Diamonds are Forever (Still!) – Investing in The Pink Diamond

25
Investing in The Pink Diamond
Diamonds are Forever (Still!) - Investing in The Pink Diamond

An old mate of mine recently got engaged.

Here’s something that might surprise you. He opted to give his love a synthetic diamond and paid handsomely for it.

Why did he go synthetic? For ethical reasons. Diamond mining can be a concern for the treatment of workers and the environmental impact of the mines.

Whether this is a new trend for the younger generation or just a fad…well, we’ll find out in the future.

The point I was making above was that synthetic diamonds are indeed flooding the market.

A big fear is that synthetic diamonds are going to crush the value of naturally mined diamonds…

Hmm. I invest in diamonds and think they’re worth your consideration, too.

That gives us lots to discuss today…

The idea of today’s Profit Watch stems from a subscriber’s email. He referenced to my last update on the beautiful pink diamonds I own.

If you missed the initial report, you can read it here.

This casual reader of ours is a retired gemmologist. He posed the concern that it’s hard to tell the difference between synthetic diamonds and natural ones.

Now, I’m not a gemmologist, nor a diamond specialist.

I first began researching diamonds in the early part of this decade. I guess I can say I know more than the average bloke.

Let’s make one thing super clear…

The DNA Structure of the Diamond is important

The Argyle diamond mine unearths 90% of the world’s pink diamond supply.

The Great Mining Collision

A huge ‘technological convergence’ is revolutionising mining operations all over the world. And a few key Australia-listed mining giants are playing a key role. Free report explains all. Plus, get a free subscription to Australia’s newest, most forward-looking daily investment email, Profit Watch. Enter your email address below and click ‘Send Me My FREE Report’.

We will collect and handle your personal information in accordance with our Privacy Policy. You can cancel your subscription at any time. Read our FAQ

The other 10% comes from Brazil, Africa and India. A small amount of Purplish Pink stones come from Canada and Russia.

Origin can play a major factor when it comes to pricing a diamond.

According to the Gemological Institute of America, you need to be aware of the stone’s DNA structure.

In short, there are two distinct DNA structures in coloured diamonds. The one you’re looking for is a Type 1a stone, which are found in Western Australia.

Let me explain this for you a little better and more in-depth.

A stone from Western Australia is perceived to have a DNA of Type 1a.

Type 1a diamonds from Western Australia tend to be smaller in size, have a lower clarity grade but have stronger and more intense colour saturation.

To the contrary…

Type 2a stones tend to have a weaker DNA structure. Though, despite the weaker structure, these stones are larger. But size isn’t everything…2a stones have a much lower colour saturation.

And when it comes to the Pinks, it’s the colour that really counts here.

And if you’re wondering what a type 1a or 2a diamond is and why this is significant…well, listen carefully…

Argyle Investments Australia told me that ‘the biggest difference between the two is that type 1a DNA stones do not change colour when exposed to sunlight. This is what makes them so rare and they also contain nitrogen.’

Type 2a are sometimes known as “chameleon” stones as the colour saturation changes under light. They are also nitrogen deficient.’

So yes…the two most important considerations before buying a natural diamond is where it was mined, along with the DNA structure.

With that in mind, let’s talk now about synthetics…

Is this a question of ethics?

What’s the problem with synthetic diamonds? Well, according to Brilliant Earth, absolutely nothing. Brilliant Earth design and sell ethically sourced engagement rings and jewellery.

They’ve suggested that ‘since they are made of the same material as natural diamonds, they exhibit the same optical and chemical properties.’

And because synthetic diamonds are not the same as diamond simulants — simulant diamonds are made from cubic zirconia or crystals — they make an excellent and ethical choice.

But that’s only for consumers, not investors!

This is where this debate begins to get blurry. But with the right rules, you won’t be fooled.

Let’s get one thing straight.

Natural diamonds and synthetic diamonds are diamonds. They are both comprised of carbon in cubic structure and they can’t be distinguished separately to the naked eye.

Those aren’t my words, either. What you just read was from Wuyi Wang, a lead researcher at the Gemological Institute of America.

The whole idea behind my investment thesis is that natural pink diamonds are going to be an excellent investment and a collectible.

But even these diamonds are now being recreated in labs, as our reader has pointed out above.

Let’s go back to the DNA structure of the diamonds. Like art and rare cars, nothing will triumph the original naturally minded stone.

You need to buy right

In fact, I think that even if more synthetics or man created diamonds are produced, it will put a higher premium on naturally mined diamonds.

That’s my belief anyway. I’ll use artwork as an example.

Here’s what Investopedia has to say on this matter…

A giclée is a machine-made print, a reproduction printed on fine paper or canvas with color and clarity that can rival the original. But it’s still a copy. The rarity of a work of art is what gives it value, so an original will always be worth more than a reproduction.’

Your takeaway…

The best way to protect yourself against a synthetic market is to ensure you get a diamond that has been inscribed directly by the Argyle mine.

Just so we’re clear, diamond inscribing is like an identification number for the diamond.

Argyle will inscribe all stones over 0.08 carats. So be on the lookout for them…

The second thing you can do is to get certification for your stone and ensure it is dated before synthetics flood the market.

Like all collectibles and art, it always pays to buy right.

Until next time,

Jonathan Evans Signature

Jonathan Evans,
Analyst, Profit Watch

How to find 2019's biggest stock market winners

Small-cap stocks are the most exciting stocks on the ASX. But they’re also the riskiest. In this free guide our small-stock expert, Callum Newman, reveals seven things he believes every investor should know before risking any money. Plus, get a free subscription to Australia’s newest, most forward-looking daily investment email, Profit Watch. Enter your email address below and click ‘Send Me My FREE Report’.

We will collect and handle your personal information in accordance with our Privacy Policy. You can cancel your subscription at any time. Read our FAQ