Personal Consultation
By Benji, Content ManagerTwo incredible rare diamonds have been revealed to the public, one a 12 ct Fancy Vivid Blue Internally Flawless diamond by Cora International dubbed “Blue Moon”, and the other a rare 8.41 ct Fancy Vivid Purple Pink by DeBeers.
Once in a Blue Moon
It feels like forever ago, although in fact it has only been six months, since Cora international won the auction set in South Africa by Petra Diamonds for the 29.62 ct rough blue diamond at $25.6 Million. Gemologists at Cora have spent these months and numerous attempts at carefully planning the polishing of the rough diamond, to which end they achieved a 12 ct Fancy Vivid Blue, the highest desired Blue diamond intensity and a very high Internally Flawless clarity. The company plans to have it reviewed by the Smithsonian, after which it will be displayed at the Natural History Museum of Los Angeles County, in the hopes that it will gain some value due to the display. It will be on display until early 2015, after which time the company will assess how to best extract value out of its investment.
A Challenge Ahead?
Cora is facing quite a challenge in trying to extract so much value out of the “Blue Moon” diamond. I would describe such an acquisition as more of a Passion Investment than anything else.
As a value investor, I am drawn to review this stunning diamond and compare it to its closest rival most recently sold at the auction I attended in May in Geneva. That pear shaped Blue diamond, the 13.22 ct, Fancy Vivid Blue, Flawless, was acquired by Harry Winston and renamed the “Winston Blue”. That blue diamond sold for $23.6 million, or about $1.78 million per carat, a world record for a blue diamond at an auction.
Taking into account that Cora paid the high sum of $25.6 million (and if we add the polishing and planning costs and all other costs, assuming a total cost of at least $26.5 million), the “Blue Moon” would have to sell for at least that price just to break even. This would come to the per carat price of $2.2 million, which would be quite difficult to justify based on the $1.78 million paid by Winston back in May. Also, a small but significant difference between the two diamonds is the fact that the Winston Blue is Flawless compared, to the lesser but still incredible Internally Flawless for the Cora “Blue Moon”, making it a less perfect stone.
A Rare Pink
It was revealed that in the upcoming Sotheby’s Hong Kong Magnificent Jewels and Jadeite auction on October 7th, a 8.41 ct Fancy Vivid Purple Pink Internally Flawless diamond will be up for auction, mined by DeBeers as a 19.54 ct rough diamond. It is believed that it will break world record prices for a pink diamond at auction.
I would like to take a more analytical approach and compare it to the closest possible stone, which was the 24.76 ct Fancy Intense Pink diamond that was purchased by Lawrence Graff in Geneva back in 2010 for which he paid a world record at the time of $46 million, or $1.86 million per carat. At this valuation, the DeBeers diamond would sell for $15.64 million which is at the high end of the estimates by Sotheby’s.
Pink Dreams
The world record for a pink diamond goes to the 5.00 ct sold in 2009 in Hong Kong for $10.8 million, or $2.16 million per carat.
Critics are also comparing the DeBeers pink diamond to The Orange, the 14.83 ct Fancy Vivid Orange diamond that sold last year for a whopping $35.5 Million, or $2.4 Million per carat, the highest price per carat ever paid for a fancy color diamond. At this value per carat, the DeBeers diamond would be worth just over $20.1 million.
Conclusion
As a professional Diamond investor, I must say that caution must be taken, as well as a certain degree of control over emotions. We must be able to acquire such beauties for a price that will have the potential to further increase over a long period of time. Only a part of our decision making can have the passion component to it.
We have seen a great deal of investors who acquire assets for real value for a long term potential (like Warren Buffet), where value is created over the long term. But we have also seen great Fund managers such as Steven Cohen return over 50% return in 1 year, but are also consistent over a long period of time. It is imperative to come to a balanced approach between the two when dealing with fancy color diamond investments.
