Diamond Industry Overhaul: Value-Driven Sales to Replace Opaque Auctions

The traditional methods for selling diamonds, primarily through tenders and auctions, are being critically reassessed for their inherent opacity and inefficiency. A leading voice in the gem trade, Oded Mansori, co-founder and managing partner of Belgian firm HB Antwerp, asserts that these systems hinder producers from maximizing their earnings and exacerbate their vulnerability during periods of price decline. Mansori advocates for a fundamental overhaul of these practices to eliminate industry inefficiencies and secure a more equitable return for diamond producers.

The diamond market is currently enduring one of its most challenging periods, marked by a prolonged downturn. This slump is largely attributed to global economic uncertainty, which has dampened consumer demand, alongside the increasing popularity of lab-grown diamonds as an alternative. The repercussions have been severe for producer countries like Botswana, which have experienced significant drops in revenue. Similarly, mining operations such as Burgundy and Lesotho's prominent Letseng diamond mine have been forced to implement workforce reductions and layoffs, underscoring the depth of the crisis that many consider to be the deepest in the industry's history.

Mansori sharply criticizes the long-standing reliance on tenders and auctions, describing them as systems that, while appearing efficient on paper, function more like a "casino" in practice. He argues that rough stones are pushed into opaque markets where their true value is largely a matter of speculation. When global demand inevitably softens, a cyclical event observed over the past decade, producers are left disproportionately exposed. This often results in job losses for workers and a decline in asset value for shareholders, highlighting the precariousness of the current sales model where rough diamonds are typically sold through a competitive bidding system with confidential bids placed on individual stones or parcels.

In response to these systemic flaws, Mansori proposes a revolutionary shift in how producers generate revenue. He believes that instead of "gambling on rough sales in opaque auctions," producers' income should be directly tied to the eventual polished value of their stones. This model aims to create a more stable and predictable revenue stream, aligning the producer's compensation with the ultimate market value of the finished diamond, rather than the speculative price of the raw material.

HB Antwerp itself exemplifies this alternative approach through its successful profit-sharing partnership with Lucara Diamond Corp. Under this innovative agreement, HB Antwerp acquires high-quality stones, specifically those of 10.8 carats and above, from Lucara's Karowe Mine in central Botswana. Crucially, the purchase price is determined based on the *estimated polished value* of each individual diamond, reflecting the potential of the stone once it has been cut and polished. This partnership has proven highly beneficial for Lucara, with HB Antwerp accounting for a significant 72% of the company's $74 million diamond revenue in the first six months of the year, an increase from 65% in the preceding year.

According to Mansori, this value-driven sales model offers substantial financial advantages for producers. He estimates that companies adopting such a partnership-based approach could potentially increase their revenue by up to 40%. This substantial boost underscores the potential for a more equitable and lucrative future for diamond miners, allowing them to better weather market fluctuations and secure greater financial stability in an evolving global industry.