THE INTERNATIONAL DIAMOND TRADE AND THE VANCOUVER MARKET
by
ANDREW JORDAN B.A., Queens University, 1973
A THESIS SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
Master of Science
in"the
Faculty of Commerce and Business Administration
We accept this thesis as conforming to the required standard
THE UNIVERSITY OF BRITISH COLUMBIA
April, 1978
/TN Andrew Jordan, 1978 In presenting this thesis in partial fulfilment of the requirements for an advanced degree at the University of British Columbia, I agree that the Library shall make it freely available for reference and study.
I further agree that permission for extensive copying of this thesis for scholarly purposes may be granted by the Head of my Department or by his representatives. It is understood that copying or publication of this thesis for financial gain shall not be allowed without my written permission.
Department of CcLOf y W\ C fC<2
The University of British Columbia 2075 Wesbrook Place Vancouver, Canada V6T 1W5
Date ABSTRACT
The subject of this thesis is the structure of the
distribution channel of gem diamonds in the world market,
and certain vertical stages of the channel are singled out
for more detailed study. The main stages of the distribution
structure are: the mining of rough diamonds, the largely
centralized sorting and distribution of the rough, the manu•
facture of polished diamonds in a number world centres, the distribution of the polished gems at several bourses connected with the manufacturing centres, and the operations of the local wholesalers, jewellery manufacturers, and retailers.
Three areas are singled out for more detailed study: the
De Beers group, which, through the Central Selling Organi• sation (S.C.O.), dominates the distribution of rough; the
Israeli diamond industry, the largest manufacturing and dis• tributing centre of polished diamonds; and finally, the
Vancouver retail market for diamonds and diamond jewellery, which is one of the many regional branches of the largely unexplored retail end of the distribution channel.
Chapter II provides a base for all that follows by describing in detail the four parameters that are basic for the appraisal of a polished diamond: colour, clarity, cut and weight. An Appendix studies the increment in the price per carat of a polished diamond as the weight of the stone
ii iii
increases. It is found, for example, that the traditional squaring rule gives results close to, but consistently higher than, the actual prices. Chapter III studies the prevailing modes of production in the diamond-producing countries, the historical evolution and present activities of the diamond- cutting centres, and the operations of the major trading centres. It is found that certain characteristics of the diamond-cutting industry make it an ideal field for cottage industries and small firms, working in places situated far from either the mining, the distribution, or the consumer centres. Certain recurrent patterns in the creation and development of local cutting industries are discussed.
Chapter IV focuses on the development of the Israeli diamond industry. Since the first years of the State of
Israel, the exportation of polished diamonds was seen as one of the main sources of foreign currency, and expansion of the industry was energetically supported by the Israeli government. The main factor limiting the growth of the in• dustry, however, was the supply of rough diamonds. The chapter studies the changing relations between the C.S.O. and the
Israeli industry, governmental protection of the industry, and the export figures. The second half of the chapter is devoted to a detailed description of the actual trading at the
Israel Diamond Exchange at Ramat Gan. Chapter V studies the role of the C.S.O. in the world market, in the frame provided iv
by the history of the De Beers group. The CS.O.'s avowed policy of stabilizing prices for. the benefit of the industry as a whole is measured against the recent and on-going deve• lopments in the world market, characterized by steeply rising prices, speculative trading and relative shortages of rough, and some tentative explanations are proposed. Chapter VI, finally, describes the Vancouver wholesale and retail diamond markets. Since diamonds are sold by retailers almost exclusive• ly as part of pieces of jewellery, a survey was made of Van• couver jewellery stores to find out the relative popularity and average selling prices of the main types of diamond jewellery.
The method employed in this survey involved appraising and coutning the jewellery pieces displayed, and direct enquiries from the salesmen. The survey was complemented by sales figures and other information on the buying preferences of
Vancouver jewellers, furnished by a local wholesaler. The results were tabulated and compared with published Canadian and American data, and explanations were proposed for the differences found. The chapter concludes with a list of questions for future research on the retail market for diamond j ewellery. TABLE OF CONTENTS
Page
ABSTRACT ii
LIST OF TABLES ix
LIST OF FIGURES . xii
CHAPTER
I INTRODUCTION 1
II SORTING OF DIAMONDS 9
OUTLINE 9
PHYSICAL PROPERTIES 10 The Atomic Lattice 10 Crystals 12 Crystal Form and Manufacture of Polished Diamonds 17
MINING OF DIAMONDS 21 Recovery of Diamonds From Blueground 21 Recovery of Alluvial Diamonds 26
SORTING OF ROUGH DIAMONDS 2 7 Gems, Near-gems, Industrials 27 Sorting Gems 2 7
MANUFACTURING PROCESSES 29 Preparation 29 Sawing 29 Cleaving 31 Bruting or Rounding Up 34 Faceting 37
CUTTING STYLES 38 Early Forms of Cutting 38 The Most Efficient Forms of Cutting 40 Departures From the Ideal 46 Other Modern Cuts 48
v vi
CHAPTER Page
GRADING POLISHED DIAMONDS 53 The Four C's 53 Grading Colour 53 Grading Clarity 57 Grading Cut 64 Weight 66 Valuations 67 Fancy Colours 73
CONCLUSION 74
III PRODUCTION, DISTRIBUTION AND MANUFACTURE
OF DIAMONDS 75
OUTLINE 75
THE DISTRIBUTION STRUCTURE . . . 75
THE PRODUCING COUNTRIES 7 8 U.S.S.R 81 South Africa 81 South West Africa (Namibia) 86 Angola 8 7 Liberia 88 Zaire 89 Sierra Leone 90 Ghana 91 Tanzania 93 Other African Producers 94 Venezuela 94 Brazil ..... 96 India 97 CUTTING AND TRADING CENTRES 9 7 Israel 98 Antwerp 98 Antwerp's Exchanges 102 India 104 U.S.S.R 107 South Africa 110 New York 112 Puerto Rico 114 Amsterdam 115 West Germany 116 France 117 Other Countries 118
CONCLUSION 120 vii
CHAPTER Page
IV THE DIAMOND INDUSTRY IN ISRAEL 124
OUTLINE 124
DEVELOPMENTS UP TO 1948 12 5
THE RECOVERY AND GROWTH AFTER 1948 AND GOVERNMENT POLICIES TO DEVELOP THE INDUSTRY 12 8 Supplies of Rough 130 Credit to the Industry 135 Manpower 137 Research, Innovation and Promotion 141 Manufacturing Practices: Plant Size and Subcontracting 142
THE DIAMOND EXCHANGE 146
ISRAEL'S EXPORTS 156
CONCLUSION 160
V THE ROLE OF DE BEERS 164
OUTLINE 164
HISTORY OF DE BEERS . . 164 Foundation of De Beers Consolidated Mines Ltd. 164 From the Syndicates to the Present 168 The More Recent Evolution of De Beers 174
THE CENTRAL SELLING ORGANISATION 176 The Sights 178 Sales and Prices 180 Purported Policies of the C.S.O. and the Current Situation 184
ADVERTISING BY DE BEERS 191
CONCLUSION 198 viii
CHAPTER Page
VI THE VANCOUVER MARKET 199
OUTLINE 199
RESEARCH TECHNIQUES 201 Sources of Information 201 Techniques Used in Surveying Vancouver Stores. 201 The Survey Form 203 Data Gathered From A Vancouver Wholesaler. . . 207
RESULTS OF THE RESEARCH 209
Results From the Data of a Vancouver Wholesaler 224
CONCLUSION 233
SOME INTERESTING TOPICS FOR FUTURE RESEARCH . . 235 Sources of Diamonds for the Vancouver Market . 235 Influence of the Activities of the World Trading Centres in the Price and Availability of Diamonds in the Vancouver Market 236 Relation Between Store Sales and Display Space 236 The Preferences of the Vancouver Diamond- Buying Public Compared to Those of Other Sections of the North American Public .... 236 Whether the Quality (and size) of the Diamonds Offered in the Retail Market Has Been Decreas• ing in Recent Years 237
APPENDIX 1 THE GEMOLOGICAL INSTITUTE OF AMERICA. ... 239
APPENDIX 2 RELATIONSHIP BETWEEN PRICE AND WEIGHT FOR DIAMONDS 244
APPENDIX 3 THE SHORTAGE OF ROUGH AS REFLECTED IN THE TRADE'S COMMENTS 250
BIBLIOGRAPHY 257 LIST OF TABLES
TABLE Page
11.1 G.I.A. PRICE REDUCTION CHART 70
11.2 COMPREHENSIVE WHOLESALE DIAMOND BASE PRICES . . 72
VIV.l IMPORT OF ROUGH GEM DIAMONDS 134
IV. 2 DIAMOND ENTERPRISES AND PROFESSIONAL WORKERS ACCORDING TO LOCATION 1973-74 ...... 140
IV.3 ENTERPRISES ACCORDING TO NUMBER OF WORKERS OCTOBER 1974 145
IV. 4 IMPORTS, EXPORTS, NET EARNINGS AND CURRENCY EARNING RATE 159
IV.5 IMPORT OF ROUGH GEM DIAMONDS AND EXPORT OF
POLISHED DIAMONDS 1949-74 . 161
IV.6 EXPORT OF POLISHED DIAMONDS 1951-74 162
V. l C.S.O. SALES OF COMBINED INDUSTRIAL AND GEM ROUGH FOR 1959-1977 182 V. 2 C.S.O. AVERAGE PRICE INCREASES IN PERCENTAGES SINCE 1949 182
VI.1 PROPORTION OF WINDOW OR INSIDE DISPLAY AREA ALLOCATED TO DIAMOND JEWELLERY 210
VI.2 AVERAGE SIZE OF THE (CENTREPIECE OR SOLITAIRE) DIAMOND IN ENGAGEMENT RINGS 210
ix LIST OF TABLES (Continued)
Table Page
VI.3 AVERAGE SELLING PRICE OF ENGAGEMENT RINGS. ... 212
VI.4 AVERAGE SELLING PRICE OF LADIES' RINGS 212
VI.5 AVERAGE SELLING PRICE OF MEN'S RINGS 214
VI.6 AVERAGE SELLING PRICE OF EARRINGS. 214
VI.7 AVERAGE SELLING PRICE OF PENDANTS AND NECKLACES 216
VI.8 AVERAGE SELLING PRICE OF ALL DIAMOND JEWELLERY . 216
VI. 9 BEST-SELLING DIAMOND JEWELLERY ITEM 218
VI.10 THE FOUR LARGEST SELLING ITEMS OF DIAMOND "
JEWELLERY SOLD, IN ORDER OF IMPORTANCE 218
VI.11 DEGREE OF TRAINING ON DIAMONDS OF THE STAFF. . . 221
VI. 12 AVAILABILITY OF LOOSE STONES FOR SALE 221 VI.13 WEIGHT OF STONES SOLD
VI.14 CLARITY OF LOOSE STONES SOLD TO VANCOUVER JEWELLERS DURING NOVEMBER AND DECEMBER, 197 7 . . 22 5
VI.15 COLOUR OF LOOSE STONES SOLD TO VANCOUVER JEWELLERS DURING NOVEMBER AND DECEMBER, 1977 . . 22 5
VI.16 STYLE OF STONES WEIGHING OVER 15 POINTS SOLD TO VANCOUVER JEWELLERS DURING NOVEMBER AND DECEMBER, 197 7 LIST OF TABLES (Continued) xi
Table Page
VI.17 STYLE OF ENGAGEMENT RING STONES SOLD IN U.S.A. DURING 1976 229
VI.18 PREFERENCES OF VANCOUVER JEWELLERS IN TERMS OF THE FOUR PARAMETERS 2 31
VI.19 PREFERENCES OF THE AMERICAN DIAMOND-PURCHASING PUBLIC IN TERMS OF THE FOUR PARAMETERS. ... 231
2.1 The actual figures are from the G.I.A.'s 1975 Base Price Chart, and apply to FL, D-Colour brilliant cut diamonds 248 LIST OF FIGURES
Figure Page
1 A carbon atom bonded to four others 11
2 The atomic lattices of graphite (left)
and diamond (right) . . . 13
3 The ideal forms of diamond crystals 14
4 Combination of the octahedron 16
5 Growth markings 16
6 Examples of twinning 18
7 Macles 18 8 Relations of octahedron crystal axes to cube crystal axes (left), and different faces or directions in an octahedral crystal (right)... 20
9 Cleaving planes. 20
10 Polishing directions . 22
11 Chambering: the blueground is shown white ... 24
12 Block caving: the blueground is undermined and breaks up to fall into draw pits 2 5
13 Sawing: two methods of cutting two brilliants from one octahedron crystal 32
14 Sawing through flaws (left) and cleaving to remove flaws (right) 32
15 Sawing and cleaving 33
16 The relation between grain and grounding directions 35
17 The sequence of grounding operations 36
18 The point cut 39
19 The table cut 39
xii xiii
LIST OF FIGURES (Continued)
Figure Page
20 The ideally proportioned brilliant (left) returns more light than a deep (centre) or shallow (right) stone 42
21 White light dispersed and refracted to produce fire 42
22 The proportions of the ideal Tolkowski
brilliant cut 43
23 Development of the brilliant or full cut. ... 44
24 Parts and Facets of the brilliant cut 45
25 Development of the brilliant or full cut. ... 47
26 Cuts for small stones 49
27 Rose cuts 50
28 Some variations of the brilliant cut 51
29 Emerald and step cuts; miscellaneous cuts ... 52
30 Comparison between the most common scales of colour 56 31 Symbols used to indicate position and nature of diamond-clarity characteristics 60
32 Clarity scales compared 61
33 A swindled brilliant (left); several brilliants that can be obtained from the same half octahedron (right) 65
34 A comparison of actual and calculated prices. . 68
35 Generalized gem diamond distribution structure. 76
36 World production of diamonds 79
37 World production of diamonds 80
38 Siberian diamond mines 82 xiv
LIST OF FIGURES (Continued)
Figure Page
39 Diamond mines in South Africa and neighbouring countries 84
40 Diamond mines in South Africa
and neighbouring countries 85
41 Namaqualand mines .' . . 85
42 Ghana mines 92
43 Lesotho mines 95
44 Sierra Leone mines. 95
45 Import of rough diamonds 133
46 The early mines of Kimberley 166
47 The De Beers Companies 177
48 Pieces of brilliants up to 1 carat 245
49 Pieces of brilliants up to 3 carats 246 50 Median price for 1 carat, D FL diamonds .... 254
51 Median price for 0.50 carat, VS1 G-J diamonds . 256
52 Median price for 0.25 carat S-, G-J diamonds . . 256 ACKNOWLEDGEMENTS
The author wishes to thank Professor H. D. Drechsler, without whose infinite patience and inspiring guidance this thesis would never have been written; Professors S. M. Oberg and J. W. C. Tomlinson, for their valuable advice and their encouragement; Barbara, secretary of Graduate Studies of the Department for her constant co-operation; and Susan, of Blazing Fingers Typing Service, for her careful typing of the final manuscript. Special thanks are due to the author's mother, for her understanding and for sharing the load of his business duties while this work was being completed.
xv CHAPTER I
INTRODUCTION
This thesis is submitted in partial fulfillment of
the requirements for a Master of Science degree in Inter•
national Business at the Faculty of Commerce and Business
Administration at the University of British Columbia. The
subject of the thesis is the structure of the distribution
channel of gem diamonds in the world market, in which certain
vertical stages are singled out for more detailed study. The
main stages of the distribution structure are: the mining of
rough diamonds, the largely centralized sorting and distribution
of the rough, the manufacture of polished diamonds in a number
of world centres, the distribution of the polished gems at
several bourses connected with the manufacturing centres, and
the operations of the local wholesalers, jewellery manufacturers
and retailers. Three areas are singled out for more detailed
study: the De Beers group, which dominates the distribution of
rough; the Israeli diamond industry, the largest manufacturing
and distributing centre of polished diamonds; and finally, the
Vancouver retail jewellery market, which is one of the many branches of the largely unexplored retail end of the distri• bution channel.
There is not a single unified exposition of the
different stages of the world trading in diamonds in the
1 2
published literature, and some areas are hardly covered at
all, like the operations of the various diamond bourses, while others are only represented by somewhat one-sided public relations literature. It is hoped that this study, which is based not only on the available literature, but on the author's experience in the wholesale commerce of polished diamonds, and on field research conducted in the Vancouver wholesale and retail markets, will in a modest way facilitiate such an exposition.
The author's background includes nine years in the import and wholesale of polished diamonds from the trading centres of Ramat Gan (Israel) and Antwerp (Belgium) to
Montreal and Vancouver. His occupation involves buying, sorting, and selling diamonds to jewellery manufacturers and retailers, managing a company, and training personnel in the various aspects of the business.
In what follows, the chapters of the work will be introduced.
Chapter II is not directly concerned with the dis• tribution channel but provides a base for what follows by describing in some detail the manufacture of polished diamonds and the appraising of the finished product. Diamonds are an exceedingly nonhomogeneous commodity, whose value varies radically with minute differences in internal color and the presence or absence of mineral imperfections invisible to the 3
naked eye. A science of grading has evolved that determines
the relative value of a diamond in terms of four parameters:
color, clarity (the degree of freedom from imperfections), cut
(the extent to which the geometric proportions of the fashioned
diamond conform to the established ideal), and weight: and a
thorough a command of this science is vital for anyone engaged
in buying and selling diamonds.
Chapter III deals with the diamond-producing countries, the cutting industries, and the trading centres. Even though over 80 per cent of the world's production of rough is marketed through the De Beers group, the constitution of the producers is by no means uniform; some are De Beers subsidiaries, others have exclusive contracts with the group, and yet others are small-scale operators and individual miners whose output is purchased locally by De Beers or else finds its way into the open market. Illicit mining in the companies' leases is also an established mode of production; and a significant amount of smuggling goes with it.
Through the Central Selling Organisation (C.S.O.) of the De Beers group, the rough diamonds are channelled to the manufacturing centres. The diamond cutting industry is unique in that the equipment is relatively simple, inexpensive, and easy to transport; the power consumption is minimal; and the transportation cost of the raw materials negligible. There- i fore, it is an ideal field for cottage industries and small firms, working in places situated far from either the mining, 4
the distribution, or the consumer centres. Historically, some of the most important cutting centres of today started as cottage industries. These industries were able to process certain kinds of diamonds that the established centres could not handle profitably. These are the small or the difficult- to-cut diamonds, where labour costs amount to a significant portion of the total cost of the finished product.
As the new cutting centres grew, typically their output, of inferior quality and lower price, found a somewhat different market than that of the established centres. Centre specialization in quality and size of output, therefore, com• bined with an expanding market and a rising demand, contributed to blunt the competition between the centres. A different kind of centre, however, originated when a producing country saw fit to start a local industry. Only the Soviet Union and South
Africa succeeded in establishing competitive industries, which in both cases found their own specialized niche in the market.
Chapter IV focuses on the diamond industry in Israel.
The Israeli industry started in the early 1930's, but only acquired momentum when World War II disabled the European centres, particularly Antwerp, that had almost monopolized the world production of polished diamonds. Rough diamonds suddenly became available from the C.S.O. and a flood of skilled refugees helped to create a booming industry. As the war ended and the old trading patterns between the C.S.O. 5
and Europe reasserted themselves, the Israeli manufacturers had to struggle to procure rough from other sources and
create a new market. With government help, they succeeded so completely that today Israel is the largest manufacturer
in the world. Most of the production is exported, and the
industry, which enjoys ample government protection as the main earner of foreign currency, netted over $200 million last year.
A large part of the Israeli exporting activity takes place at the Ramat Gan Diamond Exchange. The second half of
Chapter IV describes the actual process by which purchases are negotiated at the Exchange. The Exchange is a tightly protected medium where only established customers have access; this restricted access is necessary because in the diamond trade even wholesale purchases are made on a personal basis after careful inspection of the merchandise, which requires that the participants be absolutely trustworthy.
Nowadays Israel's supplies of rough again come largely from the C.S.O. Chapter V studies the role of the
C.S.O. in the world market, in the frame provided by the history of the De Beers group. De Beers Mining, later to merge into De Beers Consolidated Mines, was created in 1880 by a financial and administrative genius, Cecil Rhodes, to control the total output of the South African mines and re• lease it gradually into the market. Rhodes was well aware 6
that the producers' great mistake was saturating the market with diamonds, which caused prices to collapse; this pattern had occurred every time new diamond discoveries had been made.
By the end of the century, De Beers Consolidated Mines had attained direct control of almost all the South African mines, and for the next decades it endeavoured to acquire each of the new mines as they arose, or buy up their output.
In 1930, however, a combination of a low demand for diamonds due to the world depression, and an enormous output from independent miners that the company had had to incorpor• ate into its stock, together with its own unsold production, precipitated a change of structure. A new purchasing agency was endowed with large reserves of capital to buy the produc• tion from all sources and hold it in stock as needed, and the marketing of rough diamonds was given exclusively to the newly created C.S.O. This arrangement has essentially lasted to this day.
The C.S.O.'s policy, which is supposed to benefit the whole industry, is to hold the rough in stock in times of slack demand, keeping prices level, and release it when the demand rises, with suitable increases in prices. Thus the stability of gradual increase in the prices of diamonds is assured. Such policies were tested several times, in recent times most markedly during a recession in late 1969 and 1970, when reduced supplies of rough from the C.S.O. kept prices 7
from falling. The present situation (early 1978), however,
seems to be an exceptional time, when supplies are not
forthcoming at a time of very strong demand, and prices
are raised at a fast rate. Such manoeuvers have thrown
the industry into confusion and cast doubts about the capa•
city of the C.S.O. to govern the market. An appendix to the
thesis presents the most recent developments as reflected in
the trade journals.
Chapter VI, finally, describes the Vancouver whole•
sale and retail markets. Since diamonds are sold by retailers
almost exclusively as part of pieces of jewellery, a survey was made of Vancouver jewellery stores to find out the rela•
tive popularity and average selling prices of the main types
of diamond jewellery, as well as the percentage of total
store sales represented by diamond jewellery sales. There
is a dearth of research in this field, due at least in part
to the difficulty of collecting enough information from the retailers themselves. The method employed in this survey, which involves appraising and counting the jewellery pieces displayed, suggests an alternative approach.
Accurate appraisals, however, can only be done with up-to-date information on the market prices, which was partly furnished by a local wholesaler. This wholesaler also fur• nished percentages of sales of loose diamonds in the different weight, color, clarity, and style categories, that allowed the 8
completion of tables showing the relative preferences of
the Vancouver jewellers, and hence of the Vancouver public,
in terms of these parameters. Such data, as well as those
obtained from the survey of jewellery stores, were then com•
pared with corresponding results published by trade magazines.
Not surprisingly, there was a good degree of similarity,
making allowance for the overall price increases since the
last surveys were published. Tentative explanations were
offered for the differences observed, which allowed the be•
ginnings of a picture of Vancouver's individuality as a market
to emerge, but new research is needed to produce truly compar•
able data and investigate further the proposed solutions. The
chapter ends, therefore, by pointing out some promising direc•
tions for future research. In this research, it is hoped, the methods described in the sequel may be found useful. CHAPTER II
SORTING OF DIAMONDS
OUTLINE
The first section of this chapter is concerned with diamond as a crystal, starting out with the way in which the carbon atoms join .together to form a lattice, and continuing into a description of the ideal geometric diamond crystals and the naturally occurring crystals. The very practical importance of this knowledge becomes evident next, upon studying the sawing, cleaving, and polishing directions of a rough diamond. The second section describes the two forms of diamond deposits: alluvial deposits and kimberlite pipes, and explains very briefly the mining methods appropriate to each. The third section sketches the way in which rough diamonds are- sorted in categories prior to distribution. The fourth describes the manufacturing steps from rough to polished: preparation, sawing, cleaving, rounding up and faceting. The fifth describes the different styles of cut diamonds: the early attempts, the evolution of the modern brilliant cut, the optic reasons for the adoption of the brilliant cut (i.e., the desire to attain maximum brilliance, in the technical sense of the word), and then the common practice of deviating from the ideal proportions of the brilliant cut in order to
9 10
obtain heavier diamonds from the rough. Finally, styles other than the brilliant are mentioned and illustrated. The sixth and perhaps more important section describes the grading of polished diamonds, and studies the parameters along which grading takes place: color, clarity, cut, and weight. The way of making all these parameters converge into a valuation of a particular stone is described next. A reference to fancy-coloured stones completes the chapter.
PHYSICAL PROPERTIES
The Atomic Lattice. From the chemical point of view, diamond is a carbon in an extremely pure form. The only other element present is nitrogen, amounting to as much as 0.23 per cent; a relatively scarce type of diamond contains no nitro• gen at all. Other elements are only a few parts in a million.
The carbon atom has the important property of having four electrons in its outer shell, which can hold up to eight.
Two carbon atoms link together by sharing an electron from each one, which fills a hole in the shell of the other. Thus, each atom can link with four others. Such bonds are called covalent. The four bonds to each atom are at 10.95° to each other, and each atom is the geometric centre of an imaginary tetrahedron having four other carbon atoms as corners (Fig. 1)
The distance between the atoms is 1.544 angstrom units (one
Eric Bruton. Diamonds (London: N.A.G. Press, 1970), p. 300. Figure 1 carbon atom bonded to four others.
(From Bruton, Fig. 18.1) 12
angstrom unit is one millionth of a millimetre).
Covalent bonds can hold atoms together in structures called atomic crystals. Carbon produces two kinds of crys• talline arrangements: diamond and graphite. In diamond, the arrangement is as shown in Fig. 2 (right). The shaded layers show the puckered hexagonal rings of atoms. All bonds are
1.544 angstrom units long. In graphite (Fig. 2, left), the atoms also form hexagonal rings, but these are flat, not puckered. Within each layer-, the atoms are closely linked, with atomic bonds even shorter than diamond, 1.42 angstrom units, but the bonds between the layers are weaker, with a length of 3.35 angstrom units. This explains why graphite is soft: the layers sheer easily. Diamond, on the other hand, is extremely hard: the lattice is exceptionally strong, with great resistance to deformation.
Crystals. Diamonds occur both in single crystals and in aggregates of crystalline masses. Crystalline substances are classified on the basis of the symmetry of the crystals, resulting in seven main systems. Diamond belongs to the most symmetrical of thes-e systems, the cubic. Within the cubic system, there are a number of different possible forms that crystals can take. Figure 3 shows the ideal possible forms of diamond crystal. It is not yet known whether the tetra• hedron is a possible form. The commonest form is the octa- I-42& CLEAVAGE (OCTAHEDRAL) DIRECTIONS
Figure 2
The atomic lattices of graphite (left) and diamond (right)
(From Bruton, Figs. 18.2 and 18.3) CUBE TETRAHEDRON
RHOMBIC DODECAHEDRON
TETRAKIS- HEXAHEDRON ICOSI TETRAHEDRON
TRIAKIS -OCTAHEDRON HEXAKIS-OCTAHEDRON (or TRIS-OCTAHEDRON) (or HEX-OCTAHEDRON) Possible forms of diamond cr stal, with crystal axes
Figure 3
The ideal forms of diamond crystals
(From Bruton, Fig. 18.4) 15
hedron.^.
The ideal forms seldom occur in nature, due to
various factors during the growth period of the crystals.
Octahedron crystals with rough, curved or pitted faces are
often found, but also combinations of two or more crystal
forms, usually with the octahedron as the dominant form.
Figure 4 shows three combinations of the octahedron: with
the tetrakis-hexahedron, with the hexakis-octahedron, and
with the rhombic dodecahedron.
Growth markings often appear on the surface of
naturally occurring crystals. The surface of the stone is
called the skin. Octahedron faces typically show small tri•
angular depressions pointing in reverse to the octahedron
shape, while dodecahedral faces show grooves (Fig. 5).
Such growth marks are important in several ways. After a
stone has been polished, a fragment of skin may still show;
this is called a natural. A natural may affect the value of
the stone considerably. It also serves to identify a piece 3
as a diamond.
Besides the fundamental types of crystal mentioned
earlier, and their combinations, there is another major way
in which crystals can grow; it is called twinning. Twinning
Bruton, p. 303. See also Gemo.logical Institute of America (G.I.A.), Diamonds: Production, Marketing, Buying, Gradi Appraising (Los Angeles, 1976), Assignment 3, p. 1.
G.I.A., Diamonds, Ass, 3, p. 5. 16
Figure 4
Combination of the octahedron
(From G.I.A., Diamonds, Ass. 3, Figs. 8, 9 and 10) 17
occurs when the crystal changes the orientation of its struc•
ture during growth. The result is a composite or double crystal, with some of its edges (or faces) parallel, and others reversed. There are two types of twins: interpene-
trant and oontaat. Interpenetrant crystals appear to have grown within the same space so that one seems to penetrate the other. Contact twins are like crystals which have grown side by side, but with different orientations; one part gives the
impression of having rotated 180° around an axis, the twinning
axis. They are also called rotation twins, for that reason.
Figure 6 shows several examples of twinning; some of these involve more than one twin.
The most common twinning is called a made (French for twin) in the diamond trade; Figure 6 (top) shows how one half of the basic octahedron can be pictured to rotate 180° to pro• duce a macle. Macles tend to be flat, so that they look like triangles (Fig. 7, first of bottom row); their re-entrant angle, when present, shows that they are not just untwinned 4 flat crystals. Macles are hard to polish and also their flatness creates special problems of wastage.
Crystal Form and Manufacture of Polished Diamonds. The manufacture of polished diamonds, to be discussed in more detail later on, involves, among other operations, three fundamental
Bruton, p. 289. 18
Figure. 6
Examples of twinning
(From Bruton, Fig. 17.15)
Figure 7
Macles
(From Bruton, Figs. 17.24 and 17.25) ones: sawing, cleaving, and polishing. These operations are only possible in certain directions in the stone given by the crystal structure. Cleavage occurs almost exclusive• ly in directions parallel to the octahedral (Fig. 9), the reason being that in those directions there are fewer bonds to break. More precisely, there are alternate lawyers with more and fewer bonds (see Fig. 2, right) and cleavage occurs between the close-bonded layers.
Sawing is best done parallel to the cube face.
Figure 8 shows the octahedron inscribed in the cube (left) and a cube face (right, top). These sawing planes help to make an octahedron crystal, with relatively little waste, into the saleable shape of polished, the brilliant. Hence the economic importance of octahedron crystals. There are other sawing planes, parallel to the six pairs of dodecahed• ron faces.
Diamond can be polished in certain directions much more easily than in others. The difference in hardness varies with the diamond and it can range from under ten times between the hardest and the softest directions to as much as 100 times. The softest directions are, according to one source, as follows:
1. Dodecahedron parallel to crystal axis.
2. Cube parallel to crystal axis. 20
CUBE FACE (100) OR FOUR POINT
Figure 8
Relations of octahedron crystal axes to cube crystal axes (left), and different faces or directions in an octahedral crystal (right).
(From Bruton, Figs. 18.6 and 18.7)
Figure 9
Cleaving Planes
(From G.I.A., Diamonds, Ass. 5, Fig. 3) 3. Octahedron towards dodecahedron.*3
These are shown in Figure 10. Only the first two can be polished; the third cannot be ground on the true face, and so cutters tilt the polishing plane slightly, as shown.
Also, opposite grinding directions are not of the same abra• sion hardness, which is due to crystal faces being out of alignment with the lattice structure.
MINING OF DIAMONDS
Recovery of Diamonds From Blueground. Diamonds can be found in their original rock matrix where they were formed only in the diamond pipes, which are funnels more or less oval in section and narrowing with increasing depth. These pipes go down to unknown depths (some have been mined deeper than
4,000 feet) and are evidently the result of some eruptive action. The rock filling the pipes is an altered and brecci- ated basic rock related to peridotite and known as kimherlite
(for Kimberley, the name of the earliest major mine) or blue- ground. The kimberlite must have been forced up from great depths, because it is entirely unrelated to the country rock surrounding the pipes . It is believed that the diamonds were formed in the depths of the earth under conditions of great heat and pressure, and reached the surface by extrusion up
E. M. and J. Wilks, quoted in Bruton, p. 306. 22
Figure 10
Polishing directions
(From G.I.A., DiamondsAss. 5, Fig. 3) 23
pipes like Kimberley. Indeed, it was in such conditions of extreme pressure and temperature that the first synthetic diamonds were produced by General Electric Co. in 1955.^
Mining the diamond pipes in the earlier days at
Kimberley was done by individual miners working their own pits, but as the excavations got deeper the claims were con• solidated (which helped bring about the formation of the De
Beers Company) and the blueground was hauled to the edge of the mine by windlasses. Finally, open pit mining became im• possible and mining using underground methods was begun by the newly-formed De Beers Consolidated Mines Ltd. One of the main methods is chambering; a main hoisting shaft is located some 800 feet or more from the pipe rim, and sunk well below the lowest level worked so far. The working levels are 40 feet apart vertically. Cuts of blueground are mined out between adjacent levels, supported by pillars of rock. This method depends upon natural caving. Figure 11 shows the process of chambering.
The method most used at present in the:.South African mines is block caving, schematized in Figure 12. This is a common underground mining technique.
After the blueground has been hoisted from the mines, it goes through three stages: crushing, washing, and recovery.
G.I.A., Diamonds, Ass. 4, p. 9. LEVELS 40 FT. 1600 FT. APART LEVEL
Figure 11
Chambering: the blueground is shown white
(From Bruton, Fig. 4.16) 25
Figure 12
Block caving: the bluegound (shown white) is undermined and breaks up to fall into draw pits
(From Bruton, Fig. 4.18) .2 6
The ore is crushed into fragments 1% inches or less in size and carried to the washing plant, where it is reduced to a fraction of its original volume by various washing processes .
Concentrates from.the washing plant go to the recovery plant, where they are fed onto sloping or stepped tables covered with grease. Wash water is applied to the grease tables and the concentrates are dropped onto the grease through the stream of water. The waste rock drops off and the diamonds, which are nonwettable but have an affinity towards grease, adhere to the tables. Periodically, the grease is scraped and then boiled 7 off to allow the recovery of the stones.
Recovery of Alluvial Diamonds. Until 1870, when the first diamond pipe was found in present-day Kimberley, South
Africa, all diamonds recovered had been of alluvial origin.
All diamonds in alluvial deposits originally formed, it is presumed, in kimberlite, were later released by erosion from their mother rock and carried away by rivers and streams. Some of them were washed as far as the sea, but others were deposited in potholes and other depressions of the stream beds. Rivers in time often dry up or change course, and so the deposits are found also in dry beds of ancient watercourses. Alluvial deposits are worked in a variety of ways, from the primitive to the elaborate. Large scale mining is done by taking the
G.I.A., Diamonds, Ass. 9, pp. 1-7. 2 7
gravel from open pits with modern earth-moving equipment and washing the concentrates, which are either hand-picked or passed through an electrostatic separator.
SORTING OF ROUGH DIAMONDS
Gems, and diamonds in particular, are invariably sorted by hand. From the moment they are discovered, they are handled as individual commodities. This is due, not only to their high value, but to the numerous, and often hard to discern,' varieties in which they, appear. Such varieties are described in the rest of the chapter, starting with the kinds of rough diamonds and continuing with the polished stones.
Gems, Near-gems, Industrials. The initial sorting is between gems and industrials. This thesis is concerned only with gems, which are the only diamonds used in jewellery.
Besides the kinds of diamonds that are purely industrial, stones that are of gem quality but too small to use, or stones that are too awkwardly shaped, or of poor colour or clarity
(as defined by some strict criteria} which are described below) are classified as industrial. Near-gems may be sold as top industrial grades or reclassified as gems, depending on the market, because their color or clarity are marginal.
Sorting Gems. The first broad division is by size; using a series of sieves, eleven size categories are disting• uished. All pieces weighing one carat or more (the carat, the 28
traditional unit for weighing gems, has been fixed at .2 grams) are known as sizes. Sizes are classified first according to shape, which is the most important factor to determine the value of a cuttable rough diamond. In each category of sizes, the following divisions are made:
1. Stones, unbroken crystals, generally octahedra, of regular formation.
2. Irregulars, slightly distorted but flawless crystals.
3. Shapes, slightly distorted and slightly flawed, but unbroken, crystals.
4. Cleavages, all broken stones, an. very irregular crystals (many of the largest rough diamonds ever found were cleavages.
5. Macles, the twinned crystals described above. g 6. Flats, very thin macles.
Those size categories weighing less than a carat are divided into only three groups by shape:
1. Melee, equivalent to stones and shapes above.
2. Chips, like cleavages. 9
3. Macles and Flats.
The next division is by factors related to transparency, which also includes quality, the sorter's term for clarity as defined below. Starting with the stones, the grader takes away
Bruton, p. 140.
Ibid., p. 145. 28a
all the brownies, greens, frosted crystals and oxidized crystals.
Some of these may turn out to be very valuable, but they require
special assessment; in general they are less valuable. Then,
the stones without visible spots are color-graded in nine cate•
gories, from colorless, to pale yellow, which is the commonest
and least valuable. Full-bodies yellow stones form a special
category: diamonds possessing a full-bodied colour, like yellow, green, or brown, are both valuable and rare.
Since the colour of the rough stones may diminish or disappear when cutting (by dilution due to mass loss or by being concentrated in a part that is cut away), the colour
classification of the rough goods is somewhat tentative.
The spotted goods (i.e., gems with visible spots) among the stones are then sorted in seven or so classes from lightly spotted to heavily spotted. Then they are colour-graded into
fewer categories than the purest stones. The remaining size and shape categories are divided into even fewer subgroupings.
Flaws and blemishes in the rough stones are only important in• sofar as they affect the size and quality of the polished gems obtained from them, so that, for example, an octahedron with a heavy inclusion near an octahedron point will be as valuable
as a clean crystal, because the corners are cut away when pro• cessing; so the position of the flaws is very important.
G.I.A., Diamonds, Ass. 11, p. 7 29
MANUFACTURING PROCESSES
Preparation. Rough diamonds, especially larger and better ones, are carefully studied before fashioning. The object is to yield a maximum weight of well-fashioned goods with a minimum of flaws. The study may include the polish• ing of a window (sometimes several windows) to locate exactly any flaws within the crystal.- Such windows are flat surfaces perpendicular to the intended plane of separation. Besides the properties of the stone itself, the designer has to con• sider the current demand for various sizes and qualities of polished goods. One of the decisions is whether to cut to exact angles (i.e., the standard proportions of the various styles of cut, which often require more wastage), or to cut for maximum weight utilization. The fact that a large stone is much more valuable than two stones of similar quality and the same combined weight must always be considered. Finally, the designer marks the stone with India ink to indicate the plane or planes along which it is to be cut. Often these planes are chosen so as to go through any major inner flaws in the crystal, so that they may be removed by later work on the various pieces.
Sawing. As mentioned before, there are certain direc• tions in which sawing can take place; three parallel to the cube faces and six more parallel to the pairs of rhombic dodecahedron faces (Fig. 8). These directions are valid for 30
any form of diamond crystal, not just an octahedron. In shapeless crystals (like cleavages) some indication must first be obtained of the orientation of the stone. The clues to the orientation in such cases are tiny surface markings or visible internal features.
Sawing is done with a thin (.003 or .004 in.) phosphor- bronze blade of three to five inches in.diameter, turning at about 3,000 r.p.m. The saw is charged with diamond dust in olive oil, and during the course of the operation the dust from the stone itself is used on the blade. The diamond is mounted in a dop (the tool that holds a diamond during process; it secures the stone either with mechanical claws or special kinds of cement) and placed in a weighted arm to hold it against the blade. The rate of cutting is slow (one study showed that a relatively thicker blade cut ten to fifteen 11 sq. mm. per hour) but the diamond is, of course, not very large. A knot, which is an included crystal, can, however, make the sawing difficult or even impossible.
The octahedron, the commonest crystal, is always sawed, because, unless a major flaw is placed in an inconvenient loca• tion, sawing allows to conserve more weight than cleaving.
Brilliant-cut gems (Fig. 24) are generally aimed at. Sawing is done through the centre or else one of the points is sawed
G.I.A., Diamonds, Ass. 16, p. 3. 31
off (Fig. 13). Flawed octahedra are sawn through the flaws, with smaller brilliants as the results (Fig. 14, left). In general, sawing off-centre is economically more advantageous, because of the premium on larger stones, and because more' weight is recovered.
Cleaving. The directions where cleaving is possible have been stated before to be (principally) the planes parallel to the four pairs of octahedron faces. Cleaving is done only with specially misshapen rough, or to remove flaws that sawing would only belable to cut through in a wasteful way. Figure
15 shows a combination of sawing and cleaving in a common octahedron.
Cleaving is done only by expert cutters, because a wrongly calculated cleaving direction, a poor cleavage groove
(see below), or a clumsily administered blow can shatter the stone. Traditionally the cleaver is also the designer, and expertise in designing and cleaving is handed down from gener• ation to generation within the family. In spite of its apparent simplicity, it requires lengthy study and preparation of the stone to be cut, and so it is an expensive process.
To cleave a stone, a V-shaped groove is carved in its surface by a series of progressively sharper-edged diamonds.
For the operation, the stones are cemented to dopsticks with a special cement, a combination of sealing wax and shellac, and then rubbed together by hand. Finally, a broad wedge is inserted in the groove and struck with a rod. The diamond is Figure 13
Sawing: two methods of cutting two brilliants from one octahedron crystal •
• (From Bruton, Fig. 11.24; and G.I.A., Diamonds,
Figure 14
Sawing through flaws (left) and cleaving to remove flaws (right)
(From G.I.A., Diamonds, Ass. 16, Figs. 6 and 7) Figure 15
Sawing and cleaving
(From G.I.A., Diamonds, Ass. 16, Fig. 8) 34
actually split by pressure against the sides of the groove, not cut in two by the wedge.
Bruting or Rounding Up. The stone to be rounded up is set on a dop that is mounted in a lathe, with the saw cut per• pendicular to the axis of rotation and the pointed end on the axis (Figs. 16, 17). A second diamond, usually a sawed stone to be bruted next, is mounted on a dop with a long handle, which the worker fits under the armpit while holding it near the diamond end with his hands; this works better than a mechanical holder. The lathe turns rapidly and the bruting diamond is carefully brought against the stone to be bruted.
In this way the sharp edges and corners of the latter are slowly ground down.
Often the worker in charge of bruting has to remove flaws in the stone; this cannot be accomplished by taking off equal amounts on all sides, because it would mean a waste of rough. Therefore, special lathe heads are used that can be adjusted for eccentric motion. An expert worker removes only enough material to allow final eradication of the flaw in the later processing. The rounding process can be done so skill• fully that naturals or small portions of the original crystal surface are sometimes left on opposite sides of the girdle.
This is not considered to be a flaw, and it proves to the 12 foreman that the worker has indeed saved weight.
12 Bruton, p. 193. THREE POINT
CLEAVED (IF NECESSARY]
TWO POINT
Figure 16
The relation between grain and grounding directions (Top stones are octahedral; bottom is dodecahedral)
(From Bruton, Fig. 11.28) Figure 17
The sequence of grounding operations
(From Bruton, Figs. 11.30, 11.31 and 11.32) 37
Cuts that are rounded but not circular, such as the marquise (Fig. 28) are also rounded on a lathe, but mounted off centre. This process requires more skill.
Faceting. The main instrument for grinding and polish• ing facets on the stones is a power-driven horizontal grinding wheel called a soaife. The scaife is a cast-iron disc, ten to twelve inches in diameter, and one inch thick when new (it gets grooved with use, and has to be refinished periodically).
The scaife is driven at over 2,500 r.p.m., and has to run absolutely true and free from vibration. Its surface is scored to retain diamond paste, often made with olive oil.
Several diamonds are often polished at the same time on a scaife.
The diamond is held in a dop, which can be mechanical
--a stell holder with two jaws, one fixed and one adjustable
- - on a solder head, the traditional method. The dop is attached to a heavy copper wire which in turn is held by the tang, a large support that holds the dop in position over the scaife. The tang can be weighted as needed to accelerate the polishing process, which requires, however, special skill to avoid burns in the diamond and excessive deepening of the facets.
The success of the operation depends on the correct positioning of the stone against the scaife. The correct angles and settings are mostly determined by eye, although some factories employ automatic machines. 38
The directions in which the stone can be ground are given by the crystal structure. Polishers divide the stones into two-, three-, and four-pointers; Figure 16 illustrates the difference in grain. The brilliant cut is obtained by placing eighteen facets first {blocking) and then the remain• ing forty {brillianteering). Figure 17 shows the progressive stages. The facets are ground and then polished. An acid bath is given to the finished stone to remove any oil and debris that may have entered the fractures and cleavages of the surface.
CUTTING STYLES
Early Forms of Cutting. Early polishing was done with the paramount purpose of conserving maximum weight: brilliance and symmetry were not so important. The form of the rough crystal was, therefore, rather closely preserved. The point cut (Fig. 18) is simply a polished octahedron, although some old point cuts have point angles below those of the natural octahedron and must therefore have been fashioned. The table cut is an octahedron with its top point flattened to a square facet called the table (Fig. 19). The table cut was the domi- 13 nant style up to the 17th Century. The rose cut has a flat back and a domed and faceted front; this style, which is at least as old as the table cut, has many variations, and is
Bruton, p. 159. Figure 18 The point cut (From Bruton, Fig. 1
Figure 19 The table cut (From Bruton, Fig. 1 40
especially adapted for flatter rough. Some rose cuts are
illustrated in Figure 27.
As artisans strove to increase the natural beauty of
the stone, the search for symmetry and brilliance led to a
series of styles, some of them illustrated in Figure 23,
until the first stone with 58 vacets (same as the modern day
brilliant-cut) was developed by a Venetian cutter, Vincent
Peruzzi, in the 17th Century. The Peruzzi cut, shown in
Figure 23 (bottom right), is quite close to the brilliant,
but differs in the angles of the crown and base. It is now
called old-mine cut.
The Most Efficient Forms of Cutting. Diamond depends 14
for its beauty on its lustre and its brilliance. Lustre
is the quality of the light reflected from the surface of a material, and it depends not only on the light reflected from the surface itself but on rays that have been partly absorbed before being reflected back. Even though most transparent materials are not very reflective, diamond is an exception, sending back some 17 per cent of the light falling directly on it, as against some five per cent for glass.
But the main criterion for diamond design is the brilliance, which depends on two other qualities: life and fire. Life is the amount of light that is reflected back after entering the stone through the front, and fire is the
Bruton, p. 166. 41
amount of dispersion caued by the stone splitting white light into the spectrum colours. Since more light enters the stone than is reflected back (83 per cent), the designer has to make sure that the light is not lost through the sides and back, but reflected inside the stone and sent back to the viewer.(Fig. 20). The most important factor is the critical angle, at which total reflection occurs. In diamond the cri• tical angle is 24°26'; i.e., light hitting the surface at a smaller angle will be reflected, and at larger angles will be absorbed.
On the other hand, the fire depends on the colour dis• persion of the material and on the amount by which the white light is refracted (Fig. 21). The more the light is bent, the more the fire. However, the life is decreased the more the light is refracted, and so it is impossible to attain both maximum fire and maximum life. So the designer has to attain instead an optimum balance of life and fire, which occurs when life multiplied by fire is a maximum. Life times fire is the technical definition of brilliance.^"'
In 1919 Marcel Tolkowski calculated the angles and proportions that would make for maximum brilliance in the 58- facet design. Tolkowski's proportions are shown in Figure 22, and the parts of the brilliant-cut diamond in Figure 24.
Later calculations have differed somewhat from Tolkowski's.
Bruton, p. 174. Figure 20
The ideally proportioned brilliant (left) returns more light than a deep (centre) or shallow (right) stone
(From Bruton, Fig. 10.9)
Figure 21
White light dispersed and refracted to produce fire
(From Bruton, Fig. 10.10) 43
Figure 22
The proportions of the ideal Tolkowski brilliant cut
(From Bruton, Fig. 10.17 44
Figure 23
(From Bruton, Fig. 10.3) PARTS AND FACETS OF THE BRILLIANT CUT
VIEW FROM BOTTOM
Figure 2 4
(From Bruton, Fig. 10. 20 46
Today, there is no universal agreement, but several cuts are used, among them the American cut (a modification of
Tolkowski's figures) and the European cut, derived from
Dr. W. Eppler (1940). The geographic designations, however, are misleading. Figure 25 illustrates the evolution of the brilliant cut.
Departures From the Ideal. In practice, even high quality diamonds are not always cut to precise angles. The crown angles, for example, set by Tolkowski at 34°30' (Fig.
22), may be found to vary from 29° to 35°, with small loss of brilliance. The pavillion angle (40°45') is, however, more critical, with a tolerance of some 2^. Deep stones (with a larger pavillion angle) appear blackish, and shallow ones
(smaller pavillion angle) look watery. Figure 20 illustrates reflection loss in a deep stone (middle) and a shallow one
(right).
The common practice of reducing the proportions of the finished stone above the girlde, which is known as swind• ling, is based on the greater weight retention from the cut.
Indeed, if an octahedron is sawn in half, the less removed from the crown the more the weight retained. Figure 33 shows two swindled stones; the angles are right but the percentage above the girdle may be as low as eight per cent instead of
Tolkowski's 16.2 per cent. The effect, however, is a reduced fire. But life is not reduced unless the angles are changed. BRAZILIAN OLD EUROPEAN CUT CUT
LISBON ENGLISH CUT ROUND-CUT BRILLIANT [JEFFRIES]
OLD MINE EARLIER MODERN' CUT BRILLIANT [TOLKOWSKY]
The illustrations on pages 168 to 173 are not exact as they are intended primarily for identification purposes. Girdles of round stones for example, are in fact scalloped. The English square cut was also called the double- cut and those in the diagrams from the Perruzzi to the old mine cut were called triple cuts. MODERN BRILLIANT
Figure 25
(From Bruton, Fig. 10.4) 48
The manufacturer is always faced with a compromise between obtaining the maximum weight and arriving at the ideal proportions for maximum quality of cut. The higher the quality of the crystal, the more likely he is to try for the best cut; but as the quality lowers, he tends to optimize profits by saving weight.
Other Modern Cuts. Styles other than the round brilliant, the eight-cut or single cut (Fig. 26, top left)^ and the rose cut (Fig. 27) are called fancy cuts. These are illustrated in Figures 26, 28 and 29. Fancy cuts may be divided in two classes, the brilliant cut variations (mar• quise, pear, oval, and so on -- Fig. 28), and the step cuts, like the emerald (Fig. 29) and others used for small stones
(Fig. 26).
There are no established proportions for such cuts; however, one rule that applies is that the angles and propor• tions of the narrow cross section should be as close as possible 17 to the brilliant cut ideal. In the emerald cut, for instance, the angles between the rows of facets should be almost imper• ceptible, and the angles of the central row should both be
34"30', as for a brilliant. But most emerald cuts in practice show proportions calculated for maximum weight saving, with little regard for brilliance.
"^The eight-cut, which has 18 facets, is used for very small stones.
17 G.I.A., Diamonds, Ass. 15, p. 10. SINGLE FRENCH CUT CUT
/ \ /
\ / \
SWISS X SQUARE CUT =y CUT
SPLIT-BRILLIANT Ep> BAGUETTE CUT THE BRILLIANT IS ALSO USED FOR SMALL STONES.
RHOMBOID CUT THERE ARE MANY OTHER SHAPES OF SMALL STEP [OR TRAP] CUT STONES,THREE, SIX, AND TWELVE FACET ROSES ARE VERY COM• MON CUTS FOR SMALL LOZENGE CUT TRIANGLE CUT STONES.
Figure 2 6 the single cut is also called eight-cut (From Bruton, Fig. 10.7) ROSE CUTS
DOUBLE ROSE BOAT-SHAPED PEAR -SHAPED ROSE ROSE
Figure 27
(From Bruton, Fig. 10.6) Figure 28
[From Bruton, Fig. 10.5) 52
EMERALD CUT
TRILLIANT
// \\ SQUARE EMERALD CUT PROFILE CUT [ IN VARIOUS SHAPESJ
^ggg^ STEP (OR TRAP] BRILLIANT CUT'
TWO TYPES OF RONDELLE
STEP-CUT BEAD THE NUMBER OF STEPS VARY WITH THE SIZE AND DEPTH OF STONE. OTHER STEP CUTS ARE SHOWN UNDER "CUTS FOR SMALL STONES." BRIOLETTE
Figure 29
(From Bruton, Fig. 10.8) 53
GRADING POLISHED DIAMONDS
The Four C's. In the diamond trade the value of a polished diamond is judged by assessment of four qualities:
colour, clarity (or purity), cut (proportions), and weight
(in carats, whence the fourth "C") .
Grading Colour. Grading for colour means to decide how much a stone deviates from being colourless, i.e., how much off-colour it is. Gem stones appear in continuous series
from white (colourless) to yellow, which is the commonest group, from white to green, and from white to brown, and these series can be divided artificially in certain categories, but, since there are no natural divisions, there will always be borderline cases.
Colour grading must be done in white light, which im• plies that no coloured surfaces should reflect on the stone, and the stone itself must be set against a dead-white background. A common practice is to place the stone on fluted white paper with no trace of colour. Also folded white cards are sold for that purpose. The diamond must be examined through the side of the pavillion; looking at the table will cause confusion due to the phenomenon of fire.
Not every kind of white light will do, because ultra• violet light, which is invisible, is likely to cause a visible blue fluorescence in the diamond that will cancel any yellow colour. Since yellow and blue are nearly complementary, the 54
stone will appear whiter than it is. Such stones are mis• takenly called "blue-white." Some stones, on the other hand, may exhibit a yellow fluorescence that will push their colour towards the opposite end of the scale.
Therefore, ultraviolet light must be avoided. The sun's radiation, of course, contains ultraviolet, but it can be eliminated by using daylight from a north-facing window
(south-facing in the southern hemisphere). Another problem with daylight, however, is that morning and evening light, that contains too much red, is not suitable. To avoid such problems, several standard lights have been developed that contain no ultraviolet and are equivalent to north daylight.
The Gemological Institute of America (G.I.A.) introduced the
Diamondlite, a box with a niche in the front, pained white, and fitted with such a Tight. Another standard light is the
Koloriscop, a Swiss invention.
For grading colour consistently, standard comparison stones are indispensable. Institutions like the G.I.A. will grade a set of comparison stones in a standard manner.
One difficulty encountered in grading is that the size or bulk of the stone causes an illusory difference in colour. A 3-carat stone with a tinge of yellow will appear darker than a %-carat stone of the same density. Therefore, when grading, allowance must be made for this phenomenon. In any case, stones under %-carat are not graded as accurately as the larger sizes, since the price difference does not justify it. -55
Mounted stones are almost impossible to grade accur• ately, because the setting affects the colour and also the side of the pavillion is obscured. Yellow gold tends to down• grade the colour, and blue sapphires will improve it. Small mounted stones will appear colourless even when their larger 18 unmounted counterparts show more than a trace of colour. There are several colour grading systems, as shown in
Figure 30. "Wesselton" refers to the mine of that name and
"Cape" to the Cape of Good Hope; these are traditional names, the G.I.A. scale consists only of letters, started at D to avoid confusion with the A grades of many manufacturers.
There are, indeed, numerous commercial scales; some use letters and some use names like Fine White, Commercial White, Silver
Cape, Dark Cape, and so on. One inevitable problem with such scales is that the same names correspond to very different colours, so that, say, Fine White will be different for each manufacturer or dealer. The names Blue-White and Commercial
White have been especially abused and in several countries there are rules regulating their use; for instance, Federal
Trade Commission rules in the U.S.A., and similar rules in 19 the U.K.iy
Bruton, pp. 208-209.
Ibid., pp. 210 and 212. SCAND.D.N SCAN.D.N under 0.50ct and A.G.S G.I.A 0.50ct over U.K RAREST FINEST WHITE 0 RIVER WHITE (BLUE-WHITE ) TOP FINE WESSELTON WHITE WHITE 8s* WESSELTON WHITE TOP COMMERCIAL CRYSTAL WHITE TINTED WHITE TOP CRYSTAL SILVER CAPE
TOP SILVERCAPE CAPE
M LIGHT CAPE CAPE i-a. ^ o 5-
O
LIGHT YELLOW CAPE
DARK •S5 YELLOW YELLOW CAPE
ill 9-10 s-x
Figure 30 ]omparison between the most common scales of colour A.G.S. American Gem Society G.I.A. Gemological Institute of America SCAN.D.N. Scandinavian Diamond Nomenclature U.K. English System 5 7
Grading Clarity. Clarity refers to the presence or absence of inclusions, cleavages, cracks, or any other natural feature inside the stone, or any defect on the/surface. Such features, and others not normally visible, such as twinning', will cause a loss of brilliance in the piece, making it less valuable.
The minimum equipment for grading by clarity is a pair of diamond tongs and a hand lens of lOx magnification.
The tongs are provided with fine non-slip tips and are not
so strongly sprung as watchmakers' tweezers. : The lens should be corrected for chromatic and spherical aberration (like the
Zeiss). The magnification has been set at lOx as a standard; blemishes that are not visible at that magnification are not considered, even if they are visible under a microscope.
The stones can be examined in daylight or with the help of a lamp with an opaque shade. A lamp can be used so as to provide dark field illumination, which is the most useful to detect inclusions.
The G.I.A. supplies a binocular microscope magnifying to ten times, provided with both light and dark field illumi• nation and called the Gemolite. It has a 50x zoom lens that allows the grader to find small inclusions and then check if they are visible under lOx. This practice is considered un• fair by some dealers.
According to G.I.A. terminology, external features are called blemishes and internal features inclusions. A list follows. 5 8
Blemishes:
1. Cavities -- openings on the surface.
2. Nicks -- minor surface chips often caused by long wear.
3. Twin lines, knot lines, or grain lines -- caused by twinning or by large inclusions with differently oriented grain than the main crystal.
4. Naturals -- remnants of the original crystal surface or skin.
5. Scratches and grinding marks.
6. Extra facets -- usually made by the cutter to eradicate superficial imperfection.
7. Rough girdle -- often caused by too rapid bruting.
8. Facets nearly parallel to the grain -- which show a gray or cloudy appearance.
9. Burn marks -- caused by overheating during polishin
Inclusions:
1. Cleavages -- any break along the grain (i.e., paral lel";.to one of the four pairs of octahedral faces) .
2. Fractures -- any breaks that do not follow the grain for the whole of its extent.
3. Feathers and hairline feathers -- i.e., cleavages and fractures with a feathery appearance.
4. Included crystals, also called bubbles -- which are dark by transmitted light but transparent using dark field illumination.
5. "Carbon" spots -- small cleavages or sometimes inclusions of diamond crystals or other minerals, dark or white.
G.I.A., Diamonds, Ass. 20, pp. 2-4. 59
6. Pinpoint.inclusions -- minute "carbon" spots.
7. Clouds -- white cottony inclusions that are either minute hollow spaces or small patches of tiny cry• stals.
8. Knots -- included crystals oriented differently from the main crystal and standing out on the surface due to the extra hardness.
9. Percussion marks or bruises -- tiny white marks resulting from blows.
10. Crystal growth lines -- a banding effect visible only under certain lighting conditions.
11. Bearded, or feathered, girdle -- minute hairlike fractures that extend into the stone from the girdle, and are the result of abuse during bruting.
12. Fissures -- cleavages or fractures open at the surface as a long cavity.21
Such features are plotted on a chart representing the stone, as in Figure 31, using a code of signs and colours to differentiate each type of blemish and inclusion.
There are several grading scales, some of which are compared in Figure 32.
The letter S stands for "small" (inclusions)." Then
VS is "very small (inclusions)," and VVS means "very, very small (inclusions)." Pique means "pricked" in French. In the English scale the top grades are Flawless, WS and VS;
SI is a middle grade; and Pique and the rest are low grades.
Naturally, the terms in each scale stand for a definite stan-
G.I.A., Diamonds, Ass. 20, pp. 4-8. 60
r" SYMBOLS USED TO INDICATE POSITION AND NATURE OF DIAMOND-CLARITY CHARACTERISTICS
Plot on the crown diagram all characteristics visible through the crown, unless they reach or are on the pavilion surface.. Be careful to keep all markings in their relative, size and location. If the plotting is executed carefully enough, the clarity should be almost self-evident. A char• acteristic for which there'.is no symbol should be covered by a written comment. Note: It is suggested that a green pen be used,to plot external characteristics, and red to signify internal characteristics. Ball-point pens with fine auditor's points are excellent for this purpose. .
External Characteristics 1. Cavity 2. v Nick 3. External grain, knot or twinning line 4. Natural 5. Sratch or wheel mark 6.. EF A Extra facet (actual shape) 7. Rough girdle Internal Characteristics 1. Cleavage, feather and u ; -hairline feather' 2. Fracture, feather and - ' hairline feather 3. ' o Included crystal (actual shape) 4. • "Carbon" spot 5. • Pinpoint inclusion 6. . Group of pinpoint inclusions 7. O Cloud (actual shape) 8. x ": ® Knot 9. x Bruise 10. Bearded, or feathered girdle 11. J " Internal grain, knot or twinning line • 12 © Laser
Figure 31
From a brochure by the Diamond Brokers, Vancouver, B.C. Cemological A Scale Commonly Scandinavian Institute of America Used in the U.K. Diamond Nomenclature Scale
Flawless (clean) FL FL IF (Internally Flawless) WS vvs, VVS, WS, vvs, VS VS, VS, VS, VS, SI SI, SI, SI, SI, ist Pique ist Pique1 I, (Imperfect) 2nd Pique 3rd Pique 2nd Pique la Spotted 3rd I'icjiid I. Heavy Spotted Rejection
Figure 32
Clarity scales compared
(From Bruton, p. 223) dard. It would be impossible to detail fully the meaning
of each category, even if space allowed; the following is
list of examples of maximum allowable blemishes and inclu•
sions under each category of the English scale combined
with Scandinavian nomenclature.
MAXIMUM ALLOWABLE GRADE IMPERFECTIONS (Examples) VISIBILITY
Flawless Internal growth lines Barely visible colorless from the front with lOx lens Minor natural on girdle
WS Minor nicks and cavities Barely visible (Scan. IF) not in the table with lOx lens Slight facet abrasion removable by polishing
WS Pinpoint inclusions Very difficult to
(Scan. WS1) above the table find with lOx lens Slight bearding of the girdle not visible from the front
VS Small cleavages not Difficult to find under the table with lOx lens Some general abras ion
SI Nick in girdle Just visible with Slightly cloudy areas watchmaker's lens
1st Pique Dark crystal not under Just visible to table naked eye Cleavage visible from the front
22 Bruton, pp. 224-225. 63
2nd, 3rd Pique Group of dark spots under More easily visible table to naked eye Dark cloud, under table
Spotted Colored cleavage reaching Easily visible to under table naked eye Scratch on table
Heavy Spotted Large or very numerous Very easily visible dark spots under table to naked eye Large areas of colorless crystals under table
It should be noted that stones under \ carat need not be graded with the full scale, because the price difference does not justify it.
As with colour scales, there is a wide discrepancy
among the various dealers regarding the interpretation of
terms commonly used in the trade, like WS, VS, and other
like clean, eye-clean, arid commercially •perfect, which are
also used. The term clean, in particular, has been so
abused in the U.S.A. that the F.T.C. restricted its use to 23
diamonds that fit the Commission's definition of perfect.
Another problem is that, as with colour, diamonds present themselves in continuous gradations, so that even
the best defined scale will have many borderline cases. For
instance, a spot under the table is more detracting to the
value that a spot at the edge, but if the spot lies between
table and edge there is no way to decide whether to downgrade
the stone or not.
23 Bruton, p. 222 64
Grading Cut. A brilliant-cut stone with proportions
sufficiently close to the ideal described earlier will have
maximum fire and life, i.e., brilliance. The main reason
that departures from the ideal are so common is that cutting
to these proprotions causes a greater wastage of rough. A
manufacturer who cuts a spread table, i.e., one that is too
large for the diameter of the stone, will be able to offer
more weight for the same price, as illustrated by Figure 33.
The ideal-cut stone A (with culet in point 0) weighs 0.875
ct., while an extremely spread stone, like D, belongs to a
higher weight bracket by being over a carat, 1.08 ct.
A spread table goes together with a thin crown, as
can be seen. Other usual departures from the ideal, in order
of diminishing frequency, are: thick girdle, deep pavilion,
major symmetry faults, thin girdle, shallow pavilion, thick
crown.
Various instruments are available for determining
the actual proportions of a stone. The G.I.A.'s Proportion-
scope casts a magnified shadow of the stone onto a line dia•
gram of the ideal cut. Measuring devices and angle gauges
may also be used.
However, Visual estimates can be very accurate
with practice. The pavilion angle, for instance, may be
estimated by observing the reflection of the table on the pavilion facets. Looking through the front of the stone, 65
D—1.08 Ct. C—1.00 Ct. »- .94 Ct. .875 Ct.
Figure 33 (left) Figure 33 (right)
A swindled brilliant; the Several brilliants that can dotted line shows the proper be obtained from the same cut. (From G.I.A., Diamonds, half octahedron. Only A is Ass. 15, Fig. 16) a perfect brilliant. (From G.I.A., Diamonds, Ass. 22, Fig. 1) 66
a bright image of the table can usually be seen, which in a correctionly proportioned stone should be 33 per cent to 40 per cent of the diameter of the table itself. A shallow pavilion produces a fish-eye effect, and a deep pavilion large black reflections are seen in the centre of the table.
The depth of the crown and the thickness of the girdle affect the reflection in known ways.
Besides the closeness of the stone's proportions to the ideal, another factor is considered when grading for cut, namely the finish. Finish is determined by quality of polish, quality of the girdle surface (the ideal being a waxy, smooth finish), symmetry (perfection of shape and relative poisoning of the facets), size of the culet, facet edges, extra facets, and naturals, although some of these variables are also con• sidered under proportions and clarity.
There are no scales for grading cut, but only descrip• tive terms like very good, good, medium, and poor. However, for the purposes of valuation of a polished stone, the devi• ation from the ideal cut can be established as a percentage, using, for instance, the G.I.A. tables.
Weight. The metric carat, now universally in use, amounts to 0.2 g. A carat was originally the weight of a dried seed of carob. The grain, the weight of a dried grain of weight, has come to mean h carat. Hundredths of a carat are called points. 67
Loose stones are weighed in ordinary chemical balances, accurate to about a point, and several special diamond balan• ces, like the Oertling and the Mettler. The weight of mounted
stones can only be estimated; for that purpose, hole gauges, calipers, like the Moe and the Leveridge gauges, and compari•
son gauges are used. There are also formulae that give the weight of an ideal brilliant-cut diamond as a function of 2
its length measurements, like, for instance, 0.024 5 hr = weight, in carats (where h is the height and r the radius, in mm). Charts of sizes and corresponding weights have also been made. All these means are also used on unmounted stones when precision balances are not available.
Valuations. The value of a polished diamond depends on its colour, clarity, cut, and weight. Of these parameters, weight is the most objective and easily determined, so that it forms the base for all valuations.
An ancient attempt to find regularity in the pricing of diamonds by weight was formulated as early as 1638 by the merchant Tavernier, who stated the "rule of squares": 2 The price of a diamond of x carats is x times the price per 2 3 carat of that given quality. This formula has only a very general application to today's prices; however, as Figure 34 shows, it can be reasonably close to actual prices. The
A. N. Wilson, Ed., International Diamond Annual (Johannesburg: Diamond Annual Ltd., 1971), p. 97. Bruton, p. 258, attributes the rule to David Jeffries, an 18th Cen• tury diamond merchant. LOW QUALITY HIGH QUALITY WEIGHT Market Calculated Market Calculated Price Price Price Price Ct. £ £ £ £ 0-25 27 20 48 55 0- 50 72 79 '75 '34 1- 00 3'5 3'5 935 935 2- 00 1,260 1,260 3-400 3,74° 3- 00 2,580 ',835 5,000 8A'5
Figure 34 A comparison of actual and calculated prices (From Bruton, p. 259) 69 chart shows prices for polished stones of low and high qual• ity in England and Belgium in 1972; the base price for the application of the rule is the price of a one-carat stone in each case. The relation between weight and price is dis• cussed more thoroughly in Appendix 2.
To evaluate a polished stone, the weight should be determined by weighing or using a gauge; then the cut, clarity and colour should be established. There are then standard charts, such as those published by the G.I.A., that give the value of a stone as a percentage of the value of a top qual• ity stone. For instance, a G.I.A. chart for round cuts appears as Table II.1. The value of a stone of.colour.D and clarity F (G.I.A. scales) is taken as 100 per cent, whereas an F colour of clarity weighing from 0.90 ct. to 0.96 ct. would be only 57 per cent. Similarly, the G.I.A. offers charts of percentage reduction of value for poor cut. To complete the valuation, a chart of prices for top quality diamonds is necessary, and those are prepared periodically by the G.I.A. from information supplied by the wholesalers and importers (Table II.2). The G.I.A. valuation charts, are, of course, tailored to the American market, and the price lists only relevant to an American buyer (wholesaler or jeweller) wishing to buy from the importers.
Regarding the percentage reduction of value for poor cut, this is determined by comparing the present weight of a diamond to the weight that would have resulted had it been cut originally to an ideal proportion. This is G.I.A. PRICE REDUCTION CHART
ROUNDS and MARQUISE
PERCENTAGE REDUCTION CHART FOR DIAMOND COLOR AND CLARITY GRADES
Color D E F G H Color
Clarity abcdef gh abcdef gh Clarity abcdef gh abcdef gh abcdef gh
F 100% 90 91 87 ---100%--- 75 77 76 -- - 100% 63 65 64 80 81 86 85 94 53 55 56 70 75 77 78 90 F VVSj 74 75 72 77 83 88 83 93 68 69 67 77 83 88 83 93 62 63 62 77 83 88 83 93 53 55 54 69 75 80 78 91 46 48 48 62 68 72 73 88 VVSj
vvs2 62 60 60 67 75 80 76 91 58 57 56 67 75 80 76 91 53 52 53 67 75 80 76 91 46 48 48 60 70 74 73 88 42 44 42 56 63 68 68 86 J vvs2 51 52 53 61 70 74 72 88 49 50 50 61 70 74 72 88 46 47 48 61 70 74 72 88 42 44 42 56 62 70 68 86 j 38 40 38 51 58 63 64 81 j VSi
vs2 46 48 48 57 65 70 68 86 • — 1 44 46 46 57 65 70 68 86 42 44 42 57 65 70 68 86 39 41 40 53 57 63 65 84 36 38 35 48 52 58 61 78 j VS2 sii 43 45 46 5_4 6 0 66 66 84J42 44 42 54 60 66 66 84 40 42 38 54 60 66 66 84 37 39 36 50 51 56 61 78 3436 32 46 48 52 58 72 j SI . 42 43 43 52 57 62 63 78 1 SI 2 39 42 39 52 57 62 63 78 38 40 36 52 57 62 63 78 35 37 34 48 48 52 59 72 32 35 29 44 43 48 55 71 | SI 2 IX* 38 39 39 47 52 56 57 71 35 38 35 47 52 56 57 71 35 36 33 47 52 56 57 71 32 34 31 44 44 47 54 65 29 32 26 40 39 44 50 65 I- * I2* 35 36 36 43 47 52 52 65 33 35 32 43 47 52 52 65 32 33 30 4.3 47 52 52 65 29 31 28 40 40 43 49 60 27 29 24 37 36 40 46 59 j I2*
r3* 21 22 22 26 29 31 32 39 20 21 20 26 29 31 32 39 19 20 18 26 29 31 32 39 18 19 17 24 24 26 30 36 16 18 15 22 22 24 28 36 1 I3*
: This is merely a guide. In actual trade practice, stones in the Imperfect grades are likely to be priced individually, depending on the nature and visibility of flaws. Stones in the lower color grades are also likely to be priced individually.
EXPLANATION OF SYMBOLS: Column a - Includes sizes from 1.90 cts. thru 3. 10 cts. Column e - Includes sizes from .68 ct. thru .89 ct. Column b - Includes sizes from 1.36 cts. thru 1.89 cts. Column f - Includes sizes from .36 ct. thru .67 ct. Column c - Includes sizes from .97 ct. thru 1.35 cts. Column g - Includes sizes from . 18 ct. thru .35 ct. Column d - Includes sizes from . 90 ct. thru . 96 ct. Column h - Includes sizes of . 17 ct. and below. o TABLE II.1 ' (Continued)
ROUNDS and MARQUISE
PERCENTAGE REDUCTION CHART FOR DIAMOND COLOR AND CLARITY GRADES
Color I J K L MN OP *
Clarity abcdef g h abcdef gh abcdef gh abcdef gh- abcdef gh abcdef gh
F 42 46 47 63 66 71 72 88 35 40 40 49 55 63 65 84 30 34 34 41 47 57 57 82 26 30 28 36 41 49 49 76 21 25 26 32 36 44 44 64 18 22 23 27 26 37 38 56
VVSj 36 41 40 57 60 66 66 85 31 35 36 45 51 59 61 81 27 30 31 38 44 53 53 80 23 27 26 33 38 46 46 73 19 22 24 29 33 40 40 63 16 19 21 24 24 34 36 55
33 37 37 51 55 61 62 81 28 33 34 41 47 56 57 79 25 28 29 35 43 50 50 77 21 24 25 30 36 43 44 71 17 20 22 27 31 37 38 61 14 18 19 22 22 32 34 53 vvs2
VSi 30 34 34 47 52 58 58 78 27 30 31 38 44 53 53 74 23 26 27 32 39 47 48 72 19 22 24 28 34 41 42 66 16 19 20 25 29 35 36 59 13 16 17 20 21 30 33 52
28 32 31 44 48 53 56 72 26 28 28 36 41 46 51 71 22 24 25 30 36 44 46 68 18 21 22 26 32 39 40 64 15 18 19 22 27 33 34 57 12 15 16 18 20 28 31 48 vs2
26 30 29 42 43 46 53' 71 24 27 26 34 37 41 49 68 20 23 23 28 32 39 44 66 17 20 20 24 29 36 38 62 14 17 17 20 25 31 32 53 11 14 15 17 18 26 29 44 SI1 19 22 21 26 30 35 41 65 16 19 19 22 26 34 36 59 13 16 16 19 23 29 31 50 10 13 14 16 17 24 28 42 SI 2 25 29 26 41 40 42 51 68 23 26 24 32 33 37 4? 66 h* 23 26 24 37 36 38 46 62 21 24 22 29 30 34 43 60 17 20 19 24 27 32 37 59 15 17 17 20 24 31 33 54 12 15 15 17 21 26 28 45 9 12 13 15 15 22 25 38 21 24 22 34 33 35 42 57 19 22 20 27 27 31 39 55 16 18 17 22 25 29 34 54 13 16 16 18 22 28 30 49 11 13 13 16 19 24 26 42 8 11 12 13 14 20 23 35
13 15 13 21 20 21 26 34 12 13 12 16 17 19 24 33 10 11 11 13 15 18 21 33 8 10 10 11 13 17 18 30 7 8 8 10 12 15 16 25 5 7 7 8 9 12 14 21 r3*
*This is merely a guide. In actual trade practice, stones in the Imperfect grades are likely to be priced individually, depending on the nature and visibility of flaws. Stones in the lower color grades are also likely to be priced individually.
EXPLANATION OF SYMBOLS: Column a - Includes sizes from 1.90 cts. thru 3. 10 cts. Column e - Includes sizes from .68 ct. thru .89 ct. Column b - Includes sizes from 1.36 cts. thru 1.89 cts. Column f - Includes sizes from .36 ct. thru .67 ct. Column c - Includes sizes from .97 ct. thru 1.35 cts. Column g - Includes sizes from . 18 ct. thru . 35 ct. Column d - Includes sizes from . 90 ct. thru . 96 ct. Column h - Includes sizes of . 17 ct. and below.
* l-> TABLE.II .2 COMPREHENSIVE WHOLESALE DIAMOND BASE PRICES The prices compiled below are net cash per carat prices for flawless, finest color stones (entirely without body color, highly transparent and averaging no more than a 5% deduction for proportions and finish). Commercial price lists for this quality may show slightly higher figures, since they usually cover term rather than cash prices.
Average Weight Range •• Ovals, Pears Emerald Stone Size Covered* Rounds Marquise and Hearts Cuts 3 cts. 2. 90 cts.thr u 3.10 cts. $11, 500 $10,200 $9, 200 $8, 500 2 3/4 cts. 2. 63 cts.thr u 2. 89 cts. 10,300 9, 100"'- 8, 240 7,630 2 1/2 cts. 2.40 cts.thr u 2.62 cts. 9,700 8, 550 7, 760 7, 190 2 1/4 cts. 2. 23 cts.thr u 2. 29 cts. 9, 000 7, 920 7, 200 6, 680 2 cts. 1. 90 cts.thr u 2.10 cts. 8, 750 7, 700 7, 000 6, 500 1 3/4 cts. 1. 63 cts.thr u 1. 89 cts. 6, 850 6,030 5,480 5, 120 1 1/2 cts. 1.40 cts.thr u 1. 62 cts. 5, 900 5, 200 4, 720 4,430 1 3/8 cts. 1. 36 ctsthr. u 1. 39 cts. 5, 300 4, 660 4, 240 4, 000 1 1/3 cts. 1. 30 cts.thr u 1.35 cts. 5, 000 4,400 4, 000 3, 780 1 1/4 cts. 1. 23 ctsthr. u 1. 29 cts. 4,980 4, 250 3, 880 3, 670 Heavy ct. 1. 06 ctsthr. u 1. 22 cts. 4, 965 4, 220 3, 840 3, 640 1 ct. . 97 ct. thru 1. 05 cts. 4, 950 4, 180 3, 800 3, 600 Lt. 1 ct. . 90 ct. thru . 96 ct. 3,450 2, 720 2,470 2, 400 7/8 ct. . 84 ct. thru . 8.9 ct. 2,375 2, 110 1,920 1,800 3/4 ct. . 68 ct. thru . 83 ct. 2, 100 1, 980 1, 800 1, 600 5/8 ct. . 57 ct. thru . 67 ct. 1,460 1, 520 1, 380 1,120 1/2 ct. . 47 ct. thru . 56 ct. 1, 360 1,430 1, 300 1, 040 Lt. 1/2 ct. .41 ct. thru . 46 ct. 1, 060 1, 150 1, 040 815 3/8 ct. . 36 ct. thru .40 ct. 960 1, 050 955 735 1/3 ct. . 30 ct. thru . 35 ct. 910 1, 020 850 600 1/4 ct. . 23 ct. thru . 29 ct. 760 775 700 550 1/5 ct. . 18 ct. thru . 22 ct. 575 640 580 440 1/6 ct. . 15 ct. thru . 17 ct. 420 485 440 335 1/8 ct. . 12 ct. thru . 14 ct. 410 475 430 330 1/10 ct. . 09 ct. thru . 11 ct. 400 460 420 320 1/14 ct. . 07 ct. thru . 08 ct. 395 455 415 315 *These size ranges will vary slightly with different firms. 73
similar to the way in which old-mine cuts and other old- fashioned cuts are evalued: one estimates the weight of the stone if it were recut to the brilliant style, and cal• culates the corresponding value (adding the price of re- cutting) . The valuation of modern fancy cuts, on the other hand, is more complex than that of brilliants, although there are also tables. One problem is that there is a less predictable demand for fancy cuts; another, that the ideal proportions are not established.
Fancy Colours. Diamonds have been found in some tones and intensities of each of the six spectral hues, but usually they are either colourless or range from very light to very strong yellow or brown. As yellow and brown increase from the colourless end of the grading scale, value steadily drops to the point where the colour becomes deep enough to be an asset. In other words, deep tones of colour increase a diamond's desirability. A fancy is a diamond that possesses a distinct body colour other than light yellow, light brown, or grey. These colours are excluded because they are the most common. The prices of fancies vary too widely to be worth compiling.^
G.I.A., Diamonds, Ass. 18, p. 4. 7
CONCLUSION
Diamonds are a nonhomogeneous commodity, valuable enough to justify the most careful individual appraisal.
Minute observable differences in properties make for enormous differences in value. There is substantial, if not total agreement, on what qualities are desirable; thes can be summarized as rarity of the stone and beauty of the cut. CHAPTER III
PRODUCTION, DISTRIBUTION AND MANUFACTURE OF DIAMONDS
OUTLINE
The first section presents a diagram of the complex network of organizations, firms and individuals that handle the flow of diamonds from the mines to the retailers. The central element in the schema, the De Beers group, is left for a subsequent chapter, and the second section instead deals one by one with the diamond-producing countries, with special reference to what kinds of entities engage in mining, viz., companies or private diggers, and the ways in which the production reaches the world market. The third section studies briefly each of the main centres of diamond cutting in terms of history, labour practices and type of output, and the principal wholesale trading centres, which are most often closely connected to the industry. A conclusion points out certain recurrent patterns in the historical development of the cutting and trading centres.
THE DISTRIBUTION STRUCTURE
A diagram of the distribution of gem diamonds is shown in Figure 35. The central role in the distribution GENERALISED GEM DIAMOND 76 DISTRIBUTION STRUCTURE Dc Beers Producers Outside Goods Producers ZA
The Central Selling Organisation
The Diamond Trading Company
Syndicate Brokers
Rough Dealers
Polished Manufacturers
Polishid Brokers Polished Dealers
"N A
Diamond Manufacturing Investment Jewellers Broking Companies
Wholesale Jewellers Figure 35 A Generalized gem diamond distribution structure. Retail Jewellers (From The Economist Intelli• gence Unit Ltd., Inflation A Shelters: Precious Metals aseInvestments (London: EIU Diamond Consumers 1976),p. 37. 77
system is played by the De Beers companies, which sell about 80 per cent of the world's rough gem diamond production through the Central Selling Organisation (C.S.O.) in London.
C.S.0.-marketed diamonds, traditionally called "syndicate, goods", include the rough produced by the Russians and des• tined for consumption outside the Soviet Union. The Russians, however, polish part of their own rough and distribute it in the world market.
Of the 20 per cent of the world's diamonds the
C.S.O. doesn't handle ("outside goods"), the most important supply is from Ghana; part of the Sierra Leone Selection
Trust supply also goes to specified buyers direct. Indivi• dual diggers and small mines in South Africa, South West
Africa, and Lesotho, sell to licensed buyers. The Central
African Republic, the Ivory Coast, Guinea, and the South
American states of Guyana, Venezuela, and Brazil sell out• side the C.S.O. The small Indian production is also outside.
Also outside control are unrecorded but large numbers of diamond mined and sold illegally in many producing countries to end up in cutting centres.
Regarding the interpretation of the distribution diagram, it should be noted that any one diamond firm of almost any size can perform operations that embrace several of the separate functions in the boxes. Dealers handle both rough and polished, and they are often also cutters as well; 78
also, many of them have connections with brokering companies.
The difference between a dealer and a broker is that the former works for his own account, while the broker works for others. As before, dealers often function as brokers, and conversely.
THE PRODUCING COUNTRIES
Statistics regarding the production and movement of diamonds are strikingly unreliable. For instance, the U.N.
Statistical Yearbook for 1976 (Fig. 36) gives the world production of gemstones for 1967 at 8.75 million ct., for
1968 at 11.29 million ct., and for 1969 at 14.35 million 2 ct., whereas the International Diamond Annual gives 8.5,
9.2 and 11.0 million ct. respectively (Fig. 37) --a very
considerable difference. The reason for such disrepancies
is that most of the data are just estimates. Sometimes
official data are withheld; in other cases they are "invali•
dated by smuggling and other illicit practices," as the
I.D.A. puts it. Besides, many of the producing countires,
specially in Africa, have gone and are going through periods
"''The Economist Intelligence Unit Ltd. , Inflation Shelters, p. 36.
2 A. N. Wilson, Ed. International Diamond Annual (Johannesburg: Diamond Annual (Pty) Ltd., 1971). Hence• forth referred to as I.D.A.
^I.D.A., p. 11. 79
A. Industrial diamonds. B. Gem diamonds. — A. Diamants Industrials B. Diamants prieleux Thouiond metric coroti Mime r> de coroti motrlque* Country or oroa Code 1966 Payi ou lono 1967 1968 1969 1970 1971 1972 1973 1974 * 1973
TOTAL A 30 970 31 300 28 490 28 730 29 630 29 770 11 130 6 30 932 12 160 10 130 8 7S0 9 740 11 290 14 330 13 910 12 770 13 690 13 340 ,13 140 11 170 Angola A' 300 306 351 506 599 603 539 531 490 113 B 968 983 1 316 1 516 1 797 "1 810 1 1 '•1 616 1 594 1 470 1 343 Botswana A + 6 — — 11 31 538 872 2 446 2 453 1 2 718 1 2 414
1 1 Braill —Brttil ,,. A 20 10 0 10 10 25 1 1 37 127 1 133 B 13 15 1 4 35 31 63 1 1 36 127 1 133 Control African Republic. . . A 271 '261 304 187 169 164 178 1 1 Republlquo centrafrlcolne B 183 118 1 19 270 260 305 348 313 304 346 341 i 220 I 220
1 Congo A 5 000 4 154 4 343 1 415 597 702 700 700 B 400 946 957 ...
Gnano A 2 537 2 283 2 202 2 152 2 293 1 1 2 306 2 393 2 083 1 1 B 282 2 315 2 093 254 243 239 235 236 266 232 ' 237 1 233 Oulnoo •1 — Oulneo ' 1 A 31 31 49 50 52 32 53 53 B 33 33 21 20 21 22 22 22 25 25 23 25 Ouyona — Ouyono A 40 33 27 21 37 29 27 32 29 20 3 59 64 39 31 24 19 20 21 21 ^Indlo — Indo A 0 1 2 2 4 4 4 4 B 4 - 4 2 6 7 10 16 15 16 17 17 16 jlndonodo 1 — lndon4ile '.. . . A 3 3 •6 •6 •6 * 3 • 3 , •3 •3 • 3 B 14 14 • 14 • 14 I i • 14 ' 12 " 12 • 12 • 12 ' 12
Ivory Cooif * '. .! A 74 70 110 121 128 1 196 200 180 C6to d'lvolre * j B 167 125 110 105 77 81 85 130 | 134 120 112 B4 A "9 • 17 • 10 "25 * 13 6 6 8 9 2 0 • 3 • 3 ' 2 " 5 Loiotho '• * • 4 1 1 1 2 1
A 212 ' 181 * 212 * 184 • 234 277 350 308 239 B 163 1 1 • 343 • 362 • 537 ' 562 Liberia ' ' —Uborlo '* • 577 532 414 509 377 241
A 176 • 90 •86 • 101 • 93 * 82 • 80 80 79 80 B 1 1 1 583 * 1 531 • 1 636 • 1 923 Nomlblo — Nomlblo • 1 772 * 1 566 * 1 520 1 520 1 490 1 660
A * 833 ' 873 * 962 ° 1 253 1 232 1 168 • 1 080 ••738 »• 1 000 • »990 B ' 629 * 560 * 560 •736 Sierra l»onc ' 723 778 • 720 "646 "670 • ' 660 South Africa A 3 650 4 001 4 238 4 482 4 354 1 1 3 862 4 023 4 117 4 067 3 860 Afrlquo du Sud B 2 387 2 667 3 196 3 380 3 758 3 169 3 370 3 448 3 443 3 433
USSR •' — URSS" A 4 800 5 600 5 600 6 000 6 250 ' 7 000 7 350 7 600 7 600 7 750 6 1 200 1 400 1 400 1 500 1 600 1 800 1 850 1 900 1 900 1 950
United Rep. of Tanzania... . 473 410 336 417 > 471 486 398 306 ' 249 Rop.-Unle de Tonzanle B > 474 517 366 361 237 | 896 352 254 196 1 249
Venezuela A 54 32 56 76 380 385 315 537 540 B 31 38 62 ... 118 129 114 141 241 279
Zaire — Zaire A 12 418 13 154 11 353 11 621 12 438 12 004 12 181 12 162 12 991 12 415 B 11 1 551 2 500 1 649 740 1 200 935 606 393
Note. The data relote to mine and alluvial production of uncut Remarquo. Lei donnoei 10 rapportent 6 la production mlniere »t allu- diamond! and cover both gom and Induitrlal itonei. Induitrlal dia• vionnaire de diamanti brut! et englobont lei dlamanti precloux et mond! aro imall and Impuro diamond), bort, carbonado, otc. suitable InduitrieU. Lol diamanti Indullrleli comprinn.nl lei diamanti peril! el only for induitrlal ute at abrailvei, in cutting tooli, etc. Impuri, lei borti, carbonadol, etc., adaptable! teulement a dot Am 1 Sourcoi U.S. Bureau of Mlnoi (Indonoilai beginning 1968, Namibia, Induitriallei comme obrailfi, faUant partie d'outlli 6 tolller, etc. beginning 1967; Sierra teonei 1966-1969 and 1972-1974). 1 Source i U.S. Bureau of Mlnoi (Indoneiie i 6 partlr de 1968, Nomlblo i * Export!. 6 partir de 1967, Sierro Leone i 1966-1969 ot 1972-1974). 1 Exportation*.
Figure 36 World production of diamonds From U.N. Statistical Yearbook (New York: United Nations, 1977) 80
i r
WORLD DIAMOND PRODUCTION
1967 1968 Gemstones Industrials Total Gemstones Industrials Country Total carats carats Congo (Kinshasa) 500,000 17,700,000 200,000 350,000 17,150,000 17 U.S.S.R. ,500,000 1,575,000 5,425,000 .000,000 1,912,500 6,587,500 8 South Africa ,500,000 1,941,150 4,752,450 ,693,600 2,204,580 5,255,169 South West Africa ,459,749 1,529,252 169,917 699,169 1,550,034 172,225 Chana ,722,259 700,000 2,900,000 600,000 400,000 4,600,000 Angola 000,000 673,124 615,416 288,540 1,000,312 666,875 ,667,187 Sierra Leone 312,000 1,248,000 ,560,000 332,000 1,328,000 660,000 Liberia 353,000 197,000 550,000 540,000 213,000 753,000 Tanzania 370,703 556,055 926,758 280,940 421,437 702,377 Central African Republic 214,000 310,000 524,000 213,280 396,080 609,360 Brazil 115,000 115,000 230,000 138,000 137,000 275,000 Venezuela 62,300 23,200 85,500 102,500 37,900 140,400 Ivory Coast 96,800 79,200 176,000 102,850 84,150 187,000 Guinea 21,000 49,000 70,000 28,000 65,000 93,000 Guyana 28,400 42,600 71,000 20,620 30,929 51,549 Lesotho n/a n/a n/a 10,500 1,414 11,914 India 6,133 1,117 7,250 7,259 1,505 8,764 Indonesia 2,300 1,100 3,400 14,200 6,200 20,400 TOTALS 8,500,162 34,185,055 42,685,217 9,207,575 37,154,384 46,361,959
1970 PROJECTION 1969 Gemstones Industrials Total carats Gemstones Industrials Total 344,000 16,856,000 17,200,000 Congo (Kinshasa) 350,000 17,150,000 17,500,000 2,362,500 8,137,500 10,500,000 U.S.S.R. 2,700,000 9,300,000 12,000,000 2,412,243 5,496,298 7,908,541 South Africa 2,596,500 5,558,500 8,155,000 1,934,046 214,895 2,148,941 Ghana 300,000 4,600,000 4,900,000 830,000 3,320,000 5,150,000 South West Africa 2,056,000 229,000 2,285,000 1,212,920 808,614 2,021,534 Angola 1,305,000 870,000 2,175,000 386,990 1,547,989 1,934,979 Sierra Leone 400,000 1,500,000 1,900,000 610,884 241,116 852,000 Liberia 620,000 250,000 870,000 310,906 466,360 777,266 Tanzania 300,000 450,000 750,000 184,420 342,526 526,946 Central African Republic 150,000 225,000 375,000 125,000 125,000 250,000 Brazil 95,000 95,000 190,000 171,537 48,750 220,287 Venezuela 304,150 145,850 450,000 104,500 85,500 190,000 Ivory Coast 107,250 87,750 195,000 28,500 66,500 95,000 Guinea 22,500 52,500 75,000 26,525 39,787 66,312 Guyana 22,000 30,000 52,000 17,480 12,308 29,788 Lesotho 10,000 8,000 18,000 9,517 2,379 11,896 India 7,200 1,800 9,000 Indonesia 4,000 1,000 5,000
11,071,968 37,811,522 48,883,482 11,349,600 40,554,400 51,904,000
Figure 37 World production of diamonds (From International Diamond Annual, 1971, pp. 12-13) 81
of political upheaval. In what follows, the 1970 figures from the I.D.A. will be used, as the editors seem to have taken pains to compensate for such factors and to make care• ful estimates when no data were available.
U.S.S.R. The U.S.S.R. is one of the countries that do not release any data on diamond production. The I.D.A. estimates for 1970 were 2.7 million carats for gems and
9.3 million carats for industrials,^ which makes the U.S.S.R. into one of the two or three greatest producers. There are at least three pipes in operation, the Mir, Udachnaya, and
Aikhal (Fig. 38) all in the Siberian province of Yakut.
The last two are just below the Arctic Circle, and the diffi• culties of the permafrost are very great, but work continues through the winter, using especially developed technology.
It is known that several pipes remain unexploited and there are stockpiles of unprocessed kimberlite, which would allow the Russians to increase production consider• ably without any new finds, but the Soviet authorities seem to have no wish to disrupt the Western market by increased offer.
South Africa. The first African diamond was dis• covered in 1867 on the bank of the Orange River. For two years nothing else was reported, but in 1869 an 83.5 ct. stone was
I.D.A., p. 13. Figure 38
Siberian diamond mines
(From I.B.A., p. 80) 8 3
found that started the first rush to the Vaal and Orange
Rivers. By 1870 some 10,000 persons were engaged in recover• ing diamonds from river gravels, using primitive hand methods.
Towards the close of 1870, stones were found in
"dry diggings" at Jagersfontein, Dutoitspan, and Bultfontein, far from the Vaal River, and in 1871 at what is now known as the Kimberley mine (Figs. 39, 40). These diggings were at first thought to be alluvial in origin, but it was soon found that the diamonds were restricted to vertical pipes.
The Kimberley district, within an area three miles in dia• meter, contains five famous pipes, all of which are still productive: Wesselton, Bultfontein, Dutoitspan, De Beers, and Kimberley. Next to the pits lies the city of Kimberley, where most of the rough sold through the De Beers affiliates is sorted.
The largest South African mine is the Premier with
2.5 million ct. in 1969, but of this amount only 10 per cent was of gem quality. By contrast, the alluvial diggings of
Namaqualand yielded 700,000 ct., of which 90 per cent was gems, making them into the most productive of the South
African operations. This area of the Atlantic Coast (Fig. 41) has only been exploited since 1927, and only lately on a large scale. The total 1970 production of gems for South
Africa was 2.4 million ct. De Beers owns or controls all of the important pipe mines of South Africa as well as the 84
Figure 39
Diamond mines in South Africa and neighbouring countries
(From De Beers Consolidated Mines Ltd., Annual Report 1974, p. 20) 8
« ...ORARA} Windhoek * LETLHAKANE=
LETSENG- ^RA|\
^••O Bbemlontein/ Maseru j IKOINGNAAS V-ESOTHO^ 0 ^ 20QKM
'Figure 40
Diamond mines in South Africa and neighbouring countries
(From Mining Magazine, January 1978, p. 7)
Figure 41
Namaqualand mines
(From I.D.A., p. 53) 86
alluvial diggings. But the government is also a mine owner and direct profit sharer, and the South African cutting in• dustry gets, by law, special treatment from the Diamond
Trading Corporation.^
South West Africa (Namibia). This political depend• ency of South Africa produced 1.9 million ct. of gemstones in 1969, mostly from coastal gravels and offshore mining.
The operations are carried out principally by the Consoli• dated Diamond Mines of South West Africa (C.D.M.), which is controlled by De Beers. The first recorded find took place in 1908 on the sand dunes near Luderitz Bay. At this time
South West Africa was a German colony. A rush took place, and for some years several German companies exploited the coast deposits. The major discoveries were not made until after 1927, when the structure of the uplifted marine ter• races was discovered. It is now believed that diamonds from the interior of the continent were washed out to sea by floods on the Orange River and deposited on the beaches north of the river's mouth. In the course of a million years the sea retreated gradually, creating no less than
four distinct levels of beach. These were in turn overlain by marine and terrestrial deposits of varying thickness. As
soon as the formation of the deposits was understood, recovery
S I.D.A.3 pp. 42 and 153; G.I.A., Ass. 13, pp. 7-9. 87
of the diamonds became an earth-moving operation, stripping
sand and gravel overburden to expose the diamondiferous gravels
and the gullies and potholes of the ancient beaches, where
accumulations of gemstones are often found.
Since the deposits often lie lower than the tide-
line, a major operation of foreshore mining started in 1965
by C.D.M. required building a sea wall of sand and concrete
blocks to hold back the sea while stripping the bedrock and
searching the potholes. This operation proved highly produc•
tive, offshore dredging, on the other hand, started early in
the 1960's, has only been moderately rewarding, due to high
6 costs* .
Angola. In 1969, the Companhia de Diamahtes de
Angola (Diamang) had exclusive mining rights to Angola, and
the extended alluvial deposits, a continuation of the Kasai
deposits in Zaire, that Diamang exploits, yielded 1.3 million ct. of gemstones. There were over 42 mining areas
along five rivers, and the operations moved downstream as
the deposits were exhausted. .Yield from pipes was low.
Diamang sold his output through the Diamond Corporation,
De Beers' purchasing agent. Nowadays Diamang is owned by
the Angola government.
I.D.A.3 pp. 49 and 53; G.I.A. AssrL 10, pp. 6-7. 88
Liberia. Although the 1969 figures for the Liberian
gem production was 610,000 ct. (I.D.A.) or perhaps 562,000
ct. (U.N. Statistical Yearbook), it is well known that most
of these diamonds are smuggled into the country to be ex•
ported from Monrovia, where they only pay a royalty or export
duty of three per cent, as compared with 7% per cent in Sierra
Leone, where it is believed that the smuggled goods come from.
Monrovia is indeed, only one hour's drive from the Sierra
Leone border. The goods so introduced in Liberia are, of
course, only gem diamonds, so that Liberian diamonds exports
are heavily weighted on the side of the gem quality. The ex•
port figures, however, give a clue to what the real production
of Liberia may be; the I.D.A. estimates the figure at 250,000
ct. (gems) arrived at by computing the likely ratio of indus•
trial to gem production.
Liberian production is unorganized and small-scale with nearly 400 licensed claimholders and perhaps some 10,000 unlicensed African diggers. The miners sell to the seven
licensed buyers in Monrovia, among them representatives from
Antwerp, London and New York. The buyers then take the dia• monds to the Government Appraisal Office for valuation and assessment of duties. The local production consists mostly
of industrials and near gems, however. The diamonds are of
1 I.D.A.3 p. 99. 89
alluvial origin, found in swamps and in alluvial sands by the banks of various rivers: Lofa, Mano, Moro, etc. It is believed that some of them came from kimberlite fissures in the far northwestern district.
Zaire. The first diamonds were found in the then
Belgian Congo in 1907. Two main areas were discovered by prospecting: one on the Kasai River, with centre at Tshi- kapa, and the other at Bakwanga. Organized mining was started in 1920. By 1970 the Tshikapa area was not being exploited, except for a few local diggers; on the other hand, the Bak• wanga region was producing about one-half of the world's output of industrial diamonds. The I.D.A. figures are 350,000 ct. gems against 17 million ct. industrials (the U.N. Year• book's are very diffferent).
The Bakwanga diamonds come from thirteen identified kimberlite pipes. Three of these occur in a cluster, as it often happens (the best known example of a cluster being the five Kimberley pipes in South Africa already mentioned).
Diamondiferous material spilled out of these pipes in vast profusion and dispersed itself over an extensive region comprising the drainage area and surrounding the pipes. The
M.I.B.A. (Societe Miniere de Bakwanga) works ten of the pipes as open-cast mines, using earth-moving equipment in a large scale. The concentrates are worked in two very large central plants. The output is 98 per cent of industrial quality, suitable only for crushing. 90
Better diamonds are found, as is customary, in the alluvial deposits Calluvial diamonds are generally better than pipe diamonds because water selectively transports gems rather than industrials, whose amorphous crystalline struc• ture makes them disintegrate on the way). The alluvial diamonds are often picked up by illicit digging and smuggled g out of the country to Burundi.
Sierra Leone. Almost all deposits are alluvial because the main diamond content of the kimberlite in the existent kimberlite pipes had already been dispersed over the river systems. The diamond-bearing gravels yield 40 per cent gem quality, and a significant number of stones are over 40 ct. The 1969 output was 610,000 ct.9
It is of geological interest to note that Sierra
Leone and Brazil are the only two countries that produce the hard industrial diamond called carbonado; it is nowadays accepted that once the two countries were in contact, before the continents drifted apart.
Until 1970 the mining was done by the Sierra Leone
Selection Trust (S.L.S.T.) which exploited two leases, Yengema
I.D.A., pp. 69-70.
9
I.D.A.t p. 100. ^G.I.A., Diamonds, Ass. 8, p. 11. 91
and Tongo (Fig. 44). S.L.S.T. originally had the monopoly of
mining rights, but in 1955 the government tried to stop the
illicit digging by licensing a number of local small-scale
miners. These operations were well-run and prosperous, but
nevertheless illicit mining within S.L.S.T.'s leases, which
were the richest areas, continued unabated until it provoked
the nationalization of the mines under the National Diamond
Mining Company, partly owned by S.L.S.T. Sierra Leone markets
its output largely through the Diamond Corporation of West
Africa, which sells through De Beers's C.S.O., but some
American wholesalers buy directly through the Government
Diamond Office.
Ghana. Diamonds were discovered in Ghana in 1919.
The deposits were alluvial, located along the Birim and Bonsa
Rivers (Fig. 42). The exceptionally small size of the stones
(20 to 25 per carat) and the rather poor quality are the reasons for their low price per carat; besides, the produc• tion is 85 per cent industrial. Nevertheless, the concen• tration of diamonds in some of the alluvial gravels is ex• ceedingly high. For instance, three million ct. were recovered from one 160-acre plot, with the thickness of the gravel layer reaching only from two to five feet.^
G.I.A., Diamonds, Ass. 10, p. 9. Figure 42
Ghana mines
(From I.B.A., p. 100) 93
The major mines in Ghana are operated by Consoli•
dated African Selection Trust (C.A.S.T.), which controls
concessions in Birim and Akwatia. A few small foreign con•
cerns operate as well. But many native diggers also operate,
both with and without licenses. The total production of the
licensed diggers exceeds that of the companies, but total production figures are hard to estimate due to the amount
of smuggling that takes place out of Ghana and into Togo and
Dahomey. The I.D.A. reports, as an example, that whereas in
1958 from two to three million ct. (including industrials)
were sold in the organized market, after the introduction of
currency controls by the government the exports figure dropped
to 3,000 ot. The I.D.A.'s estimate is 300,000 ct. of gem-
stones.
Tanzania. First discovered in 1910, diamonds were
not systematically mined in Tanganyika until 192 5. The
alluvial deposits then exploited were not very productive.
But in 1939 a Canadian geologist, Dr. John Thorburn William•
son, discovered after a long and systematic search, an enor•
mous pipe at Mwadui, 90 miles south of Lake Victoria. William•
son Diamonds Ltd., now exploits an area of five square miles
that produce a high yield. About 80 per cent is of gem
quality, and many stones are of a high grade. Most of
Tanzania's production comes from Mwadui, and the total was
2I.D.A., p. 100. 94
estimated at 300,000 ct. in 1970. Williamson Diamonds ex• ports through the Diamond Corporation. The Tanzanian govern• ment imposes a 15 per cent royalty and a five per cent levy, 13
and the operations are run largely by Tanzahians.
Other African Producers. Other African countries
with important production are Botswana, the Ivory Coast
(107,000 ct.), Central African Republic (150,000 ct.),
Guiriea (22 ,000 ct.) , and Lesotho (10,000 ct.)(Fig'. 43).
The figures refer to gems only.
Venezuela. Initial discoveries in 1901 were not
followed by significant production until 1940, but now
Venezuela is one of the largest exporters (304,000 ct. of
gems), and recent discoveries are very promising. The
occurrences are typically river alluvial, with fields in
Gran Sabana, upper Caroni River, and upper Cuyuni River.
The latter two fields are extensions of the fields of
Guyana.
The reocvery operations take place by primitive
diving and digging by local miners, as well as some Ameri•
can companies using portable caissons for exploiting river
gravels. The marketing is somewhat chaotic, with licensed
buyers flying in to the trading centres in the interior and
having the stones brought to them. Buyers come from America,
I.D.A., p. 71; Bruton, p. 65. SCALE 1:1,900,800 REFERENCE f ^iMpnr Aux V Diamond areas Sourcej
R . S . A 8 BOTSWANA J ^ zthedral Dome . S.W.A.
$ Ka" ) Aetseng \y SWAZILAND/"^ 0>amp*Bnes SOUTH AFRICA / CasS
Mokhotlong
"habani* l/rnyana
Map Studio ,/ Figure 43 Lesotho mines (From I.D.A.., p. 65)
SCALE 1:390,000 KILOMETRES
^ Lease
..FREETOWN L ? w " 1 <
^ / TongoLe^e^1 O CT^ ( Bo-
SCALE 1:7,700,000
Figure 44 Sierra Leone mines
(From J.Z?.4.3 p. 88) 96
Europe, Israel, and even India. Venezuelan production is
thus marketed outside the De Beers system.^
Brazil. Brazilian production is not very high (fig•
ures vary widely, with the I.D.A. giving 95,000 ct. of
gems in 1970 against 31,000 ct. from the U.N. data),"^
but the mines have the distinction of being the oldest
known in South America. Brazilian diamonds were discovered
in the 18th Century, at the time when the Indian sources,
the only known ones, were running out. In the beginning,
they were shipped to Goa in India, and then brought to
Europe as Indian diamonds. Production became important
in 1740 and from that time until the discovery of South
African gems in the 1860's Brazil was the world's largest
producers.
Brazilian deposits are alluvial, but there has
been no evidence of an original kimberlite source.
Various theories were proposed to explain their origin,
but the geological opinion is now that the diamonds found
have come from the weathering and erosion of ancient con•
glomerates of kimberlite. A single source is proposed for
most of the deposits, even though these are nowadays widely
scattered. Mining is done by local diggers called "gari-
mpeiros", many of whom are small holding farmers who leave
I.D.A., p. 105; G.I.A., Diamonds, Ass. 7, p. 3.
'I.D. A., p. 104. 97
their lands in the dry season to dig the gravels along the rivers."^ Distribution takes place largely through illicit channels, because of high taxes and bureaucratic compli• cations. De Beers has at times bought part of the Brazilian 17 production through indirect channels.
India. Diamonds have been mined in India from the
earliest times, but today the production is insignificant,
the main deposits having been exhausted long ago. The
large diamonds of centuries past came from the Kollur
group, near the Kistna River.
CUTTING AND TRADING CENTRES
The manner in which De Beers performs its function
of distributor of most of the world's rough will be dis•
cussed in the next chapter. From the C.S.O.'s offices in
London, and from a few other sources as well, rough diamonds
go to the dealers and the manufacturers (cutters) who are
concentrated in a few centres, usually far from the produc•
tion areas. The high price-to-volume ratio of gems makes
it possible to carry out production, sorting, manufacture
and consumption of diamonds in places far apart, dictated
more by historical, labor, and marketing reasons than by
geography.
G.I.A., Diamonds, Ass. 7, pp. 1-3.
I.D.A., p. 104. 98
Israel. This nation has one of the most important cutting industries and is one of the largest trading centres
in the world. Israel will be discussed in Chapter IV.
Antwerp. This Belgian city has a long tradition
as a diamond cutting and trading centre. About the middle
of the 15th Century, Jewish diamond cutters and merchants
started receiving rough diamonds from Venice, which did most
of the trading with Asia, then the only source of diamonds.
At the end of the century, the Portuguese discovered the
direct sea route to the East round the Cape of Good Hope,
and they supplanted the Venetians as the world's traders with India. Antwerp received the rough from them,fashioned
it in the workshops in the outskirts of the town, and became
the most important manufacturing and trading centre in
Europe.
When the Dutch East India Company became the main
trader with India, Amsterdam rose to prominence, and the
Jewish cutters and dealers gradually moved there from
Belgium; the decline of Antwerp continued even after the
Dutch yielded to the British in 1670. By the middle of
the 18th Century, Antwerp barely survived as a centre,
getting what it could from the Brazilian diamonds mined in
Bahia and sent mostly to Amsterdam. But the discovery of
the South African mines changed the picture once again,
and Antwerp rose while Amsterdam declined. In the first 99
decades of this century, arrangements with the De Beers companies and the discovery of diamonds in the Belgian 18
Congo (now Zaire) insured a new period of prosperity.
Nowadays the industry is again slowly declining, although trading remains very active. Factors that have been mentioned to explain the decline of the industry are: first, the high rate of increase of wages and fringe bene• fits; and second, increasing competition from the Indian cutters in the smalls market (smalls are polished pieces of less than four points of 0.04 ct.), from the Russian cutters in the melee market (melees are from 5 to 15 points), and principally from the Israelis, on a broad range of sizes
and qualities.^9
Working in Antwerp's favour were, according to the
I.D.A.j the good organization of the industry; the high
level of skill of the workers, and therefore the quality of
the cutting; the great reserves of money and credit; the well-established cutting and trading activity; and the
stabilizing strength derived from its wide diversification
in the range of polished goods it offers.
There are two branches to the cutting industry:
Gross (i.e., large) that works with one carat upwards; and
I.D.A.j p. 109; Bruton, p. 150.
I.D.A.j p . Ill. 100
Klein (small), that processes even the smallest goods. The
Gross branch is largely located in Antwerp itself, where over
25 manufacturers have their own factories, employing from 20 to 150 polishers in each of them, The Klein branch operates from the "kempen", located outside the town. In 1968 there were about 15,000 workers in all. One of the specialties 2 0 of the Klein branch is the polishing of eight-cuts of sizes ranging from 30 to 200 stones a carat (about 3 points to % point).
In Antwerp the trade unions are well organized and wage scales and fringe benefits are relatively high. The highly paid workers can only be employed by the Gross branch, where the factor of labour cost is to some extent offset by the high price obtainable for the larger well-polished goods.
In the "kempen" wage rates are lower, and besides the so- called entrepreneurial system (a form of outside contract• ing) reduces or eliminates fringe benefits, making it possible for the Belgians to participate in the small goods market, where labour costs have a greater influence (this is because the work involved in polishing one small stone is not much less than the work in polishing one large diamond, which sells for a much higher price).
An 18-facet cut for small stones (Fig. 26, top left) . 101
The entrepreneurial system developed over the years to fit into the fluctuations of the diamond market. The manufacturer of merchant in the "kempen" generally has no factory of his own; he gives out his rough goods to
entrepreneurs, perhaps to two or three, but often many more. Each entrepreneur has his own group of workers,
commonly from ten to twenty. The manufacturer contracts with the entrepreneur for the finishing of a specific caratage
of diamonds; and that is the extent of his legal obligation
to the entrepreneur. The entrepreneur, in turn, hands out
the rough goods to a group of workers, again on a contract
basis. In practice, manufacturers tend to stay with the
same entrepreneurs and the latter tend to go to the same
workers; but, in tight market conditions the manufacturers
can cut down their activities without having to go and in•
cur mounting losses, as would be the case if they owned their
own factories. In 1969-70 the system was tested when after a
boom in demand that lasted two years the market reduced, and
5,000 employees had to leave the industry. There were no
mass "layoffs and many of the workers were reabsorbed into
new auto factories.
It is a common observation that one of the best
defined trends of the diamond market has been the lowering 21 of size and quality of the average goods sold. The Israeli
21 I.D.A., p. 113 and passim, 102
industry prospered on finding a market for melee (5 to 15 ct.) of a quality and price slightly lower than the Belgian melee, and the Indian industry in turn is finding a market for goods of even lower quality and price. The place for the Belgian
industry, according to the I.D.A., would lie in the better-
quality market, which is not necessarily in competition with 22
the lower quality goods. Besides, the Antwerp cutters
are skilled in handling difficult rough-like cleavages, macles,
flats and coateds, which required highly trained and versatile
workers for efficient utilization. Such differential skills
would insure Antwerp's cutting industry a continued share of
the world market. (There iSj however, no agreement in the
trade that Belgians still retain the lead in skills, particu•
larly among Israeli diamond men).
Antwerp's Exchanges. The goods produced by the
manufacturers are largely traded in Antwerp's active diamond
exchanges. There are three diamond bourses in the city, the
oldest of which, the Diamond Club of Antwerp, founded in 1893,
had over 4,000 members --brokers, dealers and manufacturers --
in 1970. Trading is not restricted to polished goods; by
far the greatest part of the world production of rough that
is not sold through the C.S.O. finds its way to Antwerp, and
through the ties that Belgium has had since 1920 with diamond
I.D.A.j p. 113. 103
production in Africa, Antwerp buyers supplement their C.S.O. allocations by purchasing directly at the African markets.
The Antwerp market in rough, moreover, is the place where direct buyers of parcels of rough from the C.S.O. (C.S.O.'s
"clients") can sell the rough they do not need and buy additional quantities of rough in which they specialize, which substantially helps the C.S.O.'s marketing system.
It is difficult to measure accurately the extent of the trade in Antwerp, due to a large proportion of un• recorded exports. For instance, in 1968 and 1969 the official figures were (in millions of U.S. dollars):
IMPORTS EXPORTS
1968 452 415
1969 573 . 464
Since the Belgian public cannot possibly purchase signifi• cant quantities of diamonds, the large excess of imports over exports must be accounted for somehow. The explanation
is that until July 1969, there was a considerable difference between the official rate of exchange and the so-called "free" rate (which is, nevertheless, under government supervision);
The device of having two exchange rates has been Belgian policy for many years. The official rate is used for ordi• nary trade transactions outside the sphere of investment, 104
while the "free" rate is designated to encourage investment of funds from abroad. The "free" rate also serves the func• tion of discouraging excessive demands for foreign exchange,
in that such demands will induce a decline of the rate.
During the currency disequilibrium of 1968 and
1969, the difference between the official rate and the "free" rate became about six per cent. In those conditions it be• came profitable to make large purchases of rough and polished goods and export them through Holland and other foreign coun• tries, receiving the proceeds via the free market. Eventually, the authorities discovered what was happening and applied a
30-day rule for foreign exchange accounting by diamond expor• ters and importers; and in anticipation of tax investigations, a brisk brokerage business in invoices developed. According to the I.D.A.'s sources, in one year some $120 million (U.S.) worth of goods were sent to other markets, like Switzerland and the U.S.A. This illustrates both the unreliability of
figures relating to the diamond trade and certain common 23 practices of the business.
India. It is thought that diamond cutting was
first practiced in India. However, many centuries ago
that industry completely disappeared. It was only during
World War II that a group of refugees from Antwerp and
I.D.A.3 p. 115. 105
Amsterdam started in the Surat area, north of Bombay, to train Gujarati workers in the manufacture of diamonds.
When these Dutch and Belgians returned to Europe the
Indian industry started declining. Some Gujaratis in turn went to Antwerp and established themselves in the industry there, while supplying some rough to their compatriots to keep the shops alive. By 1959, however, the number of workers in Bombay, Surat, and Navsari had fallen to 1,000 which, in an Indian-cottage industry, which is typically very labour-intensive, means a very small production. The supply of Indian rough was inade• quate, and the Antwerp goods had to pay 2 0 per cent customs duty upon import, which made the operation unprofitable.
In 19 58, however, the Bombay Diamond Merchants'
Association persuaded the Indian government to assist the industry. The first measure was a refund of import duties to the exporter of polished diamonds, and since then a num• ber of other concessions were made, like fiscal and currency adjustments. With that help, the Indian cutters were able to buy some relatively inferior goods and start building up the trade.
The Indian cutting industry is essentially an unorganized, very large-scale, labour-intensive cottage
industry. Even though some modern factories exist in
Bombay, for the most part the conditions are primitive. 106
The scaifes are mostly hand-driven and the labour force is seasonal, because many workers are also farmers. It was estimated in 1970 that between 15,000 and 45,000 people were employed, the difference perhaps being due to the seasonal variations. (Industry sources in Israel esti• mate the figure for 1978 to be between 200,000 and 300,000).
Labour costs are, naturally, very low, but the workers are often unskilled, and both the productivity and the quality of the output are inferior. But it is true that the Indians often work with stones that no other industry would accept, like non-sawable goods that can only be polished by hours of grinding. The rough they work with may cost from $3.00 to
$10.00 per carat. The workers get $1.50 per stone, irres• pective of size ($1.00 in the villages). But their output, however low its quality, is readily sold in the cheaper whole• sale markets of America, Israel, and the Far East, and thus brings to the country some much-needed foreign exchange.
India now has twelve buyers that are clients of the C.S.O., and four Indian companies buy in Antwerp. In addition, the Indian government concluded an agreement with
Ghana to participate in the diamond auctions held in that country. Total trade figures for 1969 were $34 million (U.S.) in imports, and $51 million (U.S.) in exports, according to an official source
I.D.A.3 p . 221. 107
U.S.S.R. Very little is known about the Soviet cutting industry, but it is believed that there are at least three cities where factories are established. In Moscow diamond cutting has-been going on for many years as part of the
Soviet watch-making industry, and now there are some very large factories (in other manufacturing countries, large factories are not the rule) that also cut diamonds for scientific uses. There is also a large plant at Kiev, and perhaps another plant at Sverdlovsk, close to the Vishera
River where some diamond findings have been.reported.
Estimates of the total number of workers are quite diver• gent, because, among other things, it is disputed to what extent the Russian production has been automatized. The
I.D.A.'s figures are 4,000 to 10,000 workers, and the same
Annual contends that the production is not nearly as mech- 25 anized as some Western sources fear.
The polished diamonds exported to Western markets are small. It seems that, before cutting, the diamonds are most carefully selected for size and quality. The
Russians emphasize that grading is done systematically and scientifically. Sizes are melee ranging up to 0.33 ct. For the most part, exports comprise remarkably uniform 20-pointers.
It has been said in the trade that above that size Russian
I.D.A.} p. 216. 108
quality tends to deteriorate. In any case, it is evident that the Russians concentrate upon establishing a market in melee of a special size and uniformity. They are so con• fident of their uniformity that they advertise their ability to accept repeat orders, which is almost unheard of in the trade.
Such uniformity of size and shape, it is believed, could not be achieved without a heavy wastage of rough, of the order of 60 per cent, and much more labour than is em• ployed in other cutting industries in the world. But such factors are not so significant in Russia, because the rough is State property, and the labour costs are paid in internal currency, whereas exports earn foreign currency. Exports have been guessed to be some 60,000 ct. of polished.
There has been the fear, ever since Russian produc• tion started, that they would undercut the other producers, but, as the I.D.A. says,
There has been no indication whatever that the Soviet Russian authorities have the slight• est intention of "dumping" their polished goods on the Western market. On the contrary, the Soviet authorities appear to accept that the industry they have been at such pains to develop and estab• lish would flounder if the markets for diamonds in the Western world were undermined or were not held in strong hands.26
I. D.A.j p. 218. 109
Moscow is a centre for selling the Russian production
of polished, and many Western buyers make their purchases
there. The Russians also have permanent centres set up in
the West, like King Mines in London, which boasts "the largest
office block in the world built exclusively for the selection 27
of polished diamonds by one organization," and offices in
Antwerp, Germany, Switzerland, and other important trading
places.
In 1977, the author visited the Soviet office in Ant•
werp. What follows is an account of his experience. When it came time, to see the merchandise, I was shown into a room and left alone with hundreds of packages, which showed some trust on their part, since it •.would have taken them hours to check every package afterwards. The packages are prepared in Moscow, and the officials in charge of sales are not allowed to break them up; they have to sell by lot. It is true, however., that they were smaller than is customary in the Israeli exchange, and more homogeneous as to size and quality. After some time of checking the packag es, one employee came in and I asked him if I could have the prices of the mer• chandise. Ee went to consult his superiors and an official came, who said, "Why do you ask my men prices? That is not the procedure." I was somewhat taken aback, and asked him what the procedure was. Ee then said, "Make a list of everything you need and give it to us." So I spent that day and part of the next examining the merchandise and on the second day presented a list to the officials. They' took it away,
Advertisement in I.D.A., p. 223. 110
deliberated for about two hours, and dame back with the prices, which were somewhat high. Before I could ask about their procedure for negotiating the prices, they volunteered the information that 'We can negotiate on the total price alone, and only if we are within 10 per cent. '
I didn't close a deal, having decided that it wasn't advantageous to do so. .My conclusion was that the method of selling was too rigid and un• imaginative. In the first place, wholesale diamond buyers have to know the prices of the merchandise they are examining in order to see how it relates to other offers in the market and their own possi• bilities; it's not enough just to make a list of needs, because the needs are influenced by the market prices and available qualities and sizes. And also, the task of examining every package in order to see what was available was extremely time consuming. One should compare this method of selling with that commonly used in Western Bourses, like the Israel Diamond Exchange (Chapter IV). But I was favourably impressed by the quality of the "make." Also, the size of the gems offered has increased since the publication of the I.D.A. (1971), becouse I saw larger stones, of up to 2 cts..
South Africa. The industry was established in 1927 under government protection and encouragement, and since then it has prospered and expanded. From one factory in Kimberley it has gone to 51 licensed manufacturers: 47 in Johannesburg, three in Capetown, and a new factory in Kimberley. There are about 1,250 employeesj divided into 700 journeymen and 550 apprentices; these figures vary as apprentices become journey• men, but the size of the labour force is regulated by the Depart• ment of Labour. One reason that the numbers are increasing is that the size of rough is diminishing. Ill
From the beginning, the South African government determined that the C.S.O. would sell larger rough to the local industry, to allow it to compete better with cutters abroad. But in the last years, with the general decrease in the size of rough, the average for white goods received is 2 8
1.65 ct. and for Capes 2.80 ct., down from about 4 ct.
Therefore, to maintain its output, the industry needs more labour. This creates difficulties, since the wages have always been high, which was only economically sound when 29 the rough was larger. Costs of cutting run about $25.00 a carat in 1970, and fringe benefits are very favourable to the worker.
The cutters are served by "sights" held at Johannesburg instead of London, but in the same respects identical to the latter (see next chapter for a description of the sights).
They are not allowed to resell abroad the rough purchased.
They can, however, buy from overseas and from independent
South African miners. They can also export their chips; they are not, in any case, equipped to deal with small sizes.
South Africa is not a large diamond trading centre, although there is a flux of buyers to Johannesburg. The slightly larger size of the South African product commands a
See Figure 30 for colour nomenclature.
I.D.A., p . 153. 112
world market, and goods are sold mainly to America, Belgium, the United Kingdom, West Germany, France and Japan. Sales abroad in 1969 were $90 million, but they went down in 1970 30 due to the worldwide recession in the market.
New York. The American cutting industry is centred in New York and Puerto Rico. There are about 3,500 workers, including 385 Puerto Ricans who polish diamonds in the work• shops of the island, the Puerto Ricans who work in New York and other places in the mainland, and the American Indians who polish in a factory in Arizona owned by Harry Winston
Ltd. the New York jewellers. Most of the workshops are in
New York itself. Wages are high ($200.00 to $250.00 per week in 1970) and social security and other charges amount to 25 per cent over the wages. ^
For several years the salaries of American workers were considerably above those earned in other countries, and therefore a 10 per cent tariff on imported polished was imposed to protect the industry. This tariff was progressive• ly reduced, as part of a general round of tariff revisions, and meanwhile wages in the cutting industries abroad have been approaching the American rates. The tariffs discriminate be• tween countries, with G.A.T.T. countries being treated more
I.D. A. t p . 153 .
I.D.A., pp. 197-198. 113
favourably (seven per cent for large stones, five per cent for 0.5 ct. and smaller). Russian polished diamonds are sub• ject to the full 10 per cent duty, and for that reason they often come into the country via Belgium and other G.A.T.T. countries -- a manoeuver which has many precedents.
Most of the supplies of rough come through the C.S.O. in London, although additional rough comes from Venezuela,
Sierra Leone, South Africa and elsewhere. American buyers from the C.S.O. receive large amounts of stones, i.e., un• broken crystals weighing 1.5 ct. and up; there are, of course, small gems in the parcels, and these are sent to Israel and
Germany for polishing. Gems between 1 and 2 carats are most often sent to Puerto Rico, and so the American cutters concen- trade on the larger pieces.
There are two official exchanges in New York, both on West 47th Street; the Diamond Dealers' Club at 30 West 47th
Street, with some 1,500 members; and the Diamond Trade Associ• ation of America at 15 West 47th Street, with 600 members.
In the vicinity of these exchanges, about 800 dealers, 200 cutters, 300 setters, and more than 1,000 jewellers, apprai• sers, trade lawyers and insurance men have their offices and shops, making this area into the hub of the American diamond trade.
The American market for polished diamonds is the largest in the world, absorbing about 60 per cent of the world 114
output, 32 and for that reason the American cutters do relative• ly little exporting. The official figures of total exports and imports for 1969 are as follows: exports, $90 million rough and $122 million polished; imports, $287 million rough and $216 million polished. These data, as usual in a trade so geographically flexible as the diamond business, are
swollen by the considerable amount of trading back and forth
that takes place among dealers before the merchandise finds
its way to the jewellery manufacturers. The corresponding
data for 1975 are: exports, $80 million rough and $279 million
polished; imports, $348 million rough and $383 million polished.
Puerto Rico. The diamond-cutting industry of Puerto Rico
is closely integrated with that of New York. There is inter•
change of diamonds and personnel, with manufacturers often
having factories in both places. The arrangement is due to
the higher labour costs for the smaller stones, which are
therefore sent to the lower paid Puerto Rican workers. Also,
the local workers can be readily called to New York when there
is a boom and labour shortages develop. There are 13 cutting
establishments, specializing in finishing diamonds from .25 ct.
32I.D.A., • p. 196.
55I.D.A., p. 198.
Jewelers ' Circular - Keystone, Directory Issue, June 21, 1977. and up; the average size is 3 to the carat.""
The Puerto Rican industry dates back to 1914, and it was founded, not by an American, but by a prestigious
Antwerp cutter, Lazare Kaplan, who was visiting New York when World War I broke out. Stranded in America, he tried to establish himself in New York, but the local industry did not allow him. He then went to Puerto Rico and built up an expert staff there.
Amsterdam. Amsterdam has been associated with the diamond trade for several centuries. The fortunes of Amster• dam and Antwerp rose and fell alternately from the 15th
Century on, as the monopoly of the commerce with India changed hands (from Venetian to Portuguese to Dutch to Eng• lish) , as religious persecutions and wars drove the Jewish cutters and traders back and forth, and as diamonds were discovered in Brazil and then in Africa.
The Dutch sought to secure all the rights to Brazilian diamonds in the beginning of the 18th Century, but had to allow London and Antwerp a share of the trade. The discover• ies in Africa led to London's definitive pre-eminence as a trading centre and Antwerp's as a cutting centre, and the
Dutch industry slowly declined, until finally during World
I.D.A., p. 199.
bI.D.A., p. 187. 116
War II it was totally eliminated and the workshops dis• mantled and carried to Germany. Nowadays the industry has
been set up again, using entirely new machinery, and employs
some 800 workers; it has also diversified by going into the
manufacture of jewellery to cater to the tourist trade.
Amsterdam's importance as a distribution centre
is based not so much on the local industry as on the
traffic from Israel and Europe to the U.S.A. and back, some
of which is done for illegal purposes, as we described earlier
in the section on Antwerp. Statistics, therefore, would be 37 hard to interpret if they were available.
West Germany. The German tradition of diamond cutting
goes as far as 1538, when the first faceting mills were estab•
lished in Augsburg by a family of merchants with contacts with
the Lisbon market. Other mills were established in Nuremberg
in 1550. But the modern-day industry goes back only to 1864,
in Hanau. Idar-Oberstein in the Pfalz district also started
production about that date, as a cottage industry. The
small German industry only survived by cutting diamonds that
were too small for Antwerp and Amsterdam to handle profitably.
These were sent to the cottage workers for finishing. There•
fore, the Germans became experts on working with stones as
small as one point, which were done as eight-cuts. Work was
done on a contract basis.
I. D. A. 3 p . 135 . 117
In 1970 the industry had grown to 1,500 workers,
specialized in small brilliants and melee. The cottage
industry had declined, because the market in eight-cuts had become more competitive and the labour costs were grow•
ing. Contract work, mostly done by the cottage workers, had
also declined; instead, company workshops handled most of
the goods. There were seven German buyers invited to the
C.S.O.'s sights, but, on a world scale, the total purchases 3 8 were relatively small.
In 1971 a new Diamond and Precious Stone Exchange was
opened at the traditional centre of Idar-Obserstein, housing 39
100 dealers in diamonds and other gems.
France. The diamond-cutting industry in France serves
the local jewellery manufacturers, and, in fact, can only
supply a small portion of their needs. The main cutting
centre is at Saint Claude in the Jura Mountains, north of
Geneva, where some 300 workers were in 1970 employed polish•
ing melee and larger diamonds up to 1.5 ct. The main product
is melee, and the French industry is said to produce a specially
good "make" (cut). Some 50 workers are employed in the environs
of Paris, and in addition there are specialized and highly skilled craftsmen working on commission or contract for the
I.D.A., p. 208.
Diamond World Review, May 1975, p. 23. 118
leading Parisian jewellers. The Paris workers do fancy cuts on larger stones. Supplies of rough come from the C.S.O. in London, wholesalers in Paris and Antwerp, and agents in 40 African markets. Other Countries. Brazil, has a small industry that is enough to provide for most of the needs of the local jewellery manufacturers. The main centre is Petropolis, near Rio de
Janeiro, where several factories cut small melee. Wages are low and so is productivity. The I.D.A. has no statistics.
In Tanzania, the cutting industry started in the 1960's using the production from the local mines. There was only one factory in 1970, where Antwerp technicians trained 300 Tanzan- ians to become experts in cutting. Interestingly enough,
Tanzanian diamonds requiring sawing or cleaving were first shipped to Antwerp for processing and then shipped back to
Tanzania.
Sierra Leone in 1968 established a factory in Freetown to process the local output; it was set up by a New York firm and run by Israeli technicians, who trained the local workers.
The enterprise was not yet economic in 1970, according to the 4 2 I.D. A.
40 I. D.A p. 175.
41 I. D.A. > P- 201.
4 2. I.D.A. > P- 205 . 119
There is a small and specialized industry in the
United Kingdom, a remnant of the flourishing manufacture of the 17th Century. Three factories employ about 100 men, most of them London-trained. One manufacturer specializes in larger diamonds and supplies American and French jewellers with goods of high quality. Another cuts extremely small dia• monds for Swiss watches. London, on the other hand, is the main centre in the world for diamond trading; the C.S.O. offices are located there, and around them the offices of their brokers and other dealers. London's activities will be dealt with in the next chapter, as part of the C.S.O.'s marketing mechanism.^
Bong Kong has a special position in the diamond trade. Its geographical location makes it a natural link between East and West, and being a "free port", it attracts foreign buyers from all over the world who want to profit from the absence'of import and sales taxes. Also, the cost of labour is low, and there is a long tradition of buying and selling. It has been said in the trade that Hong Kong is the cheapest place for diamond jewellery and single loose diamonds.
Before 1970 there was no cutting done in Hong Kong, but only commerce in polished goods. These came first from
I.D.A., p. 185.
I.D.A., p . 242 . 120
Antwerp, South Africa and Amsterdam; in the 1950's Israel
became a source; and now India and the U.S.A. also. The
latest source, somewhat surprisingly, has been the United
Kingdom. Business is done practically all on credit, some•
times on extended credit. There is also a practice of send•
ing goods abroad on consignment, which are returned if unsold.
(This practice is less widely used at times like the present,
when prices are rapidly rising). The main customer abroad
is Japan.
Singapore used to be a so-called entrepot for the re•
distribution of both cut and uncut diamonds among Malaysia,
Indonesia, Thailand, and other Far East countries, but now
Hong Kong has occupied that place. The I.D.A. says that
official statistics of what trade there still is are worth•
less due to smuggling.^
CONCLUSION
Production of diamonds is carried out by operators of
all sizes, from giant companies to small local miners to illicit
diggers. De Beers, through its own subsidiaries, through con•
tracts with independent producers, and through licensed buyers
active in most markets, manages to absorb about 80 per cent of
the output of rough; the rest finds its way to the trading
I.D.A., p. 243. 121
centres in various ways, that often include smuggling. The
U.S.S.R. is in a class by itself, with its production and
distribution carried out solely by the State.
In the cutting industry, one of the historical
patterns is the shifting in and out of prosperity of a
centre as politics and monopolies shifted, and as the
rough consequently became available or was withdrawn.
Another pattern arises from the fact that small stones
require more labour in proportion to their price than
larger stones. Thus, the more established centres find it
impossible to process the small stones, due to high labour
and overhead costs, and send them to be processed elsewhere,
often in cottage industries, and always by lower paid workers.
Many centres have started by filling that niche, and some of
them have grown into larger and more diversified cutting
industries. The new industries do compete with the old ones,
but often the market accommodates itself so that there is a
specialization of functions, and each cutting centre will then
produce a certain range of sizes and qualities that will not
greatly overlap with that of the others. This is connected
to the phenomenon of the progressive lowering of quality in
the average goods sold, as new markets are being created for
goods that are smaller, or of poorer quality, than those
commonly sold before. Thus, certain centres grow by special•
izing in a lower quality than is currently available, and the 122
prime example is Israel succeeding Antwerp and India in
turn producing even cheaper goods.
The development of cutting centres is closely
tied to the fact that diamonds have such a high value-to-
weight ratio that transportation expenses of the rough, even
over long distances, are relatively insignificant. This is
true nowadays, with cheap air travel, but it was true even
centuries ago, and made possible the creation of the var•
ious European centres to process Indian and then Brazilian
diamonds. These manufacturers were close to consumption
centres, but in the present century the Israeli and Indian
industries were created far from both the producers and
the consumers, and they did not experience any disadvantage
therefrom. By the same reason, division of labour is highly
practical, an example being Tanzanian diamonds flown to Ant•
werp for sawing and back to Tanzania for polishing; then per•
haps back to Antwerp for selling, and so on.
The ease of transportation of diamonds also allows
for much trading back and forth between the various bourses.
(As diamonds are a nonhomogeneous commodity, they must be
physically transported to be appraised by the buyer). It
also greatly facilitates smuggling, which is a common prac•
tice in certain sectors of the trade. In connection with
smuggling, there is the fact that diamonds are quite hard to
appraise accurately, even for the experts; so the declared 123
value of imported and exported diamonds may not have much connection with reality. Governments are not defenceless against such practices, but the difficulties remain. CHAPTER IV
THE DIAMOND INDUSTRY IN ISRAEL
OUTLINE
The first section of this chapter deals with the history of the Israeli diamond-cutting industry from its modest beginnings in 1934, through the war-time boom, to the trying period after World War II. The second section details the growth that has taken place since 1948, with special attention to the fundamental role of the government in assisting the industry's development. Subsections of this section deal with the way in which rough was procured to feed the industry after the De Beers sources dried out; with the financial assistance to the industry from the government; with the procurement of manpower; and with the institutions that have been built to organize research and promotion. A last subsection deals with the division of labour among cutting plants and the practice of subcontracting. The third section deals with the Israel Diamond Exchange and describes in de• tail the way in which the whole purchases are negotiated among dealers. One last section studies Israel's latest export figures. 125
DEVELOPMENTS UP TO 1948
The beginnings of the Israeli industry go back to
1934, when Zwi Rosenberg, who was born in Hungary and spent
some years in Antwerp learning the craft, went to Palestine,
and after two or three years set up polishing mills in a
disused stable in Petak Tikva. There he. was joined by his
cousin, Anton Dascal, also from the Antwerp industry, and
together they were the first diamond cutters to operate
in Palestine. Even before them, however, another Antwerp
manuacturer, Shlomo Weinstein, had brought equipment to
Palestine in 1910; but he abandoned his idea and only in
1940, after Rosenberg and Dascal had established themselves
in Natanya, did he join them to start his own shop there."*"
The major of Natanya, Oved Ben Ami, had seen the
possibilities of the industry and had offered free land,
loans on easy terms, and other benefits to the manufacturers
to attract them to the town, setting a pattern of government
help that would continue to the present day. Ben Ami succeeded
in making Natanya into a centre for the cutting industry, and
with the developments of World War II, it became the only
operating centre for Europe. Refugees from Amsterdam and
Antwerp flocked to it, and the industry and the trade grew
quickly, due to the skills and connections of the newcomers.
International Diamond Annual (I.D.A.), p. 229. 126
0. Ben Ami was also instrumental in arranging a meeting with George Prins.of the London firm of diamond brokers, I. Henning and Co. Ltd., which brought about the diamond syndicate's first interest in the young industry in Palestine. Through the Diamond Trading Company (D.T.C.) the manufacturers were promised enough rough to sustain and
expand their production. The imports Avere regulated by the colonial authorities of Palestine, who directed the local manufacturers to form an association that would become the
sole importer of rough for its members. Further, their
sole source of supply should be the D.T.C.
At the end of 1942, the government regulated again
the growth of the industry, when the Secretary of State
for the Colonies,.to "preserve the sound development of the
industry," forbade the issuance of new manufacturing licenses
or the addition of new shareholders to the existing factories.
Governmental intervention was probably motivated by the close
co-operation of the British authorities with the Belgian and
Dutch governments in exile, and the British must have been
concerned about the competition of the Israeli industry to
2Michael Szenberg, The Economics of the Israel% Diamond Industry (New York: Basic Books, Inc., 1973), p. 19. 127
the European centres once the war was ended.0 Be that as
it may, the new regulations helped the industry for the
time being by bringing in stability, centralized production,
freedom from excessive competition, and therefore a high
degree of prosperity.^ At the end of the war in Europe, however, the refugees began streaming back to Antwerp and
to Amsterdam, and the Belgian and Dutch governments strove
to reconstruct their shattered industries. The D.T.C. also started redirecting the rough to Europe, for reasons that the I.D.A., which is a De Beers publication, explains as follows:
Antwerp, as both the leading diamond centre in pre-war days, and as the controller of a vast production of mainly industrial diamonds from the (Belgian) Congo could claim special rights and preference from the D.T.C. in London. Industrial diamonds from the Congo had become supremely impor• tant for war industries"in America and Great Britain and, in post-war industrial developments, Congo boart was becoming progressively more impor• tant. Marketing allocations in London of both gem and industrial diamonds had to take account of sources of supply, long-established associations, marketing networks and the general desire to assist the Belgians and the Dutch in their great efforts to restore their industries and their marketing arrangements. (Emphasis added).
Szenberg, p. 28, n. 4
Ibid., p. 19.
SI.D.A., p. 229 . 128
So, after the favourable conditions provided by the war evaporated, the industry was threatened with extinction.
Firms disintegrated and mass layoffs took place. In 1947
the Histadrut (the Israeli Labour Federation) tried to alle• viate the economic hardships by assisting the workers to form
20 co-operatives, but by then the Israeli War of Independence,
the military mobilization it required, and the cutting off of
rough from the D.T.C. had aggravated the crisis. Eventually, all the collectives failed.^
THE RECOVERY AND GROWTH AFTER 1948
AND GOVERNMENT POLICIES TO DEVELOP THE INDUSTRY
Before proceeding with the history of the industry,
it may be useful to consider the attitude of the Israeli govern• ment towards the development of the several sectors of the econ•
omy during this period. Until the middle of the 1950's the main concern of the government was to supply the basic needs of the rapidly growing population through expansion of agricul• ture, construction and infrastructure. As for manufacturing, the leadership continued in its traditional pre - independence policy of largely 'ignoring it. (The first Zionist settlers, reacting to their former lives in Europe, had a distate for industrial and financial activities and a preference towards settling and working the land, and it was these same early
6 Szenberg, p. 19. 129
settlers who dominated the post - independence government).
Considering that during the early post-independence years it was the government who financed most of the development in the country (between 50 to 80 per cent of gross capital formation in the years 1950 to 1958) it is clear that manu• facturing couldn't prosper without official help, and, indeed, it did decline during those years (the share of manufacturing 7
in the G.N.P. went from 25 to 22 per cent in that time).
But in the latter part of the 1950's, the govern• ment started a shift towards helping the development of
Israeli's industries, probably due to the lessening in immi• gration pressures and the prospects for diminished foreign assistance. The diamond industry from the beginning appeared as one of the most promising, for the following reasons: 1. The industry is exclusively export-oriented and capable of earning foreign currency.
2. Investment per employee is small, from $150 to $600 (in 1969) .
3. Transportation costs are minimal.
4. Educational requirements for the training of the workers are also minimal.
5. Consumption of water (scarce in much of Israel) and electricity is negligible.
6. The commercial, familial and ethnic re• lations between local producers and mar• keting channels abroad facilitate access to foreign markets.^
Szenberg, p. 104.
Ibid., p. 105. 130
Therefore, a number of government programs started about this time to help the industry in its many needs: procuration of raw materials, credit, research and manpower recruitment.
Supplies of Rough. After the successful conclusion of the War of" Independence in 1948, the industry began its slow reconstruction, marked by a constant struggle to secure supplies of rough. Lengthy and only partially successful nego• tiations with the D.T.C. in 1950 finally secured a frozen yearly quota of between $5 million and $8 million worth of rough, estimated enough to employ 1,500 workers. At that time, this quota constituted about 80 per cent in value of Israel's total rough imports, the remaining 20 per cent coming from
Belgian and Dutch clients of the syndicate, which transferred their allotment but charged a premium over the syndicate's prices. It was realized that these channels would not be enough for the development of the industry, and in later years they became even less adequate, with the cessation of the shipment of chips in 1950 (chips have a high added valued and are therefore a desirable type of rough), and the newly imposed restrictions in Belgium against the export of rough diamonds.9
It thus became necessary to investigate new ways of procuring rough. As an initial effort, the government sent two negotiators to Africa, Menahem Fruchter and Joseph Nadel,
Szenberg, p. 107. 131
and urged private dealers to join them. In 1958 a government-
owned corporation, Pituach, was founded to initiate contacts with the newly-emerging African nations for the purpose of
diamond prospecting and procurement. At that time Israel was held in high esteem by many African governments, like those
of the Ivory Coast, Ghana, Guinea, and the Central African
Republic, and Pituach was successful in procuring rough: in
1959 imports from Africa amounted to only $170,000, but in
1961 they had grown to over $5 million. At the same time, relations were also expanded with independent mining and rough-diamond marketing concerns, like the New York-based
Diamond Distributors Inc.
It is conceivable that the syndicate, composed as it is of South African interests, felt threatened by the
Israeli activity in Africa, because its position in the black republics was and is precarious; for this or other reasons, it consented in 1960 to re-open negotiations to expand the quota of rough for Israel (having refused up to that point to do so). The terms of the 1961 agreement were not published, but the result was clear; the C.S.O.'s per• centage (by value) of the Israeli imports of rough was in
1959 at an all time low of 16.4, down from 81.3 in 1951; but it steadily climbed from 1960 to a value of 58.3 in 1965, and thereafter fluctuated in response to the various develop• ments, but always remained high, while the value of the imports 132
went up quite steadily over these years.1U In 1977 it was over 50 per cent from direct C.S.O. sales and a considerable but hard to estimate additional percentage from additional 11 sales. Table IV.1 and Figure 45 show Israel's imports and the share of the C.S.O. in them.
In 1969 there were about 50 manufacturers and 10 dealers, including Pituach, that had access to syndicate sights.
Pituach continues also to procure rough from other sources, avoiding competition with the syndicate (which perhaps was one of the terms of the 1961 agreement), and selling to cus• tomers both in Israel and abroad. In 1965 it was shipping to 100 customers, of which only 50 were in Israel, and its sales were over $14 million.
Parallel to the growth of Israel's share of the
C.S.O.'s sales (from 5.9 per cent of the total rough sold by the C.S.O. in 1952 to a low of 2.7 per cent in 1959 and from then up to a third and more of all C.S.O. sales) there has been a decline in Antwerp's share, from 36.4 in 1952 to 23.8 in
1966 and still decreasing. (Percentages are on value, not carats).
10Szenberg, p. 107.
^Israel Diamonds, 46:32.
12 Szenberg, p. 109. Figure 45
Import of rough gem diamonds Cl. from D.T.C. , 2 from _ 475 other sources (From Israel Diamond De- — oartment, Annual Report 'for 1 974) . -
Lr4 TABLE IV.1
IMPORT OF ROUGH GEM DIAMONDS (1. from D.T.C., 2. from other sources) 1952-74
(From State of Israel, Ministry of Commerce and Industry; Diamond Department, Annual Report for the Year 1974 (Feb. 1975)
_y_rp.ii other source3 From D. ?~ LTT ~Cro33 ioport V» Of caraa carats icport carats value 2,229,276 150,472 77.3 7,5S7,524 220,323 9,316,300 370,300 1952 5,101 ,477 207,593 56.8 6,692,523 239,002 11,794,000 446,600 1953 5,224,160 212,910 62.1 8,563,240 294,190 13,793,000 507,100 1954 5,310,633 334,S07 42.7 6,934,967 209,093 16,245,600 543,900 1955 16,226,365 +06,955 24.8 5,361 ,135 152,345 21,5S3,COO 639,800 1956 22,913,740 654,818 5,898,060 20.5 159,732 28,811,800 814,600 1957 19,042,809 597,108 6,509,154 25.5 175,362 25,551,963 772,470 1958 35,436,930 1,063,794 6,996,875 16.4 191,103 42,433,855 1,259,902 1959 40,753,833 1,181 ,091. 10,429,476 20.4 260,602 51 ,133,364 1,441,693 1960 36,993,542 20,053,141 1,175,742 35.2 ' 436,897 57,046,634 1,662,639 1961 37,673,834 34,760,245 1 ,202,103 48.0 952,553 72,434,079 2,154,656 1962 43,664,122 56,429,050 1,349,957 56.4 1,590,011 100,093,172 ' 2,939,963 1963 54,732,475 1,345,917 62,468,529 117,251,007 53.3 1 ,652,350 2,998,767 1964 • 46,142,994 1 ,165,447 64,532,621 1,542,302 110,725,615 2,707,749 1965 58.3 . 73,742,817 138,854,996 65,112,179 1 ,496,135 53.2 1 ,628,383 3,124,518 • 1966 72,5S9,325 137,927,244 65,337,919 1,510,679 52.6 1 ,575,327 3,039,006 1967 93,414,619 — ICO,526,561 " 1968 87,111,942 1 ,926,739 51.7 1,950,626 3,877,365 122,322,568 2,438,713 83,050,101 — 1,867,774 210,372,669 4,306,437 . 1969 41 .8 58,428,636-— 174,734,658 4,097,142 1970 116,355,972 2,719,815 33.4 1,377,327 92,303,209 — 2*0,263,947 5,668,832 1971 147,960,738 3,540,158 38.4 2,123,674 124,030,531 - 336,590,097 6,739,084 1972 212,559,566 4,lS5,025 36.9 2,55",059 165.27S -i6 433,017,839 - 7,233,48? 1973 322,741,493 • 4,562,018 33.8 .3 2,676,471 179,6 ,750 442,Vi4J,609 6,119,314 1974 263,265,919 3,451 ,371 40.6 ^4 135
Credit to the Industry. It is a peculiarity of the industry that even though the value of fixed equipment is very low (except that the new automatic machines are considerably more expensive than ordinary scaifes) working capital require• ments are very high, due to the cost of the raw materials.
In the early post-war years, the import of rough was financed by acceptance credits put at the disposal of the local banks by their foreign correspondents. These were repaid out of '. the proceeds from the sale of the polished goods, usually after 90 days. However, the extremely rapid growth of the industry, its seasonal pattern, and keen competition in the major export markets led to longer credit extensions to foreign customers. Orders were shipped on consignment rather than on "fix" (payment agreed upon before delivery) which generated a severe shortage of cash.
This shortage could not be met by the usual banking sources; and even if it had been possible, the interest paid on loans would have threateried or even eliminated the industry's profits. The government, recognizing the problem, formed a special fund within the general fund for financing exports, in which the Bank of Israel and specialist banks participate. (Since diamond financing demands an intimate knowledge of the product by the bank, it is mostly done by specialist banks, of which the princi• pal is the Union Bank, a subsidiary of Bank Leumi, and the 136
othersfare the Discount and Barclay's Banks). Twenty per cent of this fund is provided by the government budget,
20 per cent by Bank of Israel rediscounts, and the remainder by the specialist banks. One-half of the latter is subject to liquidity restrictions. The diamond fund ($70 million
in 1969) finances up to 80 per cent of the cost of acquir• ing stones, and maintaining stocks, and up to 90 per cent of the export deliveries, at an interest rate of only 6.2 per cent. The comparatively low interest rate, less than half of what would !have to be paid in the open market, is granted to increase the competitiveness of the industry in 13 world markets.
There was criticism about both the liberality with which these loans were granted and the heavily subsidized rates of interest and it is undeniable that there were abuses and that often some of the weakest and most ineffi• cient firms received undeserved support. To meet the cri• ticism, the Diamond Control Department revised the lending policies, trying to prevent unjustifiably large loans and also the diversion of funds into other activities, like real estate, for instance. The policies were modified, so that credit is obtained only in foreign exchange and can only be redeemed in foreign exchange.
Szenberg, p. 110. 137
Certain privileges enjoyed by the trade, which could be classified as a government support of sorts, are not made public, but are probably well known. In the Diamond
Exchange at Ramat Gan, which is only open to members (manufac• turers, brokers, and dealesr), there are, in the author's ex• perience, money changers that work without fanfare but quite openly, exchanging foreign currency at rates better than the official ones. It is hard to believe that such activities can take place without the government's knowledge, so it must be concluded that the government tacitly consents to them in the interest of the industry's welfare. 14
One more privilege enjoyed by men in the diamond industry is a little known 10 per cent discount on all hotel bills. It would be interesting to ascertain whether the hotels are reimbursed, and if so, by whom, whether by a government source or other sources.
Manpower. The speed with which the industry was built created some special features in the manufacturing pro• cess, especially as.regards the division of labour. It was not possible to spend years training apprentices in every branch of cutting and finishing. Training had to be quick; and this could best be achieved by letting one workman
"^here are very few women in the Israeli diamond industry. 138
concentrate on one particular part of the process. This con• centration led to the method called chain-of-six. First a sawer cuts a stone in two halves, and then one man does the grinding, another the top main (four) facets, then the bottom main facets, then the top corner facets, then the bottom corner facets, and finally the top and bottom brillianteer- ing. The chain-of-six system differs from the more tradition• al practice of a blocker and a brillianteerer, which employs just two workers, and is particularly well adapted for fast processing of melees that require sawing in half. The wide employment of this system, which gave Israeli for some time almost a world monopoly in polished melee, benefitted the worker in that it increased productivity and earnings, but it also engendered boredom, a reduction in the satisfaction derived from doing the work, and a feeling of insecurity because of the impossibility of any advancement. This in turn leads often to a drifting away to other trades.^
Industry workers tend to be younger on the average than workers in other industries; for instance, in 1961 workers of ages 18 to 34 were about 55 per cent of the total of 5,000 diamond workers at that time, whereas in all industries in Israel combined, that age group amounted to about 38 per cent of the total work force. One of the reasons for this difference could be the piece-rate system of remuner• ation, which favours the young worker, while discriminating
I.D.A., p. 230. 139
against those who cannot keep up with the strain.iu
The recruitment of workers for the diamond industry is considered to be so important that it has been approached as a national goal. A vigorous press and radio campaign with the slogan polishing and cutting diamonds is a craft was launched in 1966 to modify negative attitudes among diamond workers and attract new applicants. An apprenticeship pro• gram started in 1969 enables boys of 14 to 18 to learn the trade and at the same time attend a vocational school.
Apprentices are paid a small wage and given possibilities of rapid advance in pay. This reverses the previous policy of making apprentices pay from 300 Israeli pounds upwards 17 to the employer for their training. Such measures have succeeded in securing enough manpower to the industry to allow it to expand rapidly; in 1961 there were 5,100 workers, in 1974 about 8,000, and at present, according to industry 18 sources, about 20,000. Table IV.2 shows the distribution of the employees in 1974, by specialization (sawers, cutters, polishers) and location (Tel Aviv, Ramat Gan, etc):".
"''"Szenberg, p. 115,
11 Ibid. 3 p. 118.
18Interview with Mr. Gadstein, Director of the Israel Gemological Institute, 15 January 1978. TABLE IV.2
DIAMOND ENTERPRISES AND PROFESSIONAL WORKERS ACCORDING TO LOCATION 1973-74
September 1973 October 1974 Total Total j Total Total Savss Cutter? Polish. prof63. Sawers Cutters Pol. profes. Kntsrprisea " employees I enterpri • employees
753 TOTAL 437 1,070 7,165 8,692 (yV.i 403 92-; 6,755
-> t ~> r: 1o6 2,154 236 Tel-Aviv' 185 368 2,342 •2,^95 210 315 Ramat-Gan S5 162 ,429 1,676 : 194 100 190 1 >410 1 ,7i:o 157 1 Bnei-Brak • ~>~> 453 574 32 18 84 459 561 29 99 Potah-Tikvs 14 32 525 . 571 10 43 579 632 39
159 Nathanva • 146 91 211 •1,461 I ,763 95 245 1,630 1 ,97w Jerusalem - 10 41 341 392 •23" 10 51 352 413 19 Dev. Areas 12 62 363 437 41 317 407' 3a 11 79 Others 114 11 o 29 39 12 8 10 96
(From Israel Diamond Department, Annual Report for 1974). 141
Research, Innovation and Promotion. One characteristic of the industry is that the equipment is highly durable, and with proper maintenance can last for decades. This is one rea• son why manufacturers are not too interested in experimenting with new equipment. Other reasons are that a signficant propor• tion of the manufacturers are small enterprises that prefer to invest in raw materials rather than equipment. There has been, nevertheless, some movement towards greater utilization of automatic machines, due in part to inducement from the government, research institutes, and trade organizations.
Automatic machines can only process efficiently cer• tain types of rough, which can create difficulties if that rough is not available. During the author's visit to Israel in 1977, a manufacturer complained to him that in order to continue dealing with the C.S.O. he had had to buy a number of automatic machines produced by a subsidiary of De Beers, which implied that he was obliged to secure a certain type of rough. Now the rough was not forthcoming in the required quantities, and he had only been able to procure from his
C.S.O. sources about one-third of his requirements. The new
automatic equipment, then (which still requires one worker to
take care of 16 to 24 machines), may diminish flexibility to
some extent.
Technical advance is, of course, not restricted to
automatic machines. To research into improved methods of production, the government set up an experimental polishing 142
plant in Ramat Gan, which has already led to some achieve• ments, among them a girdling machine that uses a diamond- grinding wheel.^
In 1965 the Minister of Commerce and Industry cre• ated the Diamond Institute, an organization designed to follow up on technical advances, advise on labour training and conduct market research and promotion of the Israeli industry. Actually, the Institute1s services are also avail• able to manufacturers from abroad, and in 1969 enquiries from abroad exceeded in number those from Israel. The
Institute publishes a trade paper in Hebrew, Hayaholom, and an English-French magazine, Israel'Diamonds. In 1977 the
IsraelGemmological Institute was set up by the Diamond
Institute along the lines of the Gemological Institute of
America. The I.G.I, provides, among other things, standard• ized grading and valuation of diamonds, and issues certifi- 20 cates and gemprints for particular stones.
Manufacturing Practices: Plant Size and Subcontracting.
The chain system, prevalent in the diamond industry, is highly adaptable to volume operations in processing melees. Large firms operate primarily in this segment. But a large number of small and medium-sized firms are also able to operate viably,
19 Szenberg, p. 114.
Israel Diamonds, 45:22. 143
creating an extremely competitive environment. One reason for the viability of smaller-cale firms (which can be as small as a one-man operation) is the diversity of the raw material, some of which cannot be processed by chain methods. Another
is that the fabrication process consists of a number of oper• ations, all of which can be farmed out to small outfits work•
ing independently. This is done most often by the subcontract•
ing system, so that factories can be divided into two classes:
first, the integrated manufacturer who procures rough diamonds, who employs craftsmen in his own plant to saw, cut, and polish
them, and who sells the finished products. The second is the
subcontractor who produces goods to specification, never owns
the goods he is processing, and is not involved in the mar•
keting of the gems. (The subcontractor may, of course, be
producing goods for his own account). Some subcontractors
carry out preparatory steps, like cleaving; others engage
in sawing, cutting and polishing, and still others complete
the whole work from start to finish. In 1961 it was esti•
mated that one-third of all factories were doing some measure
of subcontracted work. Subcontractors as a rule handle stones
that are either too large or too small or too difficult for
the larger firms, and cuts other than brilliant (i.e., fancies 21 and eight-cuts).
Szenberg, p. 82. 144
Szenberg estimates that the optimum size for a factory handling melees, which can be most readily done by chain methods, would be from 50 to 100 employees, but for one turning out fancy cuts it may run as low as one 2 2 to nine workers. These figures were obtained by studying the different rates of factory survival and relating pro• ductivity to size. There are factors other than economic, also, for the predominance of small firms (in 1974 about 75 per cent of the establishments had from one to 20 workers, against only one per cent that had over 120 workers), like 23 the "Jewish craftsman's preference for independence."
Even though the mortality rate of the small firms is fre• quent, some do become established and they can then compete successfully with the larger firms. Table IV.3 gives the distribution of firms by size (number of employees) in 1974, and shows the preponderance of the small firms.
Szenberg, p. 48.
ibid., P; 75> TABLE IV.3
ENTERPRISES ACCORDING TO NUMBER OF WORKERS OCTOBER 19 74
E-T'.lovees Enterprises Percentage Uumber "centage Number (x) A. POLISHERS TOO 8^640 100 667 Total 29.5 2,545 75.7 505 1-15 21.7 1,877 13.3 • 89 16-30 18.3 1,585 6.2 41 31-50 12.8 1,106 2.7 18 51-75 9.0 775 1.3 9 76-JCO 8.7 752 0.8 5 100 "*>?a
B. SAWING 100 337 100 86 Total
40.1 135 74.4. 64 1-5 33.2 112 18.6 16 6-10 15.7 53 4.7 4 11-15 11.0 37 2.3 2 16-20
( *) Doe3 not include cleavors and dine tumors. (.** ) Does not include savers working in polishing' factories.
(From Israel Diamond Department, Annual Report for- ID?4)
.4^ f n 146
THE DIAMOND EXCHANGE
Most of the transactions between Israeli diamond whole•
salers, Israeli diamond brokers and foreign wholesalers,
importers and brokers take place at the Israel Diamond
Exchange. The Diamond Exchange, standing in a suburb of
Tel Aviv called Ramat Gan, is a 28-storey tower where all
non-production facilities of the industry are concentrated:
a large trading hall for the Bourse; offices of the Exchange;
the Diamond Controller (which depends on the Ministry of Com•
merce and Industry and issues licenses for trading as well
as approving imports and exports); the Diamond Institute
already mentioned; the Diamond Manufacturers Association
and other industry bodies, the three banks serving the indus•
try -- Union, Discount and Barclay's, import-export control;
customs and special postal services for shipping diamonds;
and officesof 250 firms from Israel and abroad. There is
an efficient security system and a large security staff, plus vaults in the basement; additional security arises from
the fact that all transactions can be completed in one build•
ing, including the shipping.2^
Another larger building has been completed next to the 1968 Exchange. It has 21 stories (but is taller than
Israel Diamond Institute, The Israel Diamond Industry, (n.p., n.d.). 147
the older building) and 800 rooms. Besides offices and other facilities for the diamond trade, it will contain jewellery workshops and showrooms, reflecting the increas• ing development of Israel's jewellery industry. Most office space in this building was taken up long in advance of its completion, so intense is the demand. The facili• ties will officially open on October 24, 1978, the 10th 2 5 anniversary of the opening of the first tower. The Israel Diamond Exchange Ltd. is a public limited 2 6 company with about 1,6 00 members; which include manufacturers, exporters, importers, dealers, cleavers and brokers. To be• come a member, the candidate has to be recommended by two members, be approved by the Diamond Control Department, and pay an entry fee of about $5,000 that includes acquisition of shares of the company; there is also an annual fee. But first the candidate's picture is posted for some time in the world's bourses, so that anyone who may have negative information on him may report it. It is essential for the functioning of the system that only men of untarnished repu• tations be allowed to participate in the transactions.
Israel Diamonds, 47:72.
Interview with Mr. Gradstein, Executive Director of the Israel Gem Institute, 15 January 1978. 148
Only those foreign buyers who have established con• tacts within the Bourse are allowed in the Exchange, after a security check. There are two ways in which a visitor can buy: he can go to the polished dealers' offices or he can trade in the Bourse (only if two Bourse members of at least two year's standing are willing to take full responsibility for him in writing). The polished dealers are members of the Exchange who rent or buy an office from the company. Values of offices have gone up consider• ably since the building was completed; one office costing
$10,000 would now be 10 times that price, if it could be 27 found. In his office, the polished dealer serves a num• ber of overseas clients, some of whom may be established customers and others new clients. The clients state the quantities and qualities they require, and the polished dealer either takes the goods from his stock or uses the services of a broker to procure them for his clients.
The main advaantage of buying from a polished dealer is that it is easier, especially for overseas buyers not used to the trading in the Bourse. The offices are quieter, more time is allowed for inspection of the merchandise, and there is less pressure; but the prices are higher, because the dealer has a higher overhead (and also has to pay broker's
Interview with Mr. Gradstein, 15 January 1978. 149
fees. Therefore some visiting buyers prefer to deal with the brokers directly. Brokers are also members of the
Exchange. They generally work on their own, and not as , members of a larger firm. A broker does the actual pro• curing of the merchandise from the factories or other wholesalers, and brings it to his clients. The broker's commission is one per cent of the.sale price, generally paid by the owner of the merchandise who is called the patron.
The Diamond Exchange is thus largely a personal
market, and transactions are completed through verbal
contracts. Two reasons can be given for this practice.
In the first place, the grading of polished diamonds is not
yet standardized, and the merchandise must be inspected
to determine quality. (There is also trading in rough,
and the parcels must also be inspected, unless they come
from the D.T.C. in sealed graded envelopes.) In the
second place, personal relationships based in mutual trust
and good faith count for a great deal in the industry.
Each sale in the Exchange is the result of individual
negotiation between buyer and seller. Such a negotiation
could run as follows: the buyer may be sitting at a table
in the exchange hall, and a broker comes to offer his
services. Verbal exchanges at the Bourse are quick and 150
to the point, and no time is wasted in unnecessary words; so a broker may address a'buyer by just asking, "What do you want?" The buyer says, for example,•"Melees, cleanish,
commercial white." (The informal gem grades for actual
trading in the Bourse are slightly different from the
more official scales reproduced in Chapter 1; see below.)
The broker may or may not have been entrusted with such
merchandise by some patron; if lie has it, lie proceeds to
show it; but if not, he has to decide whether it is worth
his while to try to procure it. One risk is that he may
waste time trying to find it while some other broker takes
away the client. At busy times, indeed, the brokers actually
line up to see the prospective clients, and a broker who
spent his time searching for the desired merchandise would
not even rate an apology if the client meanwhile gets it
from somebody else trading is too brisk for that.
Assuming that the broker possesses or procures the
desired goods, the next step is for the client to examine
the packages. These packets, not only at the Bourse but
everywhere that diamonds are traded wholesale, are
rectangles of white paper folded as an envelope, with a
paper lining inside, usually light blue (to improve color
of the stones). The average size of the stones contained
in it is written in pencil on the upper right corner, the 151
number of diamonds in the packet on the lower left corner, and the total weight in carats in the lower right corner, so that it may look like this:
(a serial number) 25 pt.
100 25 ct.
This does not mean that the packet contains 100 stones weighing 25 pt. apiece; 25 pt. is only an average. In fact, there may be no stones weighing 25 pt., which would be to the detriment of the buyer. The reason is that round numbers: 1 ct., 2 ct., 3 ct., and so on up, and % ct., % ct., 1/5 ct., and so on, are more sought after than fractions like 19 pt., 18 pt., 1.13 ct. and the like.
This in turn is based only on the mystique of owning a ring with a stone weighing a round number, and on no other reason. Since such a difference in marketability exists, the buyer must consider, when examining the packet, how 152
many 25-pt. stones are there. A method of deceiving unwary buyers is to take out most of the 25-pt. stones; then the buyer who did not check the weight of enough stones would make a poor purchase. Incidentally, the weight of small diamonds is checked, not by weighing, which would be highly impractical, but by passing the stones through a set of special sieves, one sieve at a time.
Another factor connecting weight and marketability which does not affect so much the deals at the Exchange but has to be taken in consideration by a wholesaler selling
to jewellers is that stones weighing slightly less than
a round number are more readily bought by many jewellers
than those weighing slightly more. For instance, these
jewellers would appreciate a 26-pointer less than a
24-pointer, and would buy a 19-pointer sooner than a
21-pointer.' The reason is that the 24-point diamond is
cheaper than the 26-pointer of the same quality, but is
almost indistinguishable from a 25-point stone (the
diameters being very close), so that a buyer at the jewelry
store is apt to choose the cheaper stone. The wholesaler,
therefore, must be aware of such preferences among his
jeweller customers. A fact that always holds true is that
a package where all the stones weigh about the same would
be welcome by the jewelry manufacturers. This circumstance
was exploited by the Russians, who, when they first 153
rted'selling polished stones abroad, concentrated on s tar bu ilding a reputation as producers of stones uniform in quality and weight -- most often 25 and 20 points. Not many makers can promise such uniformity, because of
the extra wastage of rough and . the added labour.
Therefore, the buyer first checks the stones, either
all (if they are large) or a sampling, until he has a good
idea of the merchandise. Then he starts negotiating.
Prices are quoted at so much per carat: e.g., a certain
package of h carat stones would sell at $1,100 per carat.
Besides trying to lower the prices, the buyer can try to
improve the deal in several standard ways. One common
proposition from a buyer would be "Ten per cent out."
This means that he wants to take out 10 per cent of the
stones: those of inferior quality, poorly finished, or
of inconvenient weight. Or else he may propose: "Ten
stones out," which is a similar arrangement. This selection
is advantageous to the buyer because, even though he pays
the same per carat, he is buying higher quality. So the
broker may make a counterproposal: "Five per cent out."
On the other hand, the buyer may decide that the quality
is uniform enough that it is better to ask for. a straight
reduction in price: "One thousand." Another variable
to be negotiated is the form of payment: cash or 30 days.
Paying cash earns a 1 per cent discount, but it is at the 154
present time actually worth more, because ,.given the quickly changing conditions' of the market, and the accelerated
rise in prices, cash may be highly desirable to the patron.
The broker, on his part, may negotiate on who pays the
commission due to him: he may agree to the $1,000 per
carat, but only if 'the buyer pays his 1 per cent commission.
At the end of the first round of negotiations,
the buyer and the broker agree on a price and stipulations,
e.g., "One thousand and 5 per cent out and cash." Then
they make a cachette, which is a sealed envelope containing
the packet of stones, .that the buyer signs across the flap,
after writing the agreement on the outside. The cachette
is a binding promise to buy at the stated price, and its
breach may have very serious consequences to the client.
Armed with the cachette, the broker now goes to see the
patron. It is in the broker's interest to make as many
sales in a day as possible, while a small difference in
price doesn't affect his commission appreciably; therefore,
he will now try to persuade the patron to accept the offer.
How much pressure he will bring to bear on the patron
will depend on a variety of factors, like how much business
the patrdn channels his way. Eventually, the patron will
probably either agree or make a counteroffer; meanwhile, the cachette remains sealed, and any evidence of tampering with it will nullify the promise.
Even though bargaining is acceptable, and even the
norm, it is not considered proper for a buyer to bargain
over a difference of a few dollars per carat (which may
amount to hundreds of dollars for the total purchase).
The broker may walk out on such a customer, and the latter'
reputation would be tarnished a serious disadvantage
in the Bourse.
Traditionally, a deal in the diamond trade is
concluded with.a handshake and the Yiddish words "mazal
brocha" ("good luck and blessing").
In January, 1978, trading at the Bourse was somewhat untypical, due to the scarcity of rough available in the world's markets, and the rapid r_se in prices. It was a seller's market; those who could afford to hold onto their' stock did so, and the others sold at a relative loss. It was mainly the manufacturers that had to sell, because paying wages and buying new rough couldn't wait; but, even
though they made a profit with respect to the original cost
of the rough, the new rough came costing more than
corresponding amounts of polished they were selling, and
also there wasn't enough of it. Paradoxically, there was
at that time an intense speculative trading in rough at 156
the Bourse, which does not normally happen. Another unusual phenomenon was that often brokers came back to the buyers with the news that the patron wanted more than the original asking price. Prices, indeed, were rising by the day.
The terms used at the Exchange for clarity and colour grading are as follows:
CLARITY COLOUR
Pure Extra collection Cleanish Collection Eye-clean White Light Pique Commercial White Heavy Pique Off-Colour Re j ection
Rejection is for sale too!
ISRAEL'S EXPORTS In its Newsletter of February 1978, the Israel Diamond Institute announced that, as foreseen months before, the 1977 net export figure, i.e., gross exports minus returns, had surpassed the $1 billion mark, being in fact, $1,002 million. This represents an increase of 40 per cent over the $712 million figure of 1976. The main buyers were, in millions of U.S. dollars and gross figures (before returns) only: 157
1977 197 6
U.S.A. 320 217 Hong Kong 18 3 105 Belg ium • 113 57 Holland 9 5 SI Japan 8 6 62 Switzerland 75 . 5 0 West Germany 59 3 5 France 38 24 U.K. 26 18 Canada 21 15 Singapore 14 11 Italy 9 2
To appreciate more fully the meaning of these figures, one should recall that Belgium, Holland, Switzerland,
Singapore, and Hong Kong are transit countries, that in
turn sell their purchases to others. The European transit countries sell to South American and Arab dealers and consumers, among others. Even in countries that have a
significant diamond-buying public, on the other hand, dealers
frequently trade back and forth, thus blurring the image.
Nevertheless, it is clear that the U.S.A. is the main
consumer of Israeli diamonds by far ; the second place
probably belongs to Japan. 158
The increase of 40 per cent over 1976 exports is only partly due to an increase in cartage sold. By weight, 2 8
sales increased only about 15 per cent. Prices per carat
increased, however, well over 25 per cent in the first half
of 1977 as compared to the first half of 1976, and a greater percentage still, no doubt, if the second half of 1977 is
considered (data not available yet).
The net income from diamond exports, however, is
always relatively low due to the high cost of rough. The
imports for 1977 were not available, but extrapolating from
the data from 1966 to 1976 would give 80 as the percentage
of imports in the total export figure (this agrees exactly 29 with Szenberg's estimate of 80 per cent, made in 1969 )
showing that the likely net income was about $200 million,
and the foreign-currency earning rate, defined as Export Value - Value of Import -^QQ Export Value
was about 20 per cent, a rather typical figure in the light
of past performances from 1949 to 1974. Table IV.4
shows exports, imports, currency earning rate, and percentage
of imports into exports.
Israel Diamonds, 46:32.
Szenberg, p. 25. 159
TABLE IV.4
Imports, Exports, Net Earnings, and Currency Earning Rate (In Thousands of Dollars) Imports as % of Year Imports Exports Net Rate Exports
1949 4,225 5,118 893 17 .4 82 1951 9,769 11,652 1,883 16.2 83 1952 9,817 11,462 1,645 14.4 85 1953 11,794 12,712 918 7 . 2 92 1954 13,793 15,698 1,905 12.1 87 1955 20,616 -- 1956 21,588 25,982 4 , 3 9 4 1 6 .9 83 1957 28,811 35,221 6,410 18 . 2 81 1958* 25,165 32,959 7,794 23.6 76 1959 41,489 45,195 3, 706 8 . 2 91 1960 49,159 56,318 7,159 12 . 7 87 1961 54,394 65,284 10,890 16. 7 83 1962 67,976 82,339 14,363 17.5 82 1963 93,008 104,017 11,009 10.6 89 1964 102,246 118,205 15,959 13. 5 86 1965 96,655 131,760 35,105 26.6 73 1966 124,934 164,662 39,728 24.1 75 1967 125,480 157,922 35,442 22.4 79 1968 162,049 194,802 32,753 16.8 83 1969 192, 750 ' 215,907 23,157 10.7 89 1970 154,361 202,040 46,679 23.1 76 1971 224,065 265,269 41,2 04 15.5 84 1972 316,059 385,691 69,632 18 . 0 81 1973 448,020 556,754 108,734 19.5 80 1974 407,037 562,265 155,228 27.6 72 1975 449,829 548,573 98,744 18.0 82 1976 562,446 711,958 149,512 21.0 79 1977 (800,000) 1,002,450 (200,000) (20.0) (80)
Sources: Annual Report for the Year 1974; Israel Diamonds (various issues) .
*Figures up to 1957 inclusive represent gross imports and exports. Net imports and exports were only recorded after 1957. 160
Once again, caution is necessary in the interpre• tation of such data. In the words of Szenberg,
"The export value of polished diamonds is a minimum figure, since exporters (or importers) in this way reduce their payments of custom taxes, which in the United States amount from six to 10 per cent and in Italy to 20 per cent of the total value added."30
To which it must be added that some transactions, the value of which would be hard to guess, are not reported at all.
Tables IV.5 and IV.6 give the statistics for
imports and exports from 1949 to 1974 in both carats and
dollars. The figures show how the actual caratage traded has increased at a more modest rate than the dollar value.
CONCLUSION
After many years of struggle and much organized
effort on the part of the government and the manufacturers alike, the Israeli diamond industry has become the major
source of exports for the country and a mainstay of the
economy. At the same time, the C.S.O. has become Israel's major provider of rough, and in turn Israel is C.S.O.'s main client. This situation, however, could undergo some
changes, as the rough shortage of 1977 may signify. It
Szenberg, p. 29, n. 161
TABLE IV.5 IMPORT OF ROUGH GEM DIAMONDS AND EXPORT OF POLISHED DIAMONDS 1949-74
(From Israel Diamond Department, Annual Report for 1974)
Export of Poliahad Diarionda 5 ~I carats _Import of Rou^h Gem Diamond ~j c=rats
5,118,000 75,670 4,225,000 159,800 1949 12,712,560 146,890 11,794,000 446,600 1953 35,221,18c- 341,070 28,811,800 - 814,600 1957 (*) NET 32,959,384 330,607 25,165,798 750,000 1953 45,195,602 455,070 41,489,125 1,218,778 . . 1959 56,318,625 574,298 49,159,537 1,371 ,863 1960 65,284,637 669,073 54,394,590 1,544,615 1961 82,339,723 838,228 67,976,295 1,952,420 1962 104,017,315 1,047,293 93,008,357 . 2,681,047 1963 118,205,669 1,083,927 102,246,261 2,530,103 1964 ' 131 ,760,813 1,162,376 96,655,474 2,219,436 1965 164,662,745 • 1,281,163 124,934,750 2,708,906 1966 157,922;760 1,210,838 125,450,826 2,775,200 1967 194,802,125 1,471,375 162,049,733 3,482,015 1968 . 215,907,316 4,538,477 192,750,567 3,906,954 1969 202,040,738 1,501,265 154,361 ,873 3,624,027 1970 265,269,576 1,874,686 224,065,256 5,292,715 . 1971 385,691,783 2,296,829 316,059,884 6,176,605 1972 356,754,004 2,445,092 448,020,973 6,587,690 1973 562,265,995 2 ,-'-6 7, Xb 407,037,949 5,568,191 1974
Het Inporfia import after deduction of rovijrh gooda returned abroad; "Met Exoort" ia export after deduction of polished fpods returned to Israel, Returned cooda wore registered ainco 195U. TABLE IV.6 EXPORT OF POLISHED DIAMONDS 1951-74 (From Israel Diamond Department, Annua I Report for 1 974)
Net - i^ioort Returned Goods Cross Export carats % of re turned carats S carats export
11,652,360 132,233 1951 11 ,462,260 134,570 1952 12,712,560 146,890 1953 15,698,780 183,810 1954 20,616,030 : 230,700 1955 25,982,960 262,350. 1956 35,221,180 341,070 1957 32,959,334 330,607 3.0 1,022,834 9,973 33,932,218 340,580 1958, 45,195,602 455,070 3.3 1,492,775 14,637 46,688,377 469,757 1959.- 56,318,625 574,298 7.3 4,491,492 43,566 60,S10,117 617,864 1960 65,284,637 669,078 6.9 4,850,559 44,760 70,135,196 713,838 1961 82,339,723 838,228 7.5 6,670,542 60,103 89,010,265. 898,331 1962 104,017,315 1,047,293 10.3 11 ,961,189 ' ' 103,339 115,978,504 1,155,632 . 1963 118,205,669 1,033,927 14.1 19,443,756 156,742 137,649,425 1,240,669 1964 131,760,813 . 1,162,376 14.2 21,899,561 169,464 153,660,374 1,332,340 1965 164,662,745 1 ,281,168 . 13.1 24,873,616 168,807 189,536,361 1 ,449,975 1966 157,922,760 1,210,838 18.2 35,103,537 237,756 ' 193,026,297 1,448,594 1967 194,802,125 1,471,875 15.0 34,450,852 241,141 229,252,977 1,713,016 1968 215,907,316 1,538,477 14.3 37,635,719 233,107 253,543,035 . 1,776,584 1969 202,040,738 1,501,265 17.4 42,545,121 275,413 244,585,859 • 1,776,678 -1970 265,269,576 1,874,636 12.7 38,440,770 243,014 303,710,340 2,117,700 1971 333,691,733 2,296,329 9.6 41,174,310 • 234,583 426,866,093 . 2,531,412 . 1972 556,754,004 2,445,092 • 9.8 60,355,591 234,194 617,109,595 2,679,236 1973 562,265,996 2,467,008 12.3 •78,365,790 291,169 641,131,786 2,758,177 1V74.
(*) REMARKS: Polished diamonds returned to Israel vera registered since 1958 only. 163
is yet too early to see what form these changes may take, but it is well to"remember that, while diamonds may be
forever, diamond industries come and go. CHAPTER V
THE ROLE OF DE BEERS
OUTLINE
The first section recounts the history of the De
Beers companies, the first Syndicates for the marketing of the rough diamonds, and the gradual evolution of the marketing system, that culminated in the creation of the De Beers mechanism in its present form: the Diamond Trading Company and the Central Selling Organisation.
The next section studies the C.S.O.: its policies, distribution procedures, and sales data. Finally, the new developments in the market, characterized by a shortage of rough and rapidly rising prices, are discussed in terms of their possible causes.
The third section describes briefly the advertising campaigns launched by De Beers since 1936, that have succeeded in making diamonds part of the social rituals of our society and helped to create a strong demand..
HISTORY OF DE BEERS
Foundation of De Beers Consolidated Mines Ltd.
The first diamonds'found in South Africa were of alluvial origin. In 1870, however, two years after the great rush to
164 165
the alluvial diggings, the first diamondiferous pipes were discovered. By 1872 there were about 50,000 miners working
on small claims in the present-day Kimberley area, which en•
compasses five of the most productive pipes in history (Fig.
46). Exploitation of the individual claims became increasing•
ly difficult, however, as the depth of the diggings increased,
and in 1874 amalgamation of claims was officially allowed.
One of the operators that best succeeded in expanding its oper•
ations was Cecil Rhodes, who in 1878 announced his intention
to control the entire output of the field, and in 1880 founded, with two other groups, De Beers Mining Company.
Rhodes' plans to gain control of Kimberley met with
strong opposition from Barney Barnato, the head of another
new successful conglomerate, Kimberley Central Mining Company.
After a long financial battle, Rhodes, with the help of the
Rothschilds in London, forced Barnato to come to terms, and
in 1888 the De Beers and Kimberley mines were joined in De
Beers Consolidated Mines Ltd. The new company soon owned
or controlled each of the five Kimberley pipes.
In that way, by 1899 De Beers controlled most of
the diamond production in South Africa, which meant, in the
world. Meanwhile, the Syndicate, which is described in the
the next section, was satisfactorily marketing De Beers stones,
G.I.A., Diamonds, Ass. 12, p. 10. 166
Figure 46
The early mines of Kimberley
(From Bruton, Fig. 3.3) 167
and prices were going up. Indeed, while in its second year
of existence, De Beers was selling for an average of 18
shillings per carat, in the next year, 1890, the price was nearly double.
The Boer War, which broke out in October 1899, inter•
rupted the exploitation of the mines. Rhodes was detained
near Capetown, and died in 1902, shortly before the end of
the hostilities. But production was soon resumed, and
the prices continued rising.
Prices dropped again, however, as the result of
a combination of circumstances. In 1902, the great Premier mine near Pretoria was discovered. The owners engaged in
competitive selling rather than joint arrangements, and
the production was so considerable that by 1907 the market
again was becoming saturated. Diamonds were also starting
to come in from German South West Africa. Beginning in 1909,
the small but high-quality alluvial gems were marketed through
a semi-government agency called Diamond Regie. Finally, finan•
cial crises in the U.S.A. and Europe were weakening the market
still further. But De Beers survived, and an agreement was
negotiated with the owners of the Premier mine to help re•
establish prices. De Beers bought the Koffiefontein pipe mine in 1911, and acquired control of the Premier in 1917.
By that time, however, World War I had changed the conditions
considerably: mining almost stopped, while many employees 168
joined the armed forces, and the rest worked half-time. De
Beers survived the war, too, as well as the years of econo• mic uncertainty that followed, but meanwhile the marketing arrangements were undergoing important changes.
From the Syndicates to the Present. As early as
1899, a group composed of Barnato, Dunkelsbuhler, and Mosenthal
Sons § Co. offered to purchase all of De Beers' diamonds. In
1890 a contract was signed with an organization composed of
10 firms, of which the three just mentioned owned 45 per cent, and Wernher, Beit, and Company 23 per cent of the shares.
This was the beginning of the famous Diamond Syndicate, that became so well known as the price-fixing and market-controlling factor of the diamond industry. In various forms a diamond syndicate of different persons or firms functioned in this capacity for the following 39 years, until a major crisis brought about a radical change.
In the first years of the Syndicate there was no agreement by which the producers and the Syndicate fixed a percentage quota for each producer and stated that sales could be made only through the Syndicate. Instead, there were successive contracts, by which the Syndicate purchased
De Beers' production at the valuation of De Beers' own evaluators, which, however, remained fixed for the duration of the contract. The Syndicate reassorted the diamonds pur• chased and sold them to the market at their own best advantage. 169
The Syndicate, of course, had to take the risk of a
fall in retail prices, but profitted through any rise 2
in prices during the period of the contract.
The first attempt at a more inclusive and permanent
arrangement took place in 1914, when De Beers, Premier,
Jagersfontein, and the German Diamond Regie met at a pro•
ducers' conference in London. Outbreak of the war pre•
cluded any agreement with the Germans, but the three
South African producers agreed to sell diamonds to the
Syndicate as required by the market situation.
Near the end of the war a former employee of a
Syndicate firm entered the scene. Ernest Oppenheimer had
come to Kimberley in 1902 as a buyer for A. Dunkelsbuhler
and Co. of London; in 1917 he set up the Anglo-American
Corporation to exploit the gold fields in the South African
Rand. By 1919 the Anglo-American had acquired control of
the former German West African fields, and for the first
time production quotas were set up among De Beers (51 per
cent), Premier (18 per cent), Jagersfontein (10 per cent)
and Consolidated Diamond Mines of South West Africa (21 per
cent). All sales would be made through the Syndicate, which would bear all losses, although the producers would share in
the profits.
G.I.A., Diamonds, Ass. 13, p. 2. 170
*
In 1925 the current Syndicate, led by Breitmcyer,
bid for renewal of its five-year contract, but instead
Oppenheimer's offer was accepted, and the Qppenhc1mcr.
Syndicate took over the stock, contracts, and liabilities
of the Breitmeyer Syndicate. By 1927 the new Syndicate
had, however, run into serious difficulties. The origin
of these was discovery of new alluvial diamond fields
at Lichtenburg in 1925 and Namaqualand in 1926. The
bulk of the claims in Lichtenburg was in the hands of
small workers, from whom the Syndicate purchased larger
and larger amounds, in order to control market prices,
until it had accumulated a stock of 8 million pounds..
These purchases notwithstanding, large quantities of diamonds
were released on the market by the producers, without
regard for price stability. Small producers in
Namaqualand did the same, although the longer-lasting
claims turned out to be those held by the South African government.^
In 1929 the surge of Angola, Belgian Congo, Sierra
Leone, and Gold Coast as diamond producers precipitated a change in the Syndicate's mode of operation. It could not not keep buying from the producers and maintain its enormous stock. So the Syndicate proposed to the four members of the 1919 quota agreement, known as the "Conference
G.I.A., Diamonds, Ass. 13, p. 3. 171
Producers," that they take a 50 per cent interest in its
outside purchases, which included Angola, Belgian Congo,
Koffiefontein and Namaqualand. Three of the Conference
Producers agreed, and this led to the formation in 1930
of a new company initially financed by De Beers, the
Barnato companies, Anglo-American, Dunkelsbuhler and Co.,
Consolidated West Africa and Jagersfontein. This was to
become, with Oppenheimer as chairman, the Diamond Corpor•
ation, which was to be heavily capitalized (12.5 million
pounds). The Oppenheimer Syndicate owned 50 per cent of
it, and the rest belonged to the three Conference Producers.
However, very soon the world depression forced the closure
of the South African mines and an agreement was made to
halt diamond purchases from other producers.
Meanwhile, Oppenheimer became chairman of De Beers,
and the company started to buy control of other producers.
From Anglo-American it bought the South West African mines and later, in 1941, the Cape Coast Exploration Co.,
that controlled all private production in Namaqualand.
From Barnato Brothers it bought control of Jagersfontein, and leased the whole mine in 1939. Koffiefontein was bought in 1935. This gave De Beers control of all South
African production except that in the hands of the government in Namaqualand, and some smaller alluvial diggings. 172
.-In.1933, at the same time that these transactions, were taking place, a new organism was created that united governmental and private interests: the Diamond Producers'
Association. It consisted of ' the Government of South.
Africa, the Administrator of South West Africa, Dc Beers,
Premier, Koffiefontein, Jagersfontcin, Consolidated
Mines of'South West Africa, Cape Coast Exploration, and
the Diamond Corporation itself. (The last two were
purchased and liquidated soon after, however.) The
next year, the Producers' Association entered into an
agreement with the newly formed Diamond Trading Company
to purchase and market the diamonds produced by its
members on a quota basis. The agreement included a
quota to the Diamond Corporation for its accumulated
stocks, the purpose of the quota being to market gradually
these stocks, bought from 1929 to 1934, so that the other
mines could resume operations. The production of Angola,
Gold Coast, Sierra Leone, and, later, Tanganyika, was
shipped to the Diamond Corporation in London and then
sold under the latter's quota to the D.T.C. Thus, the
D.T.C. took over from the Diamond Corporation the selling
of diamonds to the trade. Each member of the Producers'
Association was to receive a quota of the profits of the
D.T.C, after providing for the purchase by the D.T.C. 173
of the output of non-member producers.H
As the world depression lifted, sales by the
D.T.C. improved, and the Diamond Corporation's stocks
started decreasing. The figures for the years following
the formation of the D.T.C. are, in millions of pounds:
YEAR STOCKS SALES
1935 12.4 3.3 1936 11.3 8.6
1937 9.9 9.2
It is worth noting that in those years stocks exceeded one full year's sales (in 1935 the stocks were nearly equal to four times the sales of the previous year).
Nowadays, figures on the value of stocks held are, as a matter of policy, not normally publicized, but it is be• lieved that they do not exceed three or four month's
supplies.^
After the war, the agreement between the Diamond
Producers' Association and the D.T.C, was renewed for six years, and a new agency, Industrial Distributors Ltd., was established to take over the sale of industrial dia• monds, which formerly had been done through the D.T.C.
The market situation after the war reversed the trend of the early 1930's, and was characterized by a mounting
4
G.I.A., Diamonds, Ass. 13, p. 5.
Diamonds, 44:26-27. 5J. Voet, "The Central Selling Organization," Israel 174
demand and the effort to find sufficient supplies to meet
it. This situation has largely continued to the present
time.
The marketing arm of the De Beers group is the
Central Selling Organisation, which channels the diamonds
purchased through the Diamond Corporation into the Diamond
Trading Company. The C.S.O. assumed its present form in
the early 1930's, under the direction of Otto Oppenheimer,
Sir Ernest's brother. On the death of Otto Oppenheimer,
in 1948, the position was inherited by Philip Oppenheimer, now Sir Philip. Sir Philip is also one of about 15 direc•
tors of the De Beers Consolidated Mines Ltd. The activities and stated policies of the C.S.O. will be described in
detail in another subsection.
The More Recent Evolution of De Beers. During the
1950's the De Beers group succeeded in keeping"its control of the market by entering into agreements with the newly- formed African nations, a process that is still going on today. These agreements concerned the curbing of illicit mining and smuggling of rough, the channelling of the pro• duction through the C.S.O., and satisfactory ways of dividing the revenue from the production.^
Voet, ci t. Repeating a pattern that De Beers had confronted through all of its existence, the discovery of large diamond pipes in the Soviet Union again threatened the carefully-built marketing system. An agreement, however, was concluded in 1959 with the U.S.S.R. to market Russian diamonds through the C.S.O. Shortly afterwards, Russian support to certain African nations required that the
Soviet Government declare a boycott against South African trade. Alternative arrangements were made in 1963, however, 7 that amounted to essentially the same. In that same year, the purchase of the large Finsch mine, discovered in 1960 one hundred miles from Kimberley, allowed De Beers to keep its control over the South African production.
In 1957 Sir Ernest died and his son, Harry Oppen• heimer took over the chairmanship of De Beers Consolidated
Mines, continuing rather successfully the policy started by
Cecil Rhodes and followed by Sir Ernest.
The present activities of the De Beers companies show an expansion of the production base in Africa and a diversification into fields other than diamonds. One of the largest new production areas is in Botswana, where De
Beers prospectors discovered the Orapa mine in 1967.
Brought into production in 1971, it is operated by De Beers
Botswana Mining Company, in which the local government owns
Bruton, p. 129. 176
a 15 per cent of the share capital, while the profits are divided in equal halves between the government and De
Beers. (Recently the government has been said to be nego• tiating a larger share). A new mine in Lesotho, Letseng- la-Terai, was also in production, and the Lesotho government's 9 share of the profits was about 70 per cent. Such arrange• ments reflect a changing relationship with the local govern• ments in Africa.
Figure 47 shows a schematic diagram of the De Beers companies.
THE CENTRAL SELLING ORGANISATION
The C.S.O. is the marketing arm of the De Beers system, charged with distributing the rough purchased by the purchasing agencies in such a way that prices never fall. By stockpiling its own rough in times of recession, and purchasing both rough and polished in the open market whenever necessary, the C.S.O. ensures that the market is never saturated. And even though the C.S.O. does not, strictly speaking, monopolize rough sales in the world market, by directly pricing some 80 per cent of the total production of rough, it acts as the undisputed world price leader.
8 De Beers Consolidated Mines Ltd Annual Report 1974, P- 22 .
9 Ibid • 3 p. 5 . Figure 47 THE DF BEERS COMPANIES
De Beers Consolidated Mines Limited
Marketing Production Investment
i v •: • .:> --lhs Ctoond Cofpwotwo:'.'J. ^< Kimberley Dtvsion Mines De Beers !ndus:ri3i Corporation
8ultion;etn De Beers Dutoitspan The Diamond Purchasing and Trading Company Fmsch Koffiefoniein Wesselion • • p'.J i . |j f'r
The Diamond Trading Company I^^r j Namaqualand Division Mines i De Beers European Hc^.ng
1.1 !h r -y—- Industrial Distributors (1946) .'i ! - V' Consolidated Diamond Mines i I. Deohold (Canada) m f. F" Industrial Grit Distributors { Premier Diamond Mine (Shannon) I 1 r; l; De Seers Botswana Mining Abrasive Grit Sales Orapa Mini} i M P
J rf' ij i • I Non Group Ccmpsniitj f .v'-s-'fyV'lJ ;0e Beers ;" "v ^ Ultra High Pressure Units Rand Selection Corporation h=/'-Indu'stiial'OIamond Division". r/rjrf .i^i ,'aii - .. i^ii ',i —•.. - j
AE&CI Vu .
. :?-T''>^^'''--'.-"r
(From De Beers, Annual Report 1974, p. 42) 178
The Sights. The mechanism by which the C.S.O. channels
the rough into the market is known as the sights. At the
sights, which take place 10 times a year in the London
offices, a chosen group of buyers, known as clients, is
offered carefully assorted packages of rough goods, called
boxes, that have been prepared to conform both with the
clients' individual needs and the overall policies of De
Beers at the time. The boxes are prepared in the following
way: some days in advance of a sight, clients are invited
to formulate their requirements, in terms of quantities,
sizes and shapes; and also, to state their intended commit• ments. All the combined requests are considered then in the
light of the best available information on the state of the
industry and the market in each centre, painstakingly
gathered by specialists, and finally at the highest level
decisions are reached as to general policy, and the individual
demands of the clients; then the rough is allocated.
The clients can accept or reject the boxes, but not break them up. The practice, called selling in series, is meant to insure the sale of the total production of the rough.
The box is therefore likely to contain goods that the client will not particularly want, although as a compensation it may also contain special stones of high value. There may also be speculative goods, that present special difficulties to the cutter but also a high return. Every item in the box
is priced; the prices of special stones can be negotiated, 179
but most goods bear non-negotiable list prices.
As a matter of policy, the C.S.O. only keeps clients
who can buy large boxes, of not less than $50,000 (in 1970),
although in particular cases smaller boxes are given to
favour certain small buyers, as in the case of the Indian
industry during its middle years.1(^
The C.S.O. has at present (1977) about 320 clients,11
up from 270 in 1970. The position of client is very much
sought after, so that the Organisation is able to pick those
applicants who best fit its needs, and also fix some condi•
tions that they must fulfill. A client should not buy from
outside sources, should buy most of the boxes allocated to him and should be fully committed to the diamond trade. The
C.S.O. prefers that clients possess factories of their own, both to insure their commitment and to facilitate sales of
De Beers cutting equipment. A client should be neither too
small nor too large, and so there are few big firms among
them. The clients take some risks, in that they may have
difficulties in disposing of their rough, or they may have
to sell it at a discount (since official C.S.O. prices could be higher than market prices), but in the last years (at least) the situation has been quite the opposite: boxes were resold, in whole or in part, at premiums (sometimes
International Diamond Annual Cl.D.Al), pp. 22-23.
Israel Diamonds, 44:27. 180
exceedingly high premiums), and the demand was hectic. (At the time of writing, indeed, this situation has assumed nearly critical proportions, with supplies being cut to a fraction of requirements, and some sizes and qualities 12 discontinued entirely). Therefore there is no dearth of applicahts.
It is the broker that fills the function of consider• ing the likely candidates and bringing them to the C.S.O.'s attention. There are 10 brokers, ranging from individuals to larger firms, who derive their incomes from a commission paid by the client at the time of purchase of a box. The brokers may screen prospective clients and present their case to the C.S.O.; when the client has been accepted, the broker forms the link between him and the organization.^
Sales and Prices. C.S.O. sales for the period ex• tended from 1959 to the present are shown in Table V.l. The fact that the figures show combined totals of industrial and gem diamonds is due to a policy adopted at the end of 1960.
The company's explanation was that, the distinction between the lower qualities of gemstones and the highest qualities of industrial
1 2
See Appendix 3.
13 J.n./l.Jp. 23. 181
diamonds was so narrow that the differentiation in the statistics was not justified. Many diamonds of the "near-gem" quality would be bought by clients of the Central Selling Organisation for use either as gems or as the ^. better type of industrial diamonds.
Be that as it may, there is no way to know what portion of the sales comesrfrom gemstones. In years previous to 1961, the figures had hovered around 70 per cent, but it is believed that for the last few years the share for gems has been about 80 per cent.
Obviously, the impressive growth in sales does not reflect so much an increase in caratage sold, as a series of price increases that have driven up, in the average and according to official C.S.O. data, the cost of rough by about 750 per cent since 1949. Table V.2 shows the price increases since 1949, dated as per the sight at which they took place. The series of increases in 1973 reflect the devaluation of the dollar that occurred in that year, but the increases in general keep well above the level of inflation, and thus, in real terms, prices of rough are steadily going up.
I.D.A.3 p . 17 .
Computed from the data in Table V.l. 182
TABLE V.1 C.S.O. Sales of Combined Industrial and Gem Rough for 1959-197 7 (in millions of U.S. dollars)
1959 2 5 5 1968 600 1960 251 1969 692 1961 268 197 0 528 1962 269 1971 625 1963 324 1972 848 1964 372 1973 1,332 1965 415 1974 1,2 54 1966 498 1975 1,066 1967 492 1976 1,554 197 7 2,070
Sources: I.D.A. (to 1969); Israel Diamonds (to 1976);
Jewellers' Circular/Keystone (197 ).
TABLE V.2
C.S.O . Average Price Increases in Percentag es Since 1949
September 1949 25 November 1971 5 March 1951 15 January 1972 5. 4 September 19 5 2 2.5 February 1973 11 January 1954 2 March 1973 7 January 1955 2.5 May 1973 10 January 1957 5.7 August 19.7 3 10. 2 May 1960 2.5 December 1974 9 March 1963 5 January 1976 3 February 1964 10 September 1976 5 .7 August 1966 7.5 March 1977 15 November 1967 16.6 December 1977 17 September 1968 2 . 5 February 1978 30? July 1969 4
Source: I.D.A. (to 1969); Jeweller's Circular/Keystone (to 1977). 183
The student of the diamond industry should beware of giving undue weight.to such data as make up Tables V.l and V.2, however. These are official figures, released, perhaps, not so much to inform as to serve a public relations purpose (i.e., to maintain for De Beers the image of a bene• factor of the industry). For instance, the percentage in• creases are the result of a C.S.0.-estimated average over the whole range of goods, including industrials, and there is a widespread belief among wholesalers that if the average was taken over the gem diamonds only, it would be much higher.1^ Also, there are several other methods of increas• ing prices apart from direct hikes; for example, the quality of the parcels may be lowered in various ways that would be 17 hard to measure. Since it is not in the clients' interest to complain, or even to divulge any information about their dealings with the C.S.O. because their position is indeed a privilege, it follows that any information to check against
De Beers' official figures would have to come from averages and totals in the open market; with the drawback that at that stage so many other factors have intervened that the latter do not provide an effective check. In short, the available
lbSee, for example, Jewelers' Circular - Keystone, December 1977, p. C.
1 7 Even if the total weight in a parcel is kept the same, the average weight of the stones maybe lower,, the rough may give a higher percentage of waste, and the quality may be inferior. 184
data may have only a tenuous connection with reality (Appen• dix 3 discusses price increases in some more detail).
Purported Policies of the C.S.O. and the Current
Situation. The justification for the tight control of the market exercised by the C.S.O. is aptly given in a state• ment by Harry Oppenheimer, chairman of De Beers, which has often been quoted or paraphrased in company literature since it was made in 1964:
A degree of control is necessary for the well-being of the industry, not because production is excessive or demand is falling, but simply be• cause wide fluctuations in prices, which have, rightly or wrongly, been accepted as normal in the case of most raw materials, would be destruc• tive of public confidence in the case of a pure luxury item such as gem diamonds, of which large stocks are held in the form of jewellery by the general public.
Whether this measure of control amounts to a monopoly I do not know, but, if it does, it is certainly a monopoly of a most unusual kind. There is no one concerned with dia• monds, whether as a producer, dealer, cutter, jeweller or customer, who does not benefit from it. It protects not only the shareholders in the big diamond companies, but also the miners they em• ploy, and the communities that are de• pendent on their operations. The well- being of tens of thousands of individual diamond diggers of all races is dependent on its maintenance.18
I .D.A., p. 22. 185
Thus, the C.S.O. is expected to reduce the supply in times of recession in the diamond business, while keeping the prices stable (the officail prices, that is; the boxes then may be sold at a discount), and reverse the policy in times of boom. For instance, after a highly prosperous half- year, 1969'closed as a recession year for the trade, and this situation continued well into 1970. High rates of interest and severe credit restrictions made diamonds a less desirable investment than the money market, and also restricted normal trade in the jewellery industry. In those conditions, the
C.S.O. reduced its sights for 1970, and refrained from in• creasing prices -- for over two years,prices remained, stable.
No details are known of how exactly the sights were reduced, because the C.S.O. does not divulge such details, but the following data illustrating the Israeli imports of rough may give an indication:
Imports from Imports from C.S.O. Other Sources
0 Year Value 0 Weight Value % Weight
1968 93 52 1.9 87 48 1.9 1969 88 42 1 . 8 122 58 2.4 1970 58 33 1.3 116 67 2.7 1971 92 38 2 . 1 147 '62 3.5
I.D.A., p. 21. 186
(In millions of U.S. dollars and millions, of carats)
Source: Israel Diamond Department, Annual Report for 1974, Table 4.
That is, the C.S.O.'s sales to Israel dropped from
1.9 million carats in 1968 to 1.3 million carats in 1970,
forcing Israel to obtain its rough elsewhere; in 1971, the
crisis past, the C.S.O. released again 2.1 million carats to
Israel.
The C.S.O. was able to keep goods away from the market, while production went on normally, by reason of its
enormous cash reserves and other backing funds, that allowed
it to purchase as usual and take the production in stock.
No figures are released on such stocks, but those of 1970 were said to have been very large. The C.S.O. has the right
to ask producers to keep within their quotas, but the company
asserted that no such restriction was demanded of the pro•
ducers in 1970; i.e., that the C.S.O. absorbed all the nor• mal production.^
It would seem, therefore, that the C.S.O. has fulfilled well its mission of stabilizing the market and preventing
the fluctuations that used to plague the industry in the
early years, most particularly the two decades following the
first African discoveries. The benefolent character of the
C.S.O.'s monopoly, or price-leadership, has been often
stressed by outside sources, like a writer from the Israeli
I.D.A., p. 22. 187
industry, who, in a not-untypical statement, said, echoing
Oppenheimer's words:
Why does the world tolerate the practical monopoly the Diamond Trading Company has established. . .? While there is, and there has always been, some criticism of the C.S.O. by insiders, this should astonish nobody, as the C.S.O. has set itself the task to reconcile often con• flicting interests. But in the long run all parties concerned agree that the C.S.O. has a beneficial effect on the industry as a whole. By stabilized (read: rising) prices nearly every• one benefits in the lengthy chain of miners, traders, polishers and sales• men .
The ultimate consumer. . .foots the bill. But because diamonds are a luxury item. . . the customers apparently satisfied as well. In fact, they appear to be happy that the activities of the C.S.O. pro• vide some kind of guarantee that an in• vestment in diamonds will probably keep its value also in the future, as it did in the past.21
The latest developments, however, could well lead to situations that would shatter the confidence of the diamond industry in the ability of the C.S.O. to carry 22 out its stabilizing mission. It is not a matter, as in the past, of falling demand, but, on the contrary, the demand is strong, while the sights are being cut back and
J. Voet, Israel Diamonds, 44:27.
22See Appendix 3 for a survey of the recent history of the sights. 188
the prices increased more than production costs and general inflation would warrant (at least, according to the general impression in the trade). And, since the cost of rough is such a significant part of the cost of polished, the latest 23
De Beers price increases are accompanied by impressive upsurges in the prices fetched by polished goods. It is not only the actual increases by De Beers, and the relative shortages of rough, that are pushing prices up, but a specu• lative atmosphere that is fuelled by guesses on.what De Beers will do next, both in terms of supplies and prices, and also on what the real reasons for the latest developments are.
One of the questions that are most often asked is why the supplies are being cut back. Opinions abound, but there are no data to judge, for instance, if the South
African mines are running out, or merely undergoing a change in the mode of exploitation, or production is normal but De Beers is stockpiling. [Another possibility, that pro• duction was cut back in 1973 for fear of a slump that never 24 materialized, has also been voiced). Indeed, De Beers has always exercised as tight a control on information as it has has on the market, releasing no more than suited its purposes, as one Israeli source expresses:
See Table
Jewelers' Circular - Keystone, November 1977, p. 74. 189
. . .diamantaires complain that despite all the information now forthcoming, they are still left uninformed about mining prospects and the supply out• look both from the De Beers own mines and the goods which are sold from other sources.25
Of all the above opinions on the reasons for the shortage, the third possibility, that De Beers is accumu• lating stock it will not release, is the most intriguing, in terms of its political motivations. One obvious explana• tion is that the C.S.O. is exploiting the market in a classic monopolitic fashion, using its price-fixing powers to maxi• mize its short-term benefit and letting the long-term bene• fit, which obviously depends on the welfare of the trade at large, take care of itself. The problem with this explana• tion is that the management of De Beers, which has remained constant at the highest levels, has for many years, followed a truly stabilizing policy, with due consideration to the avoidance of speculation and the welfare of the industry.
Therefore, if stockpiling is really taking place in signifi• cant quantities (which remains unproven) there must be some solid justification for such a break with tradition. And indeed, the explanation that has been voiced quite openly in the trade for a number of years is that De Beers is pre• paring for political changes in South Africa that would deprive the company of its production sources. Thus, it has
2 5 Israel Diamonds, 47:45. 190
been deduced that De Beers is now engaged in reaping the
greatest short-term benefits obtainable, because there is
no long term for its existence in South Africa.
One of the darkest unknowns in the great diamond
mystery is the country that has become (if South West
Africa and South Africa are taken as two) the single lar•
gest producer in the world, and perhaps the most promising
in terms of long-term supplies. If De Beers is secretive,
the Soviet Union is positively hermetic, and all the avail•
able information on its production capabilities is the
result of estimates and guesswork. It is therefore even more impossible to guess what measures the Russian govern•
ment will take to make the most of the Western companies'
difficulties. However, it is fairly evident that the
Soviet Union, whose own production may be augmented by
that of several diamond producers within the growing Russian
sphere of influence in Africa (like Angola), will in the
future play a most important role in the making of diamond
policy and diamond profits.
When the Russians first entered the market, it
was best for them to use the system that De Beers had
built; but since the late 1950's the Soviet position in
the diamond trade has improved enormously. Due to their
new expertise in all phases of the industry, from mining
to cutting to selling, they are now more capable than ever 191
to work independently of any orther organization, and even 2 6
defy the established system. If De Beers' political and production difficulties increase as the Soviets continue
to develop their skills and reinforce still further their hold on the African countries, the long reign of the
"Syndicate" may soon come to an end.
Meanwhile, however, De Beers remains very much the unchallenged controller of the market, and a power• ful market of public opinion and taste. In the next section, the way in which De Beers is helping to shape social customs all over the world will be briefly dis• cussed.
ADVERTISING BY DE BEERS
Although mass advertising through one medium or another has been used in our society for quite some time, and certainly it has been a common phenomenon since at least the beginning of the century, large-scale advertising campaigns for diamonds were unheard of, and probably incon• ceivable, before the end of the Depression years. Diamonds marketed themselves, and found their way into the hands of the rich with little help from paid advertising, just by tradition and peer example. When De Beers took over the
2 6 A Russian official in charge of the Soviet diamond- selling office in Antwerp told the author in 1977: "We needed1 them (De Beers) but now we can go on our own. There won't be a second ten-year contract." 192
control of the industry, it saw no reason to change this
system, and perhaps it would not even have been profitable
to do so. But in 1935 De Beers found itself with an enor•
mous accumulated stock, and it became clear that the usual
marketing mechanisms were overloaded, so that a new demand
had to be created. Harry Oppenheimer, then working for his
father, Sir Ernest, is credited with the idea of using the
mass media to promote the sale of diamonds. Oppenheimer
realized clearly that diamonds required a very special
kind of promotion, and so much time was spent in finding
a suitable agent. After a detailed investigation, the
advertising agency of N. W. Ayer and Son, of Philadelphia
and New York, was chosen to start a campaign in the United
States, which was regarded as the most promising market.
Gerald Lauck and then Warner Shelly were responsible for
the development of the campaign. The company still re• mains in charge of De Beers' advertising in the U.S.A.,
and its carefully thought-out style has become inseparable 2 7
from De Beers' image.
The Ayer planners were successful in associating
diamonds with the softest and most tender manifestation of
love that a man can offer a woman. The hopefulness of engage ment, the joy at the birth of the first child, the relaxed
love of the middle years, are all expressed in tasteful
21 I.D.A.} p. 192. 193
images and soothing copy. The advertisements do not pro•
mote diamonds; instead, they evoke a feeling of which a
diamond ring is a natural expression: "4 Diamond is A Gift
of Love." The diamond captures that loving, mood in an un-
2 8
alterable form: 'M Diamond is Forever."
The Ayer style has not changed, but the emphasis
and timing of the advertising campaigns have been dictated more and more by carefully conducted market research, and
there is also a broader effort to reach and educate the
jewellery retailer. Nowadays marketing campaigns are conducted in the following main areas: U.S.A., Canada,
Japan, Germany, Italy, France, U.K., Spain, Brazil, Australia,
South East Asia, Spanish South America and the Middle East.
Each campaign is serviced by a leading advertising agency and co-ordinated by the agency account supervisor, who is in regular contact with the De Beers market controller in
London, The campaigns consist of advertising in magazines and television, trade promotion through Diamond Promotion
Services, publicity through Diamond Information Centres, and 29 research and retailer education centres. The total budget for 1977 is believed to have been around $25 million
I.D.A., p. 193.
29 ""How De Beers' Marketing Helps You," Canadian Jeweller, November 1976, pp. 20-21. 194
30 (U.S.)
In each country, the emphasis of the advertising
is different. Research studies are routinely conducted
to determine country priorities, and these form the basis
for marketing strategy. Research gives information on
ownership levels and acquisition rates of diamond jewellery.
Attitudes towards diamond jewellery and the traditions it
symbolizes are also monitored, while current campaigns are 31
tested for efficiency.
The advertising campaigns are divided into four market segments: the diamond engagement ring market, the
eternity ring market, the diamond jewellery market, and the market for large stones (over 2 carats). Although the form
of the program varies to suit local market conditions, the 32 basic strategies remain constant.
The diamond engatement ring market is the largest
and most easily recognized of the four. Engagement is one of the first opportunities for a young woman to own
diamonds, and probably also the last time such a gift may be received before entering into the heavy financial commit• ments of the wedding and early married life. The engagement
ring campaign is directed at single young women and their 30 Israel Diamonds, 47:56. 31 Canadian Jeweller, November 1976, p. 21. 32 Ibid. 195
families to increase the social and emotional significance
of the engagement tradition, and the giving of a diamond
ring as a symbol of true and everlasting love.
The diamond ring is already firmly established as
the engagement symbol in many countries of the world and
advertising there reinforces the tradition. In Canada, 74 per cent of all newly-engaged young women receive diamond
rings, and a similar percentage in the U.S.A., U.K. and 33
Australia. In other countries, advertising has intro•
duced the giving of a diamond for this occasion as a new
concept. In West Germany, until recently, an engagement was traditionally market by the exchange of two plain
gold rings, later used as wedding rings. In 1967, De
Beers'introduced the triset, a three-ring package consist•
ing of two gold rings plus an additional diamond engagement
ring. The campaign was enormously successful.
Japan is another country where the diamond engage• ment ring was successfully introduced. Japanese tradition did not include an engagement in the Western sense. Instead,
arranged marriage prevailed. The couple first met in a maia, which was a formal arranged introduction; this was followed by the yuino, a formal exchange of gifts between the two
33 Ray Vicker, "World Diamond Sales Head for A Record Year," The Wall Street Journal, 26 July 1976, p. 6. 34 I.D.A., p. 206. 196
families. The giving of a ring did not form part of the yuino. Eut at present marriages increasingly take place from casual meetings, and engagement is becoming part of the marriage process. In 1967 De Beers initiated a major advertising program that helped raise the percentage of new Japanese brides receiving a diamond ring from five per cent to 39 per cent.
De Beers has often used to advantage the story of
Archduke Maximilian of Austria, who ordered a diamond betrothal ring and a gold wedding ring for his bride, Mary of Burgundy. This gesture, which is supposed to have given the first impetus to the wedding ring tradition, was publicized all over the world in 1977, its 500th anniversary.
The eternity ring campaign, started in 1974, is a more recent addition to the advertising adtivities of De
Beers. The eternity ring is a circlet of small diamonds in either a full or a half-loop. This article was known in many markets, although in some countries it was neces• sary to give it a name and identity. The ring is deliber• ately positioned as an early post-marriage gift, to be given at an anniversary or birth of a child within the first ten years of marriage. It fills the gap between the engage-
35
I.D.A.y p. 207. 19 7
ment diamond and a more expensive gift in later life.
The diamond jewellery campaign is only run in countries where there are sufficient households with a high enough income, like the U.S.A. It establishes dia• mond jewellery as the most exciting and fashionable gift a man may give his wife, and the best way to express deep love and affection. One of the newest De Beers campaigns promotes the larger sizes of diamonds. A special adver• tising campaign in North America promotes diamond jewellery for men, following research studies that indicated many
American men owned diamond jewellery. The first survey, made in 1974, indicated that 20 per cent of all American men owned a diamond, and the figure rose to 22 per cent 37 in a year's time.
In the course of three or four decades, then, adver• tising from De Beers and other sources has succeeded in making the masses diamond-conscious, while the manufacturers have brought, at least in the developed nations, diamond jewellery within the reach of all but the least affluent.
Diamond rings are already a staple of Western society, and at the same time they have not lost any of their mystique
3 6
Canadian Jeweller, November 1976, p. 21.
37'ibid. 198
and prestige. Such a combination can only work for the bene• fit, not just of De Beers, but of the industry as a whole.
CONCLUSION
The company founded 90 years ago by Cecil Rhodes has faced during its existence innumerable tests and challenges, from depressions to wars to nationalist movements, and always emerged with a renewed grip on the market. Adapting its policies to the changing times, it has given diamonds a greater stability than any other commodity possesses, it has helped make them into a social tradition and a univer• sally desired commodity, and it has ensured the continuing prosperity of a large industry. No one can guess how long
De Beers' hegemony may last, but the unprecedented short• ages and price increases of recent months may well be the forerunners of deep changes to come. CHAPTER VI
THE VANCOUVER MARKET
OUTLINE
This chapter researches the movement of diamonds in
the Vancouver market, from the wholesaler to the jeweller
and from the jewellery store to the public. What is being
studied is actually the last two stages of the world dis•
tribution channel for diamonds, as these stages are repre•
sented in Vancouver; and therefore the chapter can be con•
sidered as a culmination and extension of all that has been
said in the first five chapters. The detailed discussion
in Chapter I of the four parameters that determine the
value of a diamond: carat weight, cut (i.e., proportions
and finish), colour grade and clarity grade, is basic to
the analysis of the buying preferences of the Vancouver
jewellers and the public at large. Relative availability
and prices of the various kinds of diamonds in the Vancouver market respond to the conditions in the major trading centres
of the world, like Antwerp (Chapter III) and Israel (Chapter
IV); and the activities of these centres are in turn directly
dependent on the current C.S.O. policies (Chapter V and Appen•
dix 3). Therefore the study of the Vancouver market for
diamonds could only be undertaken after researching the
199 200
structure of the whole distribution channel (Chapters III to
V) and, of course, the nature of the product itself (Chapter
I).
The variables studied in the present research of
the Vancouver market were: availability and prices of dia•
monds at the retail level; buying trends at the retail and
consumer levels in terms of the four parameters mentioned
above; relative demand for the different styles of cut
(brilliant, marquis, etc.); relative popularity and average
selling prices of the main types of diamond jewellery
(jewellery being by far the most common vehicle in which
diamonds reach the public): and relative importance of dia• mond jewellery in the overall operations of the jewellery
stores. The first section describes the sources of data:
a survey of Vancouver jewellery stores, the invoices of
a Vancouver diamond wholesaler and a direct survey of the buying habits of the wholesaler's clients. The techniques
used in carrying out both surveys are then described in
detail. The second section analyzes the data so gathered,
and compares them with published sources, drawing certain
tentative conclusions as to what may constitute the distinc•
tive personality of the Vancouver market in the Canadian
and American frame of reference. At the end, for the intended
convenience of future researchers, there is a list of topics
on the Vancouver market that seem to the author to hold special
interest for research. 201
RESEARCH TECHNIQUES
Sources of Information. Since the object of the present
research was not only to gather results on the Vancouver mar• ket for diamond jewellery but to compare those results to
those of other surveys made in Canada and the U.S.A., the
author chose two published sources, "A Survey oh Diamond
Jewellery," conducted for Canadian Jeweller magazine by
Maclean-Hunter Research Bureau, October 1975; and the Diamond section in Jewelers1 Circular-Keystone, Directory Issue, June 21,
1977 and designed his survey so as to obtain data comparable to those of the above publications. The sources of data were:
1. A survey of Vancouver jewellery stores done in person by the author during the month of August, 19 77.
2. A survey of the diamond-buying preferences of Vancouver jewellers, taken for the author by a Vancouver diamond wholesaler.
3. The invoices of the same wholesaler, for diamond sales made to Vancouver jewellers during November and December, 1977.
4. The author's own experience in selling dia• monds to retailers and inspecting jewellery stores in Montreal and Vancouver since 1969.
Techniques Used in Surveying Vancouver Stores. To ob• tain a sample of the Vancouver stores, at first the author attempted to follow the method used by the Maclean-Hunter re• searchers, who selected "approximately every seventh name" in the list of retail jewellers found in the Yellow Pages.^
Maclean-Hunter, A Survey on Diamond Jewellery (Toronto: Maclean-Hunter Ltd., 1975), p. 1. 202
This proved impractical, because the author soon realized that many stores among the 182 listed (counting branches) did not sell diamonds or any other costly jewellery, and several had gone out of business. Moreover, four depart• ment stores with important jewellery sections were not in the list: Eaton's, The Bay, Sears and Woodwards. So the author decided to eliminate the stores that did not stock diamond jewellery, add the department stores and from the resulting 105 stores pick randomly a sample of 20.
The Maclean-Hunter research was conducted by tele• phone. The author did not consider this to be a reliable method; because even if a busy store owner or manager con- 2 sented to spend ten minutes (as estimated by Maclean-Hunter) of his valuable time answering questions on the telephone, he would not necessarily have all the relevant facts in his memory or within his reach. This limitation of the method, incidentally, casts some doubts on the Maclean-Hunter results.
In any case, the author has found from experience the average jewellery store owner in Vancouver to be rather reluctant to divulge information about his business. Interestingly enough, the Maclean-Hunter researchers reported 33 refusals in Van- couver before they could complete 30 interviews. Personal
Maclean-Hunter, A Survey, p. 2.
^Ibid. 203
interviews and written questionnaires were also discarded
as impractical; in the author's opinion, few Vancouver
jewellers would spend any time answering such question•
naires .
The method finally adopted consisted of two techniques: personal evaluation by the author of the items on display, with certain assumptions and limitations that will be ex•
plained in the sequel; and interrogation of the diamond
salesman on duty, under pretense of being a buyer. The
author pretended to be "shopping around for a $2,000 engage•
ment ring" (the figure having been chosen so as to be high
enough to arouse the salesman's interest, but not so high as
to make him suspicious), and to be quite inexperienced on
the subject of diamond quality and prices, but in the process
of "reading up on it." Most salesmen co-operated by producing
brochures, charts, and price lists and demonstrating their
knowledge (or lack of it).
The Survey Form. Page 204 is a copy of the survey
form employed. The division of the stores in categories:
B.C. chain, national chain, department store and independent,
arose from the desire to investigate what differences would
be found between each category. A chain, according to 4
Statistics Canada, consists of four or more stores, and
such was the definition employed.
Telephone enquiry by the author. 204 Survey of Greater Vancouver Jewelry Stores
Store Name: Address:
Category: Independ, B.C. Chain National Chain Department Store
1. Proportion of window area (or inside display area) allocated to diamond jewelry:
2. The average size of the diamond in engagement rings (solitaire or centrepiece): points
3. Percentage of the following items in the total display of diamond jewelry:
E'R (Engagement Rings) % L R (Ladies' Rings) % M R (Men's Rings)
E (Earrings) % P & N (Pendants and Necklaces) % 0 (Other) %
4. If the following items were available, the average selling price was:
E R L R MR E P & N 0
5. The four best-selling items among all diamond jewelry, ranked 1 to 4:
E R L R MR E P & N 0
6. Degree of training on diamonds of the staff:
None Some Formal Training
7. Availability of WS, G color stones in sizes:
0.25 carats 0.50 carats 1.00 carats
$ $ $
81 Availability of loose stones:
Yes No
Survey Form 205
Item 1: The proportion of space allocated to diamonds in the window display of the store was estimated by eye. If there was no window display, the"inside display cases were measured in the same way. The crucial assumption is that in a well-managed and competitive store, the proportion of dis• play space allocated to diamond jewellery will be sufficient• ly close to the proportion of diamond jewellery sales in the total sales of the store, the latter figure being very hard to procure. Item 2: The average size of the (main) diamond in engagement rings was calculated from inspection of those available for display either in the outside windows or, lacking these, in the inside cases. The size of the stones displayed was sometimes shown in a store label next to the stone; otherwise, it was estimated by visual inspection. Item 3: The pieces on display were counted to answer this question. The division of jewellery in six categories deserves some comment. An engagement ring was defined as a ladies' ring with a diamond centrepiece, either a solitaire or accom• panied by one (or two) smaller diamonds (or other gems) on each side. Such a definition was arrived at by the author's experience and examination of jewellery advertisements. Any other kind of ring meant for women went into the ladies ' ring category, although recognizedly there were some borderline 206
cases. Men's rings are quite different from ladies' rings, and so there was no difficulty in separating them. Some names used in the jewellery trade: dinner ring, cocktail ring, are not in practice differentiable from other ladies' rings (the sales staff, when questioned, gave contradictory or confused answers), so the author could not imitate the
Maclean-Hunter researchers in separating those categories.
Pendants and necklaces did not warrant' a separation in two categories, being just a small portion of all jewellery displayed.
Other items were not present in large enough propor• tions to deserve a special category: diamond brooches, dia• mond watches and so on, and they were lumped together under others. The eternity ring, a quite easily recognizable type of ladies' ring that has been the subject of a great deal of advertising in recent years, and is quite popular in other centres, is very scarce in Vancouver and did not rate a cate• gory.
Item 4: As before, only those pieces on display in the windows (or the inside cases) were considered. If the pieces did not show a price tag, the prices were estimated in the following way: the diamonds were counted and appraised, the price of the gold and all labour costs were estimated and added, and markup and relevant taxes were also considered.
The result was later compared with the prices of other pieces 207
shown to the author by the sales staff. The difficulty of appraising a diamond mounted in a setting, in poor light, was not found significant, when checking the estimates, in a number of cases, against price tags and direct enquiry from the sales staff.
Item 5: It was assumed that the best-selling items were those which were displayed in largest numbers.
Item 6: By questioning the sales staff on the sub• ject of diamond grading and appraising, the author was able to determine the extent of their knowledge. No attempt was made to determine whether a salesman had formal training or just a very thorough grasp of the subject, but it was assumed that such knowledge would not come from experience alone, especially in the case of younger staff. Item 7 § Item 8: The availability of WS, G-colour stones and of loose stones was determined by direct question• ing of the staff.
Data Gathered From A Vancouver Wholesaler. The author secured the co-operation of a Vancouver diamond merchant selling to local jewellery stores, and obtained certain infor• mation from his invoices for November and December, 1977. The same wholesaler consented to carry out a simple descrip• tion of the customers' buying preferences, as follows:
When a client needed loose diamonds from him, he usually contacted the wholesaler on the phone and requested 208
stones of a certain weight and within a certain price range,
and often mentioned also the minimum acceptable clarity and
colour grades. Since the prices were usually higher than
the client anticipated, due to the quick succession of
price increases that characterized the trading at all the
world's bourses during those months (and still run unabated),
the client, unless willing to spend more, had to compromise
on one of the four categories:' colour, clarity, weight or
cut.
The wholesaler kept a tally of how many compromised
on colour, how many on clarity, and so on; and he would ask
if he was not sure. Also, he would note how many were
primarily interested in weight, how many in colour, and so
on. The results appear as Table VI.18. The wholesaler
also computed directly from his November and December, 1977
invoices the data that appear as Tables VI.13, VI.14, VI.15 and VI.16. 209
RESULTS OF THE RESEARCH
Results of the Survey of Vancouver Jewellery Stores.
The sample of 20 Vancouver stores consisted of 12 independents, four British Columbia-chain members, three national-chain mem• bers and one department store. During the research, the stores were given numbers 1 to 20, and these numbers will be used here to refer to them. The department store was No. 10; the national chains Nos. 7, 8 and 9; the B.C. chains were
Nos. 1, 4, 5 and 6; and the independents Nos. 2, 3 and 11 to
20.
Table VI.1 shows the proportion of window space (or inside display area, if the store had no windows) allocated to diamond jewellery of the total space. The average found,
31.7 per cent, corresponds well to the percentage of diamond jewellery sales in the total store sales found in the Maclean-
Hunter research, 27.8 per cent.^ This correspondence would support the validity of using the percentages of display space as an indicator of the percentage of sales. Further study would be necessary, however, to determine the accuracy of the correspondence in general.
The average size of the centrepiece (or solitary) diamond in engagement rings appears in Table VI.2. The overall average of 26.5 points is considerably lower than
Maclean-Hunter, A Survey, p. 20. 210 TABLE VI.1 Proportion of Window or Inside Display Area Allocated to Diamond Jewelry
Percentage All Indep... . B.C. Nat. Dept. Comb.
0 to 9 1 - T- - 1 1 10 to 19 4 2 l 1 2 20 to 29 5 3 2 - 2 30 to 39 6 4 - 2 - 2 40 to 49 ------50 to 59 2 2 - - - 60 and up 2 1 .1 . - - 1
Average Percentage 31 . 7% 33 .7% 2 8.71
TABLE VI.2
Average Size of the (Centrepiece oi Solitaire) Diamond in Engagement Rings
Size All Indep. B.C. Nat. Dept, Comb.
Less than 20 pt, 6 2 1 3 4 20 to 24 4 3 - 1 1 25 to 29 4 4 - - - - 30 to 34 2 2 - - - - 35 to 39 1 - 1 - - 1 40 and up 3 1 2 - - 2
Average Size 26.5 25.3 28 . 2
Combined = B.C. Chains + National Chains + Department Stores 211
the size found by Maclean-Hunter, 30.1 points. One expla• nation for this difference is undoubtedly that the sizes are diminishing with time, due to the increasing cost and scarcity of larger stones. The Maclean-Hunter study was done in 1975; at that time the American average was 30 points, down from
32 points in 1973. (It may be worth mentioning that in 1975 the Japanese average was 25 points, while the British were 7 content with seven points).
The average selling price of engagement rings is shown in Table VI.3. The overall average found, $845, is likely to be higher than a broader sample of stores would have indicated. Stores Nos. 1 and 5, two prestigious B.C. chains, are responsible for creating an artificially high average; without them the average is $655. However, the difference between the latter figure and the corresponding average price, $325, reported by Maclean-Hunter, is still considerable. Much of it can be attributed to the very con• siderable price increases of polished diamonds since 1975, but there are reasons to believe that the Maclean-Hunter
Maclean-Hunter, A Survey, p. 5. 7 Jewelers' Circular-Keystone, Directory Issue, 21 June 1977, p. 723. g Maclean-Hunter, A Survey, p. 16. TABLE VI.3
Average Selling Price of Engagement Rings
Price Range All Indep. B.C. Nat. Dept. Comb.
Less than $250 - - - - 0% $250 to $499 7 4 2 1 3 35% $500 to $749 6 4 1 1 - 2 301 $750 to $999 2 2 - - - - 10% $1,000 to $1,999 3 2 1 - - 1 15% $2,000 and up 2 - 2 - - 2 10 %
Number of Stores Selling Eng. Rings 20 12 4 3 1 8
Percentage of Stores Selling Eng. Rings 100%
Average Selling Price $845 $660 $1,735 . $1,072
.TABLE VI .4
Average Selling Price of Ladies' Rings
Price Range All Indep. B.C. •Nat. Dept. Comb.
Less than $500 1 - 1 - - 1 $500 to $749 5 3 - 1 1 2 $750 to $999 2 1 1 - 1 $1,000 to $1,499 5 4 1 ' - - 1 $1,500 to $1,999 2 1 - 1 - 1 $2,000 and up 3 1 2 - - 2 Number of Stores Selling Ladies' Rings 18 10 • 4 3 1 8 Percentage of Stores Selling Ladies' Rings Average .Selling Price $1,425 $1,115 $2,593 $1,812
Combined - B.C. Chains,;+,National Chains*4;. Department Stores 213
figure is too low; for the Canadian market, even for 1975.
Indeed, Jeweler 's Circular--Key stone reported an average of g
$485 for the U.S.A. in 1975, and Canadian prices tend to
be higher. This is by reason of the higher taxes on diamonds
in this country, namely 12 per cent Federal sales tax and
10 per cent excise tax, which amount to 22 per cent, against
five to seven per cent customs duty in the U.S.A. Finally,
the higher cost of living in Vancouver could account for part of the difference.
In Table VI.4, showing the average prices of ladies' rings, again stores Nos. 1 and 5, with extremely expensive pieces ($4,400 and $4,500 store average) are biasing the figure upwards. Without them the average is $1,046. This is approximately double the figure reported for "cocktail rings" by Maclean-Hunter, $608. Ladies' rings are gener• ally more expensive than engagement rings, because they are bought later in life by financially more able customers.
Table VI.5 indicates that the average for men's rings is $1,313. Store No. 5 sold slightly above that average, while store No. 1 did not stock the item. The relevant
Maclean-Hunter average is only $357 ,"'""'" much less than half.
9
Jeweler's Circular-Keystone, 21 June 1977, p. 723.
"^Maclean-Hunter, A Survey, p. 13.
^Ibid., p. 17. /TABLE VI.5
Average Selling Price of Men's Rings
Price Range All Indep. B.C. Nat. Dept. Comb.
Less Than $500 - - — $500 to $999 5 l 2 1 1 4 $1,000 to $1,999 3 2 1 - - 1 $2,000 and up 2 2 . .- - -
Number of Stores Selling Men's Rings 10 5 . 3 . 1 1 5
Percentage of Stores Selling Men's Rings
Average Selling Price $1,313 $1,750 $886
TABLE VI.6
Average Selling Price of Earrings
Price Range All Indep. B.C. Nat. Dept. Comb.
Less than $250 4 1 1 2 — 3 $250 to $499 3 3 - - - - $500 to $999 2 2 - - - - $1,000 to $1,499 3 2 1 - - 1 $1,500 and up 1 - . 1 - - 1
Number of Stores Selling Earrings 13 8 3 2 - 5
Percentage of Stores Selling Earrings
Average Selling Price $609 $585 $649
Combined = B.C. Chains-t- National Chains 4- Department Stores 215
It is possible that the recent advertising campaigns of De
Beers and others to popularize men's diamond jewellery may be facilitating the market for rings provided with more and larger stones, and therefore costlier. Commonly men's rings have a heavy gold shank; and a frequent design is a 3 by 3 array of 5- to 10-point diamonds, or sometimes a diamond- studded horseshoe; also there is a thriving market for large low quality stones for the "pinkies," that certain businessmen wear as an indication of financial success.
Such rings are not meant to be cheap, and if they are be• coming more popular the average item price must surely go up. There is also the intriguing possibility that Vancouver may be an exceptionally good market for such success proclaim• ing men's jewellery.
Table VI.6 shows the average price ($609) for earrings.
If Store No. 4, another expensive B.C. chain store, is deleted, the average sinks down to $497, which is not so far above 12 twice Maclean-Hunter's figure ($218). Table VI.7 shows the prices of pendants and necklaces, with an average of
$1,169 which becomes $934 by deleting the two high-priced
B.C. chains, Nos. 1 and 5. The Maclean figures are $522 for neclaces^3 and $282 for pendants,^ and taking, somewhat
12 Maclean-Hunter, A Survey, p. 10. 13 Ibid., p. 11.
Ibid., p. 12. 216 TABLE VI.7
Average Selling Price of Pendants and Necklaces
Price Range All Indep. B.C. Nat. Dept. Comb.
Less than $500 5 2 1 2 3 $500 to $999 1 1 - 1 $1,000 to $1,999 1 1 - - - $2,000 and up 4 . . .2 . .. .2 2
Number of Stores Selling P & N 11 . . 5 . . .4 . . - .2 6
Percentage of Stores Selling P & N
Average Selling Price $1,169 $1,426 $955
TABLE VI.8
Average Selling Price of all Diamond Jewelry
Price Range All Indep. B.C. Nat. Dept. Comb.
Less than $250 - _ _ _ $250 to $499 5 1 1 2 1 4 $500 to $749 2 2 - - - - $750 to $999 4 4 - - - - $1,000 to $1,499 4 2 1 1 - 2 $1,500 to $1,999 1 1 - - - - $2,000 and up 4 2 . 2 - - 2
Average Selling Price $1,155 $1,148 $1,742 $633 $452' $1,164
Combined = B.C. Chains -f National Chains +- Department Stores 217
arbitrarily, the straight mean value, we obtain $402, again
quite close to half of our Vancouver average.
Table VI. 8' combines the average selling prices of
each item in each store and the proportion of sales of
each item in the total sales of diamond jewellery to furnish
the average selling price of all diamond jewellery. There
is no corresponding figure in the Maclean study or else•
where to compare it with. The chain stores appear rather
neatly divided into categories: "cheap" (average under
$500) and "expensive" (average over $1,000); the latter are
Nos. 1,5, 4 and 8. The independent stores are more evenly
spread, although only two sell in the middle range of $500
to $749.
To study the demand for each type of diamond
jewellery, it was assumed that the relative demand for
a given item was given by the proportion of that item in
the total number of pieces displayed. Thus, if 33 per cent
of the diamond pieces were engagement rings, it was assumed
that about 33 per cent of the items sold were engagement rings;
results appear in Tables VI.9 and VI.10. .Table VI.9
shows'that 62.5 per cent of the stores had engagement rings
as the main item, and the rest ladies' rings; no other item was predominant in any store. The average store, besides,
displayed 45 per cent engagement rings; this is higher than
the American percentage of 36, reported by Jewelers' Circular 218 • TABLE .VI/'. 9
Best-selling Diamond Jewelry Item
Number & Percentage of Stores for Which Best-Selling Item is All. Indep. B.C. Nat. Dept. Comb. L
Engagement Rings 121 8 2 11 1 M 62.51
Ladies' Rings 71 4 2 U - 31 37.5%
The fraction comes from a split first place.
TABLE VI.10
The Four Largest Items of Diamond Jewelry Sold, in Order of Importance
Note: The table was obtained by allocating 4 points to the most important item sold (rank i in Question 5), 3 to the second most important (rank 2), and so on.
Item All Indep, B.C. Nat. Dept. Comb.
Engagement Rings 73 44 14 11 4 29 37.41 37.9% 35% 37.9% 40% 36.7%
Ladies' Rings 58 39 11 7 1 19 29.7% . 33.6% 27.5% 24.1% 10% 24.0%
Men's Rings 19 10 4 2 3 9 9.71 8.6% 10% 6.9% 30% 11.4%
Earrings 20 15 4 1 5 10.2% 12.9% 10% 3.5% 0% 6.3%
Pendands & Necklaces 11 3 4 4 8 5.7% 2.5% 10% 13.7% 0% 10.1%
Other 14 5 3 4 2 9 7.2% 4.5% . 7.5% 13.7% 20% 11.4%
Total Points 195 116 40 29 10 79 1001 100% 100% 100% 100% 100%
Combined = B.C. Chains 4- National Chains-h Department Stores 219
Keystone, for 1976. XJ The difference may perhaps be due to
the fact that Vancouver is relatively far from the fashion
centres and therefore the local consumer pays less attention
to other forms of jewellery.
Table VI.10 was computed in the same way as a corres•
ponding table in the Maclean report, and some of the results
are indeed surprisingly close:
VANCOUVER MACLEAN-HUNTER ITEM SURVEY SURVEY*
Engagement Rings 37.4% 35.1%'0
Ladies' Rings 29.7% 26.8%
Men's Rings 9.7% 13.9%
Earrings 10.2% 10.5%
Pendants
§ Necklaces 5.7% 8.4%
* Maclean-Hunter, A Survey, p. 19.
The fact that the 37.4 percentage value for engage•
ment rings is so close to the American percentage of 36 for
sales of the same rings is probably just a coincidence. It
should be noted that the 36 per cent figure was only obtained
by computing the "10 most recent consecutive diamond jewellery
Jeweler's Circular-Keystone, 21 June 1977, p. 723 220
sales," according to the Jewelers1 Circular-Key stone.^^:
Rarely, it seems, are any figures obtainable on the actual percentages of sales over a period of time; this is most likely due to the fact that jewellers seldom bother to report such data.
Table VI. 11 shows the degree of training of the staff, including the owner of small independent jewellery stores, who generally attends personally to the prospective purchasers of diamond jewellery. Those stores having no trained personnel were 60 per cent of the total; but the independents fared somewhat better, with 50 per cent having someone trained in diamonds, whereas 75 per cent of the chains did not. This result is not surprising; the inde• pendent stores do their own purchasing, and somebody (gener• ally the owner) is obliged to know something about the merchandise -- it can be noticed that only one of the inde• pendents totally:lacked trained personnel -- whereas purchas• ing for the chains is done centrally, and even though the merchandise may be of high quality, it already comes cata• logued and priced, so that there is less need of skilled staff. (Even so, two of the better chains, Nos. 5 and 8, had trained personnel). The figures from the Maclean report show, on the other hand, 77.7 per cent of the stores having
Jeweler's Circular-Keystone, 21 June 1977 , p. 724. TABLE VI.11
Degree of Training on Diamonds of the Staff
Degree All Indep. B.C. Nat. Dept. Comb.
None 5 1 1 2 1 4 Some 7 5 2 - 2.
None 4- Some 12 6 3 2 1 6 601 50% 75% 66.6% 100% 75%
Formal Training 8 6 1 1 - 2 40% 50% 25%
TABLE VI.12
Availability of Loose Stones for Sale
Availability All Indep. B.C. Nat. Dept. Comb.
_ Not Available 7 4 2 1 3 35% 33% 37%
Available 13 8 4 1 5 65% 67% 63%
Combined - B.C. Chains -f National Chains + Department Store 222
17 trained personnel. The difference may be explained in
several ways: reluctance on the part of the owner or man•
ager to admit the contrary, a degree of uncertainty as to what exactly constitutes training (in the present survey,
training was inferred from the salesman's knowledge), and
the possibility that since 1975, they forgot all they knew
about diamonds.
Table VI.12 shows availability of loose stones for
sale. It should be noticed, however, that the answer to
an enquiry about losse stones is seldom an unqualified
yes or no. In principle, anything would be available (at
least, from an independent store) for the right price, but
the client would sometimes have to wait for the store to
order or purchase the merchandise. Therefore, such
answers as "Yes, but takes a day," or, "No, but we can get
them" (both of which were recorded by the author) mean
essentially the same thing. With this caution, there was
a clear positive correlation between training and availabil
ity of loose stones, as follows:
NO SOME FORMAL TRAINING TRAINING TRAINING
Not Available 4 3
Available 14 8
17 Maclean-Hunter, A Survey, p. 6 223
Question number 7 of the Survey Form investigated
the availability of WS, G-colour stones, whether mounted
or unmounted, in three specified sizes: . 25 points, 50 points and 1 carat. Here, availability was taken to mean
that the stone could be ordered, if necessary. One diffi•
culty that arose during the survey was the wide divergences of interpretation of the G.I.A. terms by the stores. Per• haps the most amusing variation on the theme was Store No.
4's rendering of WS as "Very, very select." According to the company catalogue (Store No. 4 is a prestigious B.C. chain selling expensive goods), diamonds were classified as "Very, very select," "Select," and "Industrial" (which the store did not carry). The author identified WS as no better than VS^ or VS2 and "Select" as 1^ to 1^, two low grades.
In all, 25-point stones assumed to be WS, G-colour, were available at 16 stores, for a price averaging at $427 per stone. The variation was wide, ranging from $320 to
$680. It is most likely that such discrepancies are due principally to the different interpretation of the grading terms by the chains and the suppliers. In a few cases, however, it was possible to actually check the stones in question. It may be of interest to note that the independ• ent stores averaged a relatively low $392, against the chains* $485. 224
Larger stones presented the same grading problems and uncertainties. The \ carat stones were available at
13 stores, averaging $1,552 with no marked difference be• tween chains and independents. One-carat stones were available at 13 stores too, averaging $6,467. These figures should not be given undue weight, as they are averages of prices charged for goods of dissimilar quality.
Results From the Data of A Vancouver Wholesaler.
The data concern exclusively purchases made by Vancouver retailers, and do not include therefore any direct sales to the public, but it is largely safe to assume, in the author's opinion, that the purchases made by the jewellers reflect in the long run the preferences.of the public at large.
Table VI.13, which is given principally as a refer• ence against the next two tables, shows that, not surprisingly, the overwhelming majority (78.7 per cent in number) of the stones sold to jewellers are small, up to % carat.
Table VI.14 shows the percentages of individual stones sold divided in weight and clarity categories. Look• ing first at the second clarity bracket, VS-^ to V^, there is a steady decrease in the popularity of such stones as size goes up. Conversely, there is a steady increase of preference towards the lower grades of clarity, Imp-^ to Imp^, as size goes up. The first column, on the other hand, remains (
TABLE VI. 13"
Weight o£ Stones Sold to Vancouver Jewellers During November and December, 1977 (In Percentage of Number of Stones)
Weight % Up to I ct. 78 . 7 1 ct. to I ct. 15. 3 1 ct. to 1 ct. 3 . 7 1 ct. and up 2.3
All Sizes 100.0
TABLE VI. 14.
Clarity of Loose Stones Sold to Vancouver Jewellers During November and December, 1977 (In Percentage of Number of Stones)
^"^^.Clarity F to WS2 VSj^ to SI2 Imp^ to Imp^ Total 0. Weight ^^"^-^ % 0 % 0
Up to I ct. 18.5 52.7 28.8 100.0 1 ct. to 1 ct. 19.3 31.1 49.6 100.0 1 ct. to 1 ct. 20.4 21.3 58.3 100.0 1 ct. and up 18.5 19.1 62.4 100.0 All Sizes 18.7 47.5 33.8 100.0
TABLE VI.15 . Color of Loose Stones Sold to Vancouver Jewellers During November and December, 1977 (In Percentage of Number of Stones)
~~~^~^^Color D E F G H I J K L M N 0 Total Q, Weight 0 % % % % Up to I ct. 10.3 74.6 11.2 3.9 100.0 1 ct. to 1 ct. 17.1 69.2 9.7 4,0 100.0
\ ct. to 1 ct. 24.4 57.3 t 14.5 3.8 100.0 1 ct. and up 31.3 40.4 ^ 19*. 2 9.1 100.0 All Sizes 12.4 72.3 11.3 4.0 100.0 226
constant. Such tendencies become more easily explainable
if it is taken into consideration that, as size increases, prices also increase steeply. Therefore, a larger stone
of medium clarity becomes too expensive for the average
diamond buyer, who, if interested in the larger sizes,,
switches to a lower clarity grade instead. Or, looking
at it from another angle, smaller stones of higher clarity
are more affordable. The invariable character of the
first clarity grade can be explained also by the fact that
certain buyers are interested in high quality, regardless of price, so that they do not switch to the lower grades.
Since the difference between the first and second clarity brackets is hardly visible at all by an inexperienced eye, and much less so when the stone is mounted on a ring, con• sumers who buy larger sizes in the higher quality do not do it for show so much as for other reasons, like high standards and investment value. Those consumers would not be tempted to save by going one clarity bracket lower.
The author has not been able to find in the liter• ature data comparable to those of Tables VI.13 to VI.15.
There is information, however, on the overall clarity pre• ferences, with no separation by weight. The Jewelers '
Circular-Key stone presents the percentage of engagement ring diamonds (weighing, as stated before, an average of
30 points in 1975) in the different clarity grades; the 227
percentages corresponding to our brackets are 30.7, 60.4 and 18
8.9, respectively, against 18.7, 47.5 and 33.8 of our data.
The shift towards higher clarity of the American data may be accounted for in several ways: first, the Vancouver mar• ket probably does consume lower grades of goods; second, the overall availability of the higher grades has decreased in two years; third, the American data may be biased by the understandable tendency of jewellers to grade their mer• chandise higher than is the case, which, as we already saw, is compounded by conflicting interpretations by the companies and the distributors of the standard terms; fourth, engage• ment rings are less likely to contain low quality stones than other rings, especially men's rings.
Passing now to colour, Table VI.15 illustrates the colour preference of Vancouver jewellers vis-a-vis size..
The most noticeable shifts as size goes up are one towards increasing popularity of the higher colour grades, and another away from the second-best grade (G, H, I) and into the third and fourth grades (J, K, L and M, N, 0, respective• ly). Such facts can be accounted for in a similar way as those of Table VI.14, by differentiating between two classes of ultimate consumers, those with high regard for quality and those primarily interested in size and show. The trend to• wards the higher colour grades, which was not present in
Jewelers' Circular-Keystone, 21 June 1977, p. 724. 2 28
Table VI.14, is most likely due to the fact that the
larger the stone, the more noticeable the colour; a
1 carat stone of grade I, for instance, looks more yellow than an I-colour % carat stone, and that fact prompts a seeker of quality to switch to the higher
grades. The other buyers of the second colour grade are,
instead, deterred by the high prices and switch to the
third grade. The fourth grade, interestingly enough, only becomes popular in the sizes over 1 carat, where the colour
is fairly noticeable by the untrained eye. Such stones are mostly bought for men's rings.
Again, the author could not find in the literature data comparable to those of Table VI.15. The overall per•
centages of colour categories for engagement rings in the 1 9
U.S.A. were in 1976 29.6, 58.3, 10.7 and 1.4, against the figures of Table VI.15: 12.4, 72.3, 11.3 and 4.0.
The discrepancies can be accounted for in the same way
as before.
Table VI.16 shows the Vancouver preference for cer• tain styles of cut, and Table VI.17 is the counterpart for 2 0 engagement rings in the U.S.A. In both countries the brilliant dominates the scene; and, if the difference be• tween the 89.3 per cent brilliants in Vancouver and the 85.6 per cent in the U.S.A. means anything, it is probably due
Jewelers1 Circular-Keystone, 21 June 1977, p. 724.
Ibid., p . 725 . 229
TABLE VI.16
Style of Stones Weighing Over 15 Points Sold to Vancouver Jewellers During November and December, 1977 (in percentage of number of stones)
Type of Cut Percentage
Brilliant 89.3% Marquise 1. 2 Pear 3 . 2 Oval 0.0 t Emerald 3 . 5 Heart 2 . 3 Other 0 . 5 Total 10 0.0%
TABLE VI.17
Style of Engagement Ring Stones Sold in U.S.A. During 1976
Percentage of Rings Sold by Retailers Type of Cut in 1976
Bri11i ant 8 5.6 % Marquise 5 .1 Pear 5.0 Oval 3 .1 Emerald ••1.2
Total . .-. 100.0 %
(From Jewelers' Circular-Keystone, Directory Issue, 21 June 1977) 23
to the fact that Vancouver, as we mentioned, is too far from the cutting centres, and, more importantly, the fashion centres, to allow enough exposure of the customers to styles other than the popular brilliant.
Purchasing a diamond (unless it is a collector's item at a very high price) inevitably entails a compromise, and the parameters of the compromise are well defined: weight, colour, clarity and cut. Table VI.18 shows the parametres that Vancouver retailers and, it is assumed,
Vancouver customers, are most ready to compromise on, and those that they are more interested in. Carat weight is, from both sides of the question, the most important point for Vancouver buyers. Colour comes next, then clarity a close third; then, last of all, cut. Cut here means the degree to which the stone is well proportioned and well finished rather than the style of cut. The American results (Table VI.19) also show that weight is the main interest, and colour the second; but cut, not clarity, is the third and clarity comes last. On the other side, they are more ready to sacrifice cut, then clarity, like in the
Vancouver results, but carat weight comes third, and colour last. Besdies, in terms of percentage figures there is a somewhat smaller interest in weight than in Vancouver, larger interest in colour and cut, and less interest in clarity, whereas the willingness to sacrifice cut is less TABLE VI.18
Preferences of Vancouver Jewellers in Terms of the Four
more ready most.interested in : to sacrifice:
6.2 % Carat Weight 5 5.3 % 19.7 9.5 Color 9.2 70.3 Cut 14 .0 Clarity 15.8 100.0 % Total 100.0 %
TABLE VI.19
Preferences of the American Diamond-Purchasing Public in Terms of the Four Parameters
more ready most interested in: to sacrifice:
Carat Weight 42.8 % 11.4 % Color 31. 0 2 . 3 Cut 16 . 7 61. 3 Clarity 9 . 5 25 . 0
Total 100.0 % 10 0.0 %
(From Jewelers' Circular-Keystone3 Directory Issue, 21 June 1977) 232
overriding, and they are more willing to sacrifice weight and clarity, and less colour. These differences can be explained by remarking that the most noticeable charac• teristic of a polished diamond is its size, or, more pre• cisely, its diameter and table size. The parameter that largely determines diameter and table size is the weight, followed by poor (i.e., not ideally proportioned) cut, which produces spread tables and large diameters. The second most noticeable characteristic, following by a long distance, is clarity; then colour and cut. Therefore, the Vancouver market would tend to stress the most noticeable characteris• tics at the expense of the subtler ones. This preferential stress could be called, somewhat derogatorily, a lack of sophistication. But, on the other hand, the American figures may not be strictly comparable, because they were originally predicated on the preference of buyers of expensive engage• ment rings, where such sophistication as the American public possesses would be most in evidence; whereas the Vancouver figures apply to all buyers. Furthermore, the American data were obtained as the composite opinion of a group of
Jewelers' Circular-Keystone panelists, whereas the Vancouver data are actual sales figures. For that reason, it would be unfair to accuse the Vancouver public of relative lack of sophistication without a much more careful research. 233
CONCLUSION
Jewellers as a rule are more interested in running a successful operation than in conducting or facilitating
scholarly research on the jewellery business. Many just
do not have the data that a researcher would need; a good number are positively secretive about their operations,
and most have neither the time nor the inclination to sit
for a lengthy interview or fill endless blanks in a ques•
tionnaire. Therefore, the gathering of data for a study
of the jewellery business, and in particular the retail
trade in diamonds, can be a frustrating operation. Besides,
the inherent difficulty of grading diamonds in a consistent
way, and the wide divergence of interpretation of the grading
terminology by the wholesalers and distributors, make most
available data involving the quality parameters, colour and
clarity, rather suspect. All these factors help explain the
dearth of serious studies on the retail end of the diamond
distribution channels.
In this study, an attempt was made to circumvent such difficulties. First of all, the data on the retail sales of jewelry were collected by careful inspection of the merchandise on display rather than enquiries from the owner or manager. It was then assumed that the prices, relative frequencies, and relative space allotment of the various items displayed were sufficiently representative 234
of the total store operation to be used as indices of the
latter. To what extent this equation is valid remains
to be researched further, although then the same difficulty will arise. Second, the information from a Vancouver wholesaler provided data on the diamond-purchasing habits
of the retailers themselves, and also an invaluable check
for the figures obtained by direct inspection. These methods, then, allowed the author to bypass the direct questioning of the management, with its accompanying uncertainties, and also provided a homogeneous interpretation of the quality parameters.
The Vancouver market does reflect the fluctuations at the world's wholesale exchanges, but it does so out of phase and in a rather distorted manner. By the time the effect of the selective price increases and the relative scarcities of the different types of diamonds arrive in Vancouver, they have already averaged out to a large extent. Thus, even if the prices dropped at the exchanges for some time, the Vancouver retail prices, buffered by a standard 100 per cent markup over the wholesale price plus 22 per cent tax (so that a diamond sold at $1,000 by the wholesaler retails at about $2,500, without counting the cost of the ring) would probably' not come down. It would be a fascinating study to research further the relation between the world market and 235
Vancouver, and certainly such study would benefit the local jewellers. For instance, it has been the author's experience that some Vancouver jewellers, at the start of the recent wave of price increases, rushed to buy very
low quality but relatively large goods, believing that
such goods would disappear from the market or else be
priced out of reach; but in fact those qualities were,
quite foreseeably, the ones least affected either by the
new demand or by the increases. A study of the market
would perhaps have helped them direct their purchases
better. As George Holmes, the Editor of Jewelers' Circular-
Keystone, wrote:
For the jeweler well set in his ways, the prospect of restarting the learning process may not be appealing. But once the first step is taken, jewelers dis• cover it is not a painful process. One good thing about the jewelry industry: its business leaders are proof that the person who is willing to keep on learning and innovating is usually the one who's also the most successful.21
SOME INTERESTING TOPICS FOR FUTURE RESEARCH
Sources of Diamonds for the Vancouver Market. Most
diamonds come to the Vancouver market from the trading centres
of Antwerp and Israel, either directly or through Montreal,
Toronto and New York. Detailed information, however, is not
21George Holmes, "Theory vs. Reality" (Editorial), Jewelers' Circular-Keystone, July 1977, p. 45. 2 36
readily available. In particular, it would be useful to dis• tinguish between the independent stores, which purchase their diamonds from wholesalers, and the chain stores, which have central purchasing. A related question is what proportion of diamonds reach the Vancouver market as jewellery, and what proportion is set into jewellery pieces by Vancouver craftsmen.
Influence of the Activities of the World Trading
Centres in the Price and Availability of Diamonds in the
Vancouver Market. This is a complex but fascinating topic for research. One aspect of the question is the exact relation be• tween price increases in the trading centres and related increases in the prices paid by retailers and consumers, including a study of the time lag.
Relation Between Store Sales and Display Space.
This question has been alluded to several times in the course of the chapter. It is quite clear that the correspondence be• tween sales and display space would be found to vary with the individual store. Presumably stores whose managers are more aware of the market's nature would show a better correspondence.
This is, of course, a very broad question, not restricted to jewellery stores.
The Preferences of the Vancouver Diamond-Buying
Public Compared to Those of Other Sections of the North American
Publie. The characteristics of the Vancouver retail market for
diamonds should be investigated to determine, among other things, 237
if there is any evidence of relative lack of sophistication, as referred to before. For the question to make sense, however, a working definition of "sophistication" should be produced, perhaps elaborating on the one proposed earlier by the author.
Whether the Quality (and size) of the Diamonds
Offered in the Retail Market Has Been Decreasing in Recent
Years. It would be a rewarding undertaking to substantiate or disprove the claim often made by industry sources, that the diamonds offered in the market have been of decreasing quality. The question is complicated by the fact that dia• monds of lower quality or smaller size than those commonly offered in years past have indeed found a place in the mar• ket; but it remains to see whether these products have
displaced the higher quality diamonds to any significant
degree. Reliable statistics on this subject are very
scarce. 258
APPENDICES APPENDIX 1
THE GEMOLOGICAL INSTITUTE OF AMERICA
The Gemological Institute of America (G.I.A.), founded by Robert M. Shipley in Los Angeles in 1931, is a non-profit organization founded and operated for the benefit of jewellers in North America and abroad. The Institute offers a number of thorough correspondence and residence courses on diamonds and other gems, publishes books and magazines, and carries out testing and grading of gems in its Los Angeles and New York laboratories.1 Another activity of the G.I.A. is the manufacture and distribution of diamond-grading and gem-testing equipment, like the
Diamondlite (for colour grading), the Gemolite (a special microscope), the Proportionscope, a gem spectograph, and so on.
It is one of the Institute's aims to induce the diamond trade to universally adopt its standards of colour, clarity and proportion grading. Broad use of the G.I.A.'s grading system is encouraged by teaching it in the Institute's courses, and by applying it in the certificates issued at the
Gemological Institute of America (G.I.A.), Diamonds, Introduction, p. 2.
239 24
two gem trade laboratories.''
CERTIFICATES
A certificate is a report accompanying a diamond attesting to its quality: carat weight, clarity grade, colour grade and cutting. A number of private and public institutions throughout the world issue certificates; among the public ones, the G.I.A. is one of the most respec• ted, and many others have accepted its standards, like the new Israel Gemmological Institute. Certificates are issued for a fee, which is lower for members of the Institute and diamond students. While in transactions among the trade itself a certificate has not yet replaced personal inspec• tion and judgement, certificates are becoming gradually more important for larger stones. For the diamond-buying public at large, on the other hand, a certificate from a respected institute may seem the only way of checking on the pronouncements of the jewellers or the diamond broking companies. Therefore, both kinds of retailers often make a point of offering a certificate for each of their larger stones. The inexperienced buyer, however, should first check
Bruton, p. 214.
Israel Diamonds 3 47:20 . 241
carefully exactly who is issuing the certificate. One of perhaps many cases of certified deception came to the author's notice recently when perusing the Better Business
Bureau Newsletter for the Mainland of British Columbia, 4
July 12, 1977. Two companies specialized in selling dia• monds by telephone had been charged with fraud following investigation by the R.C.M.P. Turning to the promotion booklet of one of the companies (London House, Toronto), the author discovered that the promised certificate was indeed issued by "a member of the Gemological Institute of America," not by the Institute itself. Such unscrupulous operators often manage to convince the gullible that their certificates are backed by the prestigious Institute.
THE GEMPRINT
The Gemprint is an invention of the Weizman Institute
in Israel, manufactured by Kolso Ltd., of Haifa. It is a
device that produces a laser photograph of a diamond, also called Gemprint, which is used for identification purposes.
The principle is to pass a narrow beam of light from a low- powered helium-neon laser, through lenses and a pinhole in the middle of an adjustable holder, and onto the table of a
London House and Merchants Diamond Group. 242
diamond, that reflects the beam back through the pinhole and onto a film. Any scattered beams caused by reflection from the surface or refraction inside the stone are picked up and recorded as spots on the film when the stone is rotated during exposure. The result is a pattern of light
spots. There is only one position of the pinhole where
the diamond will reflect light back through it, so the sub•
sequent) Gemprints of the same stone will be identical.
The Gemprint is thus useful for identification, inasmuch as
it will produce prints that are unique for each brilliant
cut diamond [unless it is repolished). It is, therefore, becoming popular in the larger American jewellery stores as
a selling aid; and the U.S.A. distributors keep a central
registry of Gemprints that might assist in the identification
of stolen goods.
Another use of the Gemprint is to identify diamond
simulants.. A diamond produces a certain type of print
characterized by randomness of the spots, whereas the
prints obtained from spinel, strontium titanate, YAG and
most other simulants, have more definite patterns and at the
same time the spots are blurred. Furthermore, doubly re•
fractive stones, like zircon, white sapphire, and rutile,
show a number of double spots, whereas diamond, being singly
refractive, produces almost exclusively single spots.
Finally, almost all simulants produce a central halo in 243
their prints. Rutile shows a very faint halo, but smudged spots. The experienced gemologist, nevertheless, can usually identify diamond simulants by using less expensive tools.
Israel Diamonds, 46:50. APPENDIX 2
RELATIONSHIP BETWEEN PRICE AND WEIGHT FOR DIAMONDS
To study the relationship between price and weight, it is best to assume that the quality, the colour and other variables are kept constant, and to examine the variation in price as weight varies. In Chapter II, Table II. 2, we show the G.I.A. 1975 base price chart, where the stones are assumed to be flawless, well proportioned, and of the highest colour category, so that the only variations are size and style of cut. Considering just brilliant cuts, the price variations are shown in Figure 48 (for small stones) and
Figure 49. It will be noticed that the price per carat
remains constant throughout well-defined intervals, due
to the impossibility of having a continuously varying
price scale. For instance, between 0.90 and 0.96 carats
the price per carat will be the same, and similarly between
0.96 and 1.05 carats. (The price of the stone, of course, will increase proportionately to the weight). The most ob•
vious feature of the graph is that the line ascends rather
rapidly, indicating the sharp increase in per carat price
as weight increases. Another noticeable phenomenon is that
price jumps tend to be much steeper just before a carat
weight expressed in a round number or fraction: one quarter,
one half, three quarters and most noticeable of all, one
244
Z.5 cb. 247
carat: then two, three and so on. This has nothing to do with any property of diamond, but with the mystique of owing a stone of a round weight; an explanation for its origin is that advertising often shows, or refers to, stones of such weights, whereas irregular weights are never mentioned. It can also be seen that (in Fig. 48) for small stones, weighing 1/6 carat and less, the price per carat tends to remain stable; this is due to the relatively high labour cost of processing small stones.
As mentioned in Chapter II, a traditional rule to determine the price of a stone was to multiply the price of a one-carat stone of the same quality by the square of the carat weight of the stone in question:
2 Pc = Px x c
Equivalently, the price per carat of a stone weighing c carats would be obtained as P^ x c. Table 2.1, obtained from the G.I.A. 1975 price chart, shows a comparison be• tween the actual figures and the estimates, using P^ x c.
The actual price is consistently lower than the estimate, but the two never stray too far apart; the approximation is particularly close beyond one carat. To see this more clearly, it is best to examine Figure 49 where the straight line is the price given by P^ x c. The line intersects the actual graph at the one carat value, which is the base price. TABLE 2.1
The actual figures are from the G.I.A.'s 1975 Base Price
Chart, and apply to FL (flawless), D-color (colorless)
brilliant-cut diamonds.
Weight Ovals, Pears, in Rounds Marquise Emeralds Carats and Hearts Actual Estim. Actual Estim. Actual Estim. Actual Estim. $ $ $ $ $ $ $ $
3.00 11,500 14,850 10,200 12,540 9,200 11,400 8,500 10,800 2.75 10,300 13,612 9,100 11,495 8,240 10,450 7,630 9,900 2.50 9,700 12,375 8,550 10,450 7,760 9,500 7,190 9,000 2.25 9,000 11,137 7,920 9,405 7,200 8,550 6,680 8,100 2.00 8,750 9,900 7,700 8,360 7,000 7,600 6,500 7,200 1.75 6,850 8,662 6,030 7,315 5,480 6,650 5,120 6,300 1.50 5,900 7,425 5,200 6,270 4,720 5,700 4,430 5,400 1.25 4,980 6,187 4,250 5,225 3,880 4,750 3,670 4,500 1.00 4,950 4,950 4,180 4,180 3,800 3,800 3,600 3,600 Base 0.75 2,100 3,713 1,980 3,135 1,800 2,850 1,600 2,700 0.50 1,360 2,475 1,430 2,090 1,300 1,900 1,040 1,800 0.25 760 1,237 775 1,045 700 950 550 900 0.20 575 990 640 836 580 760 440 720 0.10 400 495 460 418 420 380 320 360
248 249
Therefore, this formula, which is sometimes called the squaring rule, does give a rough approximation for the price of larger stones.
Unfortunately, since stones over three carats and much more so flawless, colourless ones, are so extremely rare, the graph could not be extended beyond three carats without losing its statistical validity. But it is interest• ing to note that the squaring rule, applied to exceptionally large stones that appear from time to time in the market, would give impossibly high prices, beyond the reach of any private buyer. For instance, in 1976, Cartier of New York offered for sale the largest D-colour (colourless) flawless diamond ever cut, weighing 10 7 carats. The asking price was $5 million. However, at the then prevalent price of
$13,000 for a 1-carat D FL stone, the squaring rule would have given about $149 million as a reasonable price for the Cartier diamond. APPENDIX 3
THE SHORTAGE OF ROUGH AS REFLECTED IN THE TRADE'S COMMENTS
It is difficult to analyze a historical movement
that has not yet resolved itself. What follows are pro-
- gressive reports of the rough shortage as seen by whole•
salers. The material has been gathered from issues of
Jewelers' Circular-Keystone from 1977 to 1978.
March 1977. "The last three sights have been small, with rough assortments generally mediocre. This has tended to dry up supplies and fire up demand for goods. In fact, quarter carat stones have just about disappeared."
"World-wide demand for diamonds is very great now. Dealers in Antwerp, Tel Aviv, Bombay, are buying anything they can lay their hands on. Even unopened boxes of rough are capturing a 10 per cent premium."
In late March, De Beers raised prices on small
goods by 30 per cent, even though the overall increase
was only 15 per cent, as officially announced.
250 251
June 1977. "We did record business . . . Most of the heavy buying was done in .fear of
another price increase . . . Many (dealers) were worried about dwindling supplies of medium- to larger-sized stones. Such shortages meant that either De Beers was holding back certain sizes of rough -- or that dealers who cut that rough were hoarding the finished stones."
September 1977. "The stage is set for another diamond price increase. . . . De Beers' July sights were very small, continuing the trend noted after the previous three sights. Boxes of unopened rough were fetching premiums of 25 to 30 per cent in the open market . . . The Syndicate was buying polished goods in Europe to further create scarcities and shore up prices."
October 1977. "De Beers moved to squelch rumors of an imminent price hike shortly before Labor Day. In a typically terse announcement, it said there would be no further increases this year. But other - Syndicate actions seemed to speak louder than words. For the fifth time in a row, De Beers' sights, held August 22, were very small. . . . Dealers are forced to scramble for goods in the open market. . . . Boxes of unopened melee rough were selling in Israel for as much as 40 per cent . / over De Beers' list price." 2 52
November 1977. "Prices for melee will have shot up 50 to 60 per cent for 1977 overall (because) the Syndicate cannot keep up with demand for small rough. Consequently, dealers are bidding up against each other in the open market. . . . Since the March 2 7 sight, the C.S.O. has been releasing only about 25 per cent of the goods people have applied for. . . . The demand for melee is so great because the' prices for larger engagement ring stones are becoming more and more prohibitive. . . . Israeli dealers make 43 per cent on boxes of unopened small roughs."
December 1977. "The Syndicate shrank its already meager sights drastically on October 31. De Beers is (said to be) intent upon holding prices at current record highs."
(A special release.) "In an unexpected move, De Beers announced a 17 per cent average increase effective December 6, 60 days after the Syndicate pledged not to hike its prices for the remainder of 1977. . . . Industrial, rough, which makes up the large majority of Syndicate goods, will increase maybe 2 to 3 per cent; on the other hand gem rough will soar 30 to 40 per cent higher Yet it will all come out to 17 percent. . . . The market is completely turned upside down." 253
January 1978. "Diamond prices head for the sky. . . . The mere fact that a 17 per cent De Beers price hike for diamond rough was to take effect on December 6th launched diamond prices upward nearly 10 per cent in November. But that was only the first stage. . . . Smaller sizes will be hardest hit, since world-wide demand is greatest for them. . . . Rumor has it that in December the Syndicate would release only one third of the amount of rough sold in October. . . . Larger stones also will take sharp upward price climbs. Such jumps will be fueled by a recent avalanche of investment buying. ... De Beers cancelled its sights of larger rough (5 carats and over) to U.S. dealers, a sign, perhaps, such goods are very scarce."
At this time, unopened boxes were making a 60 per cent premium and more.
February 1978. "Prices for 1 carat, D flawless stones catapulted out of sight." (See Figure 50). "By this time next year a lot of engage• ment rings may contain diamonds that always were considered industrial quality. . . As gem diamond rough prices climbed and the supply made available at the London sights grew smaller, some gem cutters -- especially in Israel and India -- began to buy up the industrial diamonds available on the world market." 4.10,000
45,ooo
$l,ooo
U F H A M 0 J A S 0 N t> 0 PHA M vj sj A S o ^ j J. F
j Figure 50
Median Price for 1 carat, D FL Diamonds i (Data from Jewelers' Circular-Keystone) ~
254 255
EVOLUTION OF THE PRICES PAID BY RETAILERS
Figures 50, 51 and 52 record the changes in median prices of three specific types of diamond as reported monthly
in the Jewelers' Circular-Keystone's Diamond Index., Figure 50, the median price for 1-carat D-colour flawless diamonds and
illustrates how the prices have, as the Jewelers' Circular-
Keystone for February put it, "catapulted out of sight." Figure
51 shows the increases for % carat VS^ G- to J-colour diamonds,
and Figure 52 for % carat Sn G- to J-colour stones. 256
$ 1,160
0 FMf\MJ J ASOND J F rl A ^ J J AS O H D J F - . W\ A°<\1
Figure 51 I
Median Price for 0.'50 carat, VS^ G-J Diamonds
'(Data from Jewelers' Circular-Keystone')
<
4 loo
A S O N TJ> J
m A<\U
Figure 52
Median Price for 0.25 carat S.^ G-J Diamonds
(Data from Jewelers '.Circular-Key stone) BIBLIOGRAPHY
, A. BOOKS
Bruton, Eric. Diamonds. London: N.A.G. Press Ltd., 1970.
Gemological Institute of America. Diamonds: Production, Marketing, Buying, Grading, Appraising. Los Angeles: Gemological Institute of America, 1976.
Lenzen, G. The History of Diamond Production and the Diamond Trade. London: Barrie § Jenkins Ltd., 1970.
Szenberg, Michael. The Economics of the Israel Diamond Industry. New York: Basic Books Inc., 1973.
Van Der Laan. The Sierra Leone Diamonds. London: Oxford University Press, 1965.
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Wilson, A. N. (Ed.). International Diamonds, Number Two. Johannesburg: Diamond Annual (Pty) Ltd., 1972.
Zucker, Benjamin. How to Invest in Gems. New York: Quad• rangle/The New York Times Book Co., 1976.
B. REPORTS AND BROCHURES
De Beers Consolidated Mines Ltd. Annual Report 1974. Kimberley: South Africa: De Beers Consolidated Mines Ltd., 1975.
De Beers Consolidated Mines Ltd. The Kimberley Diamonds. Johannesburg: De Beers Consolidated Mines Ltd., n.d.
257 258
Economist Intelligence Unit Ltd., The. Inflation Shelters: Precious Materials as Investments. London: The Econo• mist Intelligence Unit Ltd., 1976.
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"De Beers Profits Almost Double." Jewelers ' Circular-Keystone, November 1977, p. H.
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(Diamond Mines in Transvaal). Newsweek, November 23, 1970, p. 107.*
(Diamond Pipes). Chemistry, May 1973, p. 23.*
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(Diamond Prices Up). Journal of Commerce, December 23, 1968, p. 1.*
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"Diamond Sales Up." Jewelers1 Circular-Keystone, October 1976, p. F.
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"Diamonds From Russia With Love." Dun's Review, September 1973, p. 82 .
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(Diamond Situation in Venezuela). Atlantic, April 1971, p. 56.*
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"Diamonds: Siberian Gravy Train." The Economist, October 20, 1973, p. 121.
"Diamonds Up; Emeralds Down." Jewelers' Circular-Keystone, September 1977, p. A.
(Diamonds Up In Value). Vancouver Province, July 6, 1973, p. 12.*
"Double-Barrelled Diamond Promotions." Jewelers' Circular- Keystone, August 1977, p. 88.
(Editorial). Israel Diamonds, 47(August/October, 1977):5.
"The Fascinating World of Diamonds." Reader's Digest, October 1973, p. 237.
Federman, David. "Dealers Fight Gold and Costs." Jewelers' Circular-Keystone, March 1977, p. 70.
„ ' • "De Beers Stays Stingy With Rough." Jewelers ' Circular-Keystone, December 1977 , p. 30.
' ' . "Diamond Melee Up 55% in 12 Months." Jewelers' Circular Keystone, February 1978, p. 94.
. "Diamond Prices Head for the Sky." Jewelers' Circular-Keystone, January 1978, p. 141.
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______. "Market Changes Prompt New Diamond Price Index." Jewelers' Circular-Keystone, August 1977 , p. 92.
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. "Melee Prices Head for New Highs." Jewelers' Circular-Key stone, November 1977 , p. 74.
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' . "Signs Say De Beers Will Raise Prices Soon." Jewelers' Circular-Keystone, September 1977, p. 60.
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Gem Over I.B.M.?" Forbes, July 15, 1973, p. 58.
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______. (Company Statement) . The Economist, May 13, 1972, p. 117.
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