The Value of a Diamond
Each diamond is unique – a gemological marvel formed billions of years ago under extraordinary heat and pressure.
Celebrating meaningful moments – emotion, gratitude, attachment, commitment, and love. Diamonds are universally admired, appreciated and desired.
The modern diamond market grew out of the major diamond mine discoveries of the 1870s in South Africa and was effectively managed as a monopoly until 2001. Today, Botswana, Russia, and Canada are the world’s top three diamond producing countries by value respectively. Ninety-nine per cent of natural diamonds are used in jewellery, with only one per cent used for industrial purposes.
Dominion Diamond Mines receives rough diamonds from its controlling ownership interest in the Ekati Diamond Mine and its 40 per cent ownership interest in the Diavik Diamond Mine, both located in Canada’s Northwest Territories. The Ekati Diamond Mine is Canada’s first surface and underground diamond mine and is renowned for the premium gem quality diamonds it produces. The Diavik Diamond Mine is Canada’s largest diamond mine and has some of the highest grade diamond ore bodies in the world.
The hardest natural substance on earth, diamonds signify the ultimate. For centuries diamonds have been used to mark the most important moments in people’s lives.
The value of a rough diamond is calculated using four criteria:
By Carat Weight (Size). Originally the carat was the weight of a carob seed which ancient lapidaries used to balance their scales, as the seeds in a carob pod are very uniform in weight. This weight was standardized to the metric system as 1 carat = 200 milligrams (one-fifth of a gram). A carat is further divided into points, with 100 points to a carat. In general terms, rough and polished diamonds are weighed to two decimal places.
By Cut (Shape). A rough diamond can be classified into several main shapes. Stones (octahedron, dodecahedron), cleavage (broken stones), maccles, and cubes. Each of these main categories has a multitude of sub-categories and variations.
By Clarity (Quality). Quality is determined by how clean the diamond is inside. Very few diamonds can be described as “flawless”; most have inclusions which may be caused by carbon spots (piques), mineral inclusions (olivine), bubbles or cracks (gletz). The positioning of the inclusions within the diamond influences its value, as some inclusions may be polished out during the manufacturing process. Some diamonds may be so heavily included that it is almost impossible to see into them (Boart).
By Colour. Generally, the closer a diamond is to being absolutely colourless (white), the more valuable it will be. As the diamonds become more visibly yellow or brown, their value decreases. However, diamonds saturated with colour can be more valuable and are known as “fancies.” Diamonds can be almost any colour of the spectrum, red, orange, yellow, green, blue, pink. Impurities and different degrees of heat in which diamonds are formed cause various colours in diamonds.
Diamonds are evaluated for carat weight, color grade, clarity grade and cut grade. This ranking standard is known as the 4Cs of Diamond Quality.
The Diamond Market
Worldwide production of rough diamonds in 2016 amounted to approximately 129 million carats, at an average price of US$105 per carat, for a total market of US$13.5 billion.
Demand for rough diamonds, and therefore their pricing, is based on pull-through from demand for the polished stones used in jewelry.
- Rough diamond supply is constrained; although a number of mines have come onstream in 2017, some will reach the end of their lives by 2020; and
- In the medium-term, global demand for diamonds is expected to exceed supply, leading to increased prices. The jewelry retail markets of China and India are seen as the key long-term growth areas.
The long-term outlook for the diamond market remains positive, with demand expected to outpace supply starting in 2019. World diamond jewelry demand in the next 10 years is forecast to grow at an average annual rate of about 3% to 4%, in real dollars. On the other hand, rough diamond supply volumes will rise in 2017, then plateau and fall off from 2020 onwards. This forecast reflects fundamental supply and demand factors rather than short-term fluctuations or unforeseeable long-term macroeconomic shifts.
The international diamond jewelry market is large, amounting to approximately US$80 billion at retail in 2016. China, India and the US are expected to continue being major diamond jewelry consumers, driving rough-diamond demand.
Global diamond jewelry demand was flat in 2016. The US continued along its growth path. However, demand in India was hit by demonetization in the fourth quarter offsetting some of this growth. China and Hong Kong also saw weaker demand in US dollar terms as a result of weaker macroeconomics and a weaker currency.
Rough diamonds are naturally occurring crystals, and appear in a number of forms. In addition to diamonds from Canada, other leading suppliers of rough diamonds include Russia, Botswana, Democratic Republic of Congo, Australia, Angola, South Africa and Namibia.
Sources: KPCS statistics, company reports, census data, published trade statistics