There were buyers, but none willing to pay what the sellers wanted for a tennis ball-size diamond at a Sotheby’s auction in London on Wednesday — perhaps the result of Brexit jitters, NBCNews reported.
Bids for the 1,109-carat uncut stone — dug out of a Botswana mine in November –topped out at $61 million – falling short of the minimum reserve price.
Sotheby’s estimated that the diamond, found at Lucara Diamond’s Karowe mine, would sell for more than $70 million, Reuters reported.
“There is definitely demand for the stone,” said William Lamb, CEO of Vancouver-based Lucara, in a phone interview with Reuters. “The fact that the stone didn’t sell, yes, it is disappointing but it doesn’t change anything for Lucara as a company.”
Named the Lesedi la Rona, it’s the largest gem quality diamond found in more than a century, and the second-largest ever found. The largest is the Cullinan diamond, a 3,106-carat stone found in South Africa in 1905. Its name means “our light” in the Botswana’s Tswana language.
Typically, stones are cut before a sale. This sale was unusual because it involved a raw diamond rather than a cut stone, NBC reported.
Large rare diamonds are usually offered for sale to small groups of sophisticated diamond dealers. Public auctions are unusual for such stones.
“The result is a disappointing one and potentially calls into question the sale method chosen,” BMO analyst Edward Sterck said in a note to clients.
Lucara chose the auction route, Lamb said, because it wanted to have “access to as many ultra-high net worth individuals as possible, those people who had bought very expensive items in the past.”
The record for an auctioned diamond was reached last month when the 14.62-carat Oppenheimer Blue sold for $57.5 million at Christie’s. A 15.38-carat pink diamond sold for a record $31.6 million a day earlier.
Lucara Diamond wanted to sell the diamond directly to a wealthy buyer to capitalize on the current boom in gem prices. That bet didn’t pay off. Stocks and financial assets have been volatile, especially after last week’s Brexit vote.
Diamonds have been fetching record-breaking prices at auction lately, as the world’s ultra-rich seek safeguards against stock market volatility, AFP reported.
“No rough even remotely of this scale has ever been offered before at public auction,” said David Bennett, Sotheby’s chairman of jewelry, before the auction.
The bullish gem market “may have reached a tipping point and demand for large rare stones might just be saturated,” said Tobias Kormind of online retailer 77 Diamonds after the failed sale.
“The market instability with Brexit may have just caused this to be a case of bad luck or bad timing,” Kormind said.
So how do diamond sales benefit Botswana?
In many parts of Africa, diamonds haven’t been a blessing. They’ve been associated with exploitation, environmental destruction, corruption and “blood diamonds,” used to pay for civil wars in countries from Sierra Leone to the Democratic Republic of Congo, NPR reported.
Botswana’s diamond story is different, said economist Keith Jefferis, former deputy governor of Botswana’s Central Bank.
Botswana shares joint-ownership of of its biggest mines with De Beers in an arrangement that guarantees it most of the profits. Botswana has also set up a progressive taxation system so other mining companies are taxed at higher rates when they get windfalls.
Founded in South Africa and now based in the U.K., De Beers sells approximately 35 percent of the world’s rough diamond production.
Historically there has been strong political consensus in Botswana that diamond revenue should only be used for spending on schools, roads, and getting water into people’s homes and farms, NPR reported:
“The principle,” said Jefferis, “was that all the revenues from what essentially amounted to a depletion of an asset — (Botswana’s diamonds) — had to be reinvested in other assets, so that mining wouldn’t lead to an overall depletion of the national assets.” In other words, invest in people and projects that will create future wealth.
It’s hard to overstate the impact of all this on Botswana’s roughly 2 million citizens. The percentage of citizens living at or below poverty declined from 50 percent at independence to its current level of about 19 percent today. And incomes rose so fast that by 1990 Botswana was reclassified from a low-income country to a middle income one, with average incomes of around $7,240 per person.
