second, as mentioned above, we need to have a large database of characteristics for comparison, both to demonstrate that the first requirement is met and to use as the basis to evaluate unknown specimens. Currently, measuring the ultra-low concentrations of trace elements in diamond needs specialized analytical techniques that are simply too slow, too expensive, and too destructive to allow researchers to easily build up a large database. Assembling a representative diamond collection from each mine presents another obstacle, as it would likely need to incorporate thousands of specimens from each locality to faithfully capture the natural variability.
• Third, it must be feasible to measure those discriminating characteristics routinely and commercially in order for it to become a viable service offered by gemological laboratories. Even if trace element analysis met the first two requirements and technically enabled origin determination, the current high-tech methods for making this measurement would not be feasible to offer as a routine service.

Attempting to fulfill the three requirements outlined above would demand a combination of technological innovation and substantial data collection, without a guarantee of success. This would be a monumental research undertaking that few organizations or groups have the expertise and resources to tackle, especially considering that diamond origin determination might be inherently limited by geological factors.

In summary, there has been no scientifically robust study by any method demonstrating unique and measurable characteristics that would allow for independent provenance determination of a random individual diamond^1,7-9. Unfortunately, the ideal goal of determining origin independently through a lab analysis is not on the horizon. For now and the foreseeable future, the only definitive method to establish diamond origin depends on retaining country-of-origin and/or mine-of-origin information from the time of mining.

Figures:

References cited

1            Smith, E. M., Smit, K. V. & Shirey, S. B. Methods and Challenges of Establishing the Geographic Origin of Diamonds. Gems & Gemology 58, 270-288, doi:10.5741/gems.58.3.270 (2022).

2            Groat, L. A. et al. A review of analytical methods used in geographic origin determination of gemstones. Gems & Gemology 55, doi:10.5741/GEMS.55.4.512 (2019).

3            McNeill, J. C. R. et al. Quantitative analysis of trace element concentrations in some gem-quality diamonds. Journal of Physics: Condensed Matter 21, 364207-364220 (2009).

4            Smith, E. M., Krebs, M. Y., Genzel, P.-T. & Brenker, F. E. Raman Identification of Inclusions in Diamond. Reviews in Mineralogy and Geochemistry 88, 451-473, doi:10.2138/rmg.2022.88.08 (2022).

5            Stachel, T., Cartigny, P., Chacko, T. & Pearson, D. G. Carbon and Nitrogen in Mantle-Derived Diamonds. Reviews in Mineralogy and Geochemistry 88, 809-875, doi:10.2138/rmg.2022.88.15 (2022).

6            Stachel, T., Aulbach, S. & Harris, J. W. Mineral Inclusions in Lithospheric Diamonds. Reviews in Mineralogy and Geochemistry 88, 307-391, doi:10.2138/rmg.2022.88.06 (2022).

7            Krebs, M. et al. A common parentage-low abundance trace element data of gem diamonds reveals similar fluids to fibrous diamonds. Lithos 324, 356-370 (2019).

8            Dalpé, C., Hudon, P., Ballantyne, D. J., Williams, D. & Marcotte, D. Trace element analysis of rough diamond by LA‐ICP‐MS: a case of source discrimination? Journal of forensic sciences 55, 1443-1456 (2010).

9            Cartier, L. E., Ali, S. H. & Krzemnicki, M. S. Blockchain, Chain of Custody and Trace Elements: An Overview of Tracking and Traceability Opportunities in the Gem Industry. Journal of Gemmology 36 (2018).

Main image: Rough diamonds. (Shutterstock)

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Russian diamonds are entering India, Belgium and other global trading centers. Everyone acknowledges that. But it’s unclear how the goods are getting there, what the volumes are, and which banks are handling the payments.

One rumor on the market is that Russian miner Alrosa, a sanctioned entity in the US, has set up a subsidiary that sells rough to manufacturers, perhaps via an intermediary. Some say Alrosa goods have been reaching Mumbai and Surat via Dubai, though this pathway seems to have ceased due to banking problems.

By almost all reports, the flow of Russian rough into India has declined since the start of the Ukraine war in February 2022. Shipments slowed in last year’s fourth quarter, though few people who spoke with Rapaport this past February were able to explain why. It appears certain banks became less willing to approve money transfers to Russia, either voluntarily or under the influence of governments.

Another factor might be the depletion of existing stockpiles of Alrosa stones. The company has not published production and sales data since the war began, so it’s hard to know the extent of its fresh output.

Several Mumbai-based traders told Rapaport they’d been buying Russian rough from private dealers in Antwerp, at least until recently. However, one small-scale manufacturer — who also focuses on small diamonds — found that the quality of the rough he’d been receiving had dropped, with lower clarities and more fluorescent stones appearing in parcels. This led him to believe the best stones were going to a few large manufacturers rather than to the secondary market.

He isn’t alone in that belief. Widespread reports say only a select few major cutting firms have been getting access to the bulk of direct Alrosa supply, creating an impression of shortages for everyone else. Indeed, the manufacturers that estimated Alrosa was still selling at prewar volumes in February were in the minority.

The bottom line is that no one knows for sure how much merchandise is coming from Russia. But it’s definitely flowing. Most of the polished demand is in China and India, where consumers are less sensitive about the Ukraine war than their North American and European counterparts. With the US likely to expand its sanctions, that trend looks set to continue.

This article is from the March-April 2023 issue of Rapaport Magazine. View other articles here.

Image: (David Polak/Midjourney)

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De Beers has signed up the Gemological Institute of America (GIA) to its Tracr platform, enabling the laboratory to issue enhanced grading reports for polished diamonds documented as part of the blockchain service.

The new GIA grading reports will provide consumers with additional information about the provenance of their diamonds as well immutable proof of origin, De Beers said last week. The collaboration is part of an agreement between the miner and the lab to boost consumer confidence in natural diamonds.

“As the issue of diamond provenance rapidly grows in importance for stakeholders across the diamond value chain, having immutable data about a diamond’s journey from the source on grading reports is a major step forward and will underpin consumer confidence,” said Ryan Perry, acting executive vice president of strategy and innovation for De Beers.

The GIA will also explore ways to incorporate additional information about the positive impact of natural diamonds in its grading reports, De Beers noted.

Last year, the GIA launched a separate program for diamond provenance called Source Verification Service. On that platform, the lab works with vetted manufacturers to include confirmed source-origin information on grading certificates issued for polished stones those cutters produce. The GIA and De Beers have previously partnered on other projects to advance the industry and strengthen consumer trust, including the identification of lab-grown diamonds and diamond treatments, De Beers explained.

“Ensuring consumer confidence by providing trusted, impartial information about their diamonds is at the core of GIA’s consumer-protection mission,” said Pritesh Patel, GIA senior vice president and chief operating officer. “Working with De Beers to bring others in the industry to Tracr will expand the reach and positive impact of the platform.”

Image: Rough diamonds. (Ben Perry/Armoury Films/De Beers)

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The RapNet Diamond Index (RAPI) for 1-carat diamonds fell 1.6% in March and 2.6% during the first quarter. RAPI for 0.30-carat stones continued to firm, driven by the rebound in China – a strong market for this category. Inventory of 0.30-carat goods has declined due to reduced manufacturing over the past year.

Sentiment improved as the Hong Kong International Jewellery Show signaled a return of Chinese buyers after a prolonged absence due to Covid-19 restrictions. However, those buyers lacked urgency following the initial boost from the fair. The release of pent-up demand has yet to occur.  

Polished inventory remains historically high but has come down in popular sizes. The number of unique diamonds listed on RapNet declined 3% in March to 1.72 million as of April 1. That was still 10% above the pre-pandemic levels of March 1, 2020.

Polished production is stable at lower quantities. India’s rough imports by volume dropped 14% year on year in the first two months of 2023. Manufacturers’ profit margins have tightened since prices for smaller rough increased an estimated 30% in the first quarter.

The diamond supply chain is bifurcating into goods that are fully traceable to responsible sources, and goods that are not. Ahead of a mid-May summit, the G7 nations are working on a plan that would require companies to declare the non-Russian origins of their diamonds. The directive would increase measures to keep any polished that came from Russian rough out of the major G7 consumer markets.

The updated sanctions will likely accelerate the market split and may lead to scarcities of popular items within G7 countries, especially with demand projected to improve in the second half of the year.

Rapaport Media Contacts: media@rapaport.com

US: Sherri Hendricks +1-702-893-9400

International: Avital Engelberg +1-718-521-4976

About the RapNet Diamond Index (RAPI): The RAPI is the average asking price in hundred $/ct. of the 10% best-priced diamonds, for each of the top 25 quality round diamonds (D-H, IF-VS2, GIA-graded, RapSpec-A3 and better) offered for sale on RapNet® (www.rapnet.com). Additional information is available at www.rapaport.com.

About the Rapaport Group: The Rapaport Group is an international network of companies providing added-value services that support the development of ethical, transparent, competitive and efficient diamond and jewelry markets. Established in 1976, the group has more than 20,000 clients in over 120 countries. Group activities include Rapaport Information Services, providing the Rapaport benchmark Price List for diamonds, as well as research, analysis and news; RapNet, the world’s largest diamond trading network; Rapaport Trading and Auction Services, the world’s largest recycler of diamonds, selling over 400,000 carats of diamonds a year; and Rapaport Laboratory Services, providing Rapaport gemological services in India and Israel. Additional information is available at www.rapaport.com

Image: Polished diamond with tweezers. (Shutterstock)

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Hard-luxury companies are accelerating their responsible-sourcing efforts so they can meet consumer demand, comply with new legislation and ensure their long-term growth. But there is a lot yet to be done, and the costs of not embracing these practices are rising.

In the late 1960s, Philip Kotler’s seminal book Principles of Marketing introduced the “four P’s” that constitute a blueprint for any company: product, price, place and promotion. But the advent of more knowledgeable, demanding and engaged consumers calls for a revision. So businesses have added a fifth P: purpose. A company’s purpose is more than a consumer-facing mission. Investors see a firm’s environmental, social, and governance (ESG) credentials as intertwined with profit.

The latest financial reports from the largest luxury groups are a case in point: LVMH and Kering included a section detailing their ESG-related activity and progress, while Richemont issued a separate corporate social responsibility (CSR) report.

But which ESG areas are the most important for hard-luxury companies when it comes to consumer perception and long-term growth? And how far have these companies come? While ESG encompasses a broad range of topics, Federica Levato and Matteo Capellini — respectively senior partner and associate partner at Bain & Company — point to three key areas for luxury businesses: responsible sourcing and labor conditions, environmental sustainability, and transparency.

Monitoring the supply chain

The issues of human rights and labor practices in the jewelry business came to the fore at the end of 2020, when NGO Global Witness released a 48-page report alleging that rubies from the military-controlled state of Myanmar were ending up in the jewels of Place Vendôme brands. In the past, Global Witness exposed how the Taliban and other armed groups were earning millions with Afghanistan’s lapis lazuli, while the arrest of Horacio Triana, known as Colombia’s “emerald czar,” revealed Colombian emeralds’ complicated links to drug trafficking and the country’s paramilitary groups.

Unlike diamonds, which are controlled by a handful of large miners and regulated by the Kimberley Process, colored gems mostly come from a multitude of small artisanal mines scattered all over the globe, and pass through a tangle of dealers before ending up in jewelry. Supervising bodies like the Responsible Jewellery Council (RJC), the Coloured Gemstones Working Group (CGWG), the World Jewellery Confederation (CIBJO), the International Colored Gemstone Association (ICA), and the International Council on Mining and Metals, among others, have attempted to make the sector more transparent and accountable, but there seems to be no magic bullet.

Let’s not only ask where the gemstones are mined; let’s also ask, who are the companies and the executives running the mining companies?

Gemfields, the largest colored-stone miner, joined the Voluntary Principles Initiative on Security and Human Rights in 2020. The move aimed not only to improve Gemfields’ own image — it had come under fire for its labor practices in the past — but also to lead the way for other players in the colored-gem sector. The House of Gübelin has begun buying rubies from less problematic countries such as Greenland.

However, even in countries with ethical issues, there are responsible ways to source directly from miners, believes Susan Wheeler, founder of the Chicago Responsible Jewelry Conference. If one does purchase from conflict areas, Wheeler recommends thorough due diligence. “Let’s not only ask where the gemstones are mined; let’s also ask, who are the companies and the executives running the mining companies?” she says.

Large luxury groups still have a lot of homework to do on workers’ rights, according to the Sustainability Index that online media source The Business of Fashion published last year. Although it didn’t focus specifically on jewelry, the report rated the workers’ rights scores of publicly traded luxury firms. Kering scored 40 out of 100, Richemont 25, and LVMH only 19.

De Beers, which has full mine-to-market operations, is keen to declare its own ESG credentials. “Our diamonds are not only 100% conflict-free, but they have been ethically sourced to the highest health, safety, environmental and labor standards,” says Céline Assimon, CEO of De Beers Jewellers. For the past 15 years, the miner has employed “the strictest set of standards in the industry…covering all critical issues of ethical, social and environmental integrity,” she adds. Responsible sourcing is one of the core pillars of De Beers’ “Building Forever” plan — a set of 12 goals the company announced in 2021 to achieve by 2030.

The company also runs the GemFair program to regulate and improve the operations of artisanal and small-scale miners (ASM). The platform tracks diamonds and ensures that these mines respect international requirements for fair labor practices, worker health and safety, and environmental impact.

While GemFair’s stated aim is to promote the sector’s legitimacy and benefit the 150 million people who depend on ASM, the platform is not without its critics. In a 2020 study, Marc Choyt, president of New Mexico-based jeweler Reflective Jewelry, warned that GemFair posed the risk of letting De Beers dominate the diamond trade again as it did until a couple of decades ago.

A structural turnaround

Some critics still maintain that initiatives like these are mere public relations stunts — especially considering the top three luxury groups’ poor scores in The Business of Fashion Sustainability Index. Running a sustainable business goes beyond isolated initiatives; it demands structural and operational changes.

“To really make a change, the industry needs to consider the supply chain as a value chain,” asserts Leanne Kemp, founder and CEO of blockchain company Everledger, which provides traceability technology for the trade. “This means considering every aspect of a product’s life — the impact each of the supply chains is having [on] the production process” — and restructuring the company’s operations to incorporate ESG strategies.

Everyone must get involved, she believes: “The responsibility for ESG practices should be shared throughout the entire organization, rather than a single C-level role hidden within the marketing department or alongside procurement.”

Kering rated only 40 out of 100 on workers’ rights in a Business of Fashion study — still better than Richemont and LVMH.

Naturally, a structural turnaround implies costs. Ethical practices challenge companies’ bottom lines, says Dupreelle. “There is up to a 20% to 25% cost increase when switching to Fairtrade gold to ensure it is mined in ethical conditions. The effect is the same with responsibly mined gemstones, which have an average cost increase of 10% to 15%. The question remains as to how much of these costs customers will be willing to absorb.” Larger and established luxury brands have a greater ability to adjust to these changes, he adds.

And it’s not just the monetary costs. Besides being more expensive, recycled materials require additional traceability efforts to guarantee their sustainable origins, explains Dupreelle. The monitoring also needs to reach sub-suppliers to be truly meaningful, and this requires investment in technologies. In the creative department, designers have to retrain to adopt sustainable practices.

Yet the costs of not implementing sustainable practices are rising, Dupreelle warns. Governments are cracking down on companies’ transparency and emissions with new laws and taxes. ESG criteria matter not only to consumers, but also to prospective employees. When looking for work, 40% of millennials check firms’ ESG records, according to a recent BCG study. So do financial institutions, which offer better deals to companies with good ESG scores.

As Assimon says, “sustainability is no longer [just] nice to have, but core to every business.”

This article is from the March-April 2023 issue of Rapaport Magazine. View other articles here.

Image: Dorcas Masilo, shift coordinator at a processing plant water reserve at De Beers’ Orapa Mine in Botswana. (De Beers)

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The diamond market has had an eventful 2023 so far: Some of the developments include new Russian sanctions on the horizon, China opening for business, more takeover rumors among the luxury brands, artificial intelligence (AI) making waves and a major delegation of young diamantaires exploring India.  

Editor in Chief Sonia Esther Soltani returns from maternity leave to catch up on the news with Senior Analyst Avi Krawitz and News Editor Joshua Freedman, in this episode of the Rapaport Diamond Podcast. The team highlights the major events, trends and quirky stories that have shaped the diamond industry in the first quarter of the year. 

Listen to the podcast here:

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