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De Beers makes historic U-turn by selling man-made diamonds
FOR the first time in its 130-year history, De Beers will sell diamond jewellery made in a lab rather than underground over billions of years.
The move is a historic shift for the world's biggest diamond miner, which vowed for years that it wouldn't sell stones created in laboratories. The diamonds will be marketed in the US under the name Lightbox, a fashion jewellery brand, and sell for a fraction of the price of mined gems.
The strategy will create a big price gap between mined and lab diamonds and pressure rivals that specialise in synthesised stones. A 1-carat man-made diamond sells for about US$4,000 and a similar natural diamond fetches roughly US$8,000. De Beers new lab diamonds will sell for about US$800 a carat.
"Lightbox will transform the lab-grown diamond sector by offering consumers a lab-grown product they have told us they want but aren't getting: affordable fashion jewellery that may not be forever, but is perfect for right now," said Bruce Cleaver, chief executive officer of De Beers.
"Our extensive research tells us this is how consumers regard lab-grown diamonds - as a fun, pretty product that shouldn't cost that much - so we see an opportunity," he said.
There's been increasing concern in the industry that expensive diamonds aren't appealing to millennial consumers, who are often more likely to spend on high-priced electronics or vacations. Diamonds have also come under fire for environmental and human-rights concerns related to mining in poor communities in Africa.
Unlike imitation gems such as cubic zirconia, diamonds grown in labs have the same physical characteristics and chemical makeup as mined stones. They're made from a carbon seed placed in a microwave chamber and superheated into a glowing plasma ball. The process creates particles that can eventually crystallise into diamonds in 10 weeks. The technology is so advanced that experts need a machine to distinguish between synthesised and mined gems.
While De Beers has never sold man-made diamonds before, it's very good at making them. The company's Element Six unit is one of the world's leading producers of synthetic diamonds, which are mostly used for industrial purposes. It has also been producing gem-quality stones for years to help it tell the difference between natural and man-made types and to reassure consumers that they're buying the real thing.
Man-made gems currently make up a small part of the US$80 billion global diamond market, but demand is increasing. Global diamond production was about 142 million carats last year, according to analyst Paul Zimnisky. That compares with lab production of less than 4.2 million carats, according to Bonas & Co.
The move also comes at a sensitive time for De Beers and its relationship with Botswana, the source of three-quarters of its diamonds. The two have a sales agreement that gives De Beers the right to market and sell the diamonds from Botswana. The deal, which gives De Beers its power over global prices, will soon be up for negotiation and Botswana is likely to push for more concessions.
On Tuesday, De Beers said it had extensive talks with Botswana about the decision to sell man-made diamonds and the country supports the move. BLOOMBERG