A new rough diamond trading system

[Garry H (Cut Nut)]

The current method that the vast majority of rough diamonds are traded on as invented by Barney Banarto and Cecil Rhodes in the 1890's in South Africa finally has a competitor. Maybe a perfect use for blockchain?
https://www.thediamondloupe.com/rou...ond-platform-not-lacking-ambition-holding-4th

and the nice video
https://www.lucaradiamond.com/clara/

 

[EncikG]

Thanks for the informative link.

Not sure if it’s the marketing hype, in reality does a rough actually change hands thru 10 wholesalers/ manufacturer before it finally gets cut?

Just wondering is this complementary to GIA’s traceability initiative or rather in competition with it.

 

[Garry H (Cut Nut)]

Thanks for the informative link.

Not sure if it’s the marketing hype, in reality does a rough actually change hands thru 10 wholesalers/ manufacturer before it finally gets cut? It 'could'. but that would be rare, but my guess would be that 10% of larger rough and especially complex heavily included rough may change hands. Perhaps Paul Slegers will come in and comment?

Just wondering is this complementary to GIA’s traceability initiative or rather in competition with it. I think this would be more efffective than what GIA are proposing. But remember these Clara guys are building a trading platform and the rough diamonds added to it may come from already traded diamonds with no proof of provenance.

 

[Serg]

• Benefits to Clara customers
  PRODUCERS
  
  • Maximum selling price achieved for every stone
  MANUFACTURERS/RETAILERS
  
  
  • Purchase of rough based on polished orders

Who does pay for Clara mistakes in Color and Clarity forecast ? again manufactures? It looks as one more way to increases rough price and reduces manufactures margin that does increase instability in whole pipeline more and more.

 

[Garry H (Cut Nut)]

• Benefits to Clara customers
  PRODUCERS
  • Maximum selling price achieved for every stone Every seller wants more, every buyer wants to pay less.
  MANUFACTURERS/RETAILERS
  
  • Purchase of rough based on polished orders

Who does pay for Clara mistakes in Color and Clarity forecast Mistakes can go both ways Sergey. And buyers will allow their own margin of error. ? again manufactures? It looks as one more way to increases rough price and reduces manufactures margin that does increase instability in whole pipeline more and more.

Given that manufacturers can buy the goods they want, not what they get in a box at a sight - there could be efficiencies.
I wonder at the amount of time and staff needed to buy the needs of a large business.
But mainly it seems to me this could be a more efficient way to trade off the unwanted goods in a sight box.

 

[Serg]

Given that manufacturers can buy the goods they want, not what they get in a box at a sight - there could be efficiencies.
I wonder at the amount of time and staff needed to buy the needs of a large business.
But mainly it seems to me this could be a more efficient way to trade off the unwanted goods in a sight box.

Lets consider simplest cutters wishes to receive mass break , for example 1ct RBC.
Depends from rough shape inclusions it is mainly possible for rough sizes 2.8ct-3.5ct( Stones, Shapes rough shapes)
current sight box has range of rough mass. from some of them 1ct RBC is possible for others are not possible. if price is same then a cutter will receive profit from 1st type rough and negative profit for others.
For big sight boxes it is possible reduce risk and control average margin . margin could be bigger or less depends from market situation bit it is well predictable .
now somebody( or Clara) will split big box in to smaller boxes :
1)1st sight box for 1ct-1.1ct
2) 2d sight box for 0.9-1ct
and increase price for 1st on 20%, but reduce price on just 10% to 2d box. right?( total price for all rough have to bigger, have not it?)

but due resonable level of sorting mistake( because crack and cavites plotting in Galaxy has error around 100 microns ) a cutter will not receive 1ct clean EX RBC from 1st Box( he will receive either 0.95ct or worse clarity or VG ) from 10-20% rough.
Will a Buyer of 1st box win anything from such sight splitting box? no
will a Buyer of 2d box win anything? no.

Low accuracy of color prediction will also increase the risk of cutters loss.

Will mining company win???

May be now I can add one more sample to my presentation from 2008 year( 10 years ago)
https://www.dropbox.com/s/jn75l55kqvn7m6l/2008 December India_25_12_2008_version3_2612.ppt?dl=0

 

[Garry H (Cut Nut)]

I do not think this is anything new Sergey.
I am not supporting Clara. I am interested in the concept.
https://www.opalauctions.com/auctions/rough-opal/ is also a risky business. I had a huge rough opal boulder left with me in the mid 1990's and a small sample chipped off about the size of a fist that I took to Tucson gem show to help the owner find a buyer. I have no idea how opal cutters gauge the value of their rough.
Sarine Galaxy is quick and less accurate than the technologies you have developed, and I see no reason why Clara would not want to enable your technologies too.

Anyone bidding on rough diamonds is like anyone at any auction.
They pays their money and they takes their chances.

 

[denverappraiser]

Efficient for whom?

A stone that will cut to a 1.10ct/I-2/M is not going to be a hot item. It never has been, and it probably never will be, but it has a market. It has a price. Mines produce them and companies sell them. Does it make any sense to pay Sarine to scan such a stone and sell it individually, even in an efficient way? I have my doubts, and I’ll be surprised if that happens. This is about empowering the sellers to RAISE the prices on specific stones, not really to improve overall efficiency. Sarine wins. Clara wins. Certain cutters who are looking for very specific things may win. That’s about it. I see it raising consumer prices on all but the bottom shelf goods.

What about smaller stones? Melee. Obviously individual scans and individual sales on stones that will cut to 0.01s isn’t part of this plan. So where’s the line? It doesn’t much matter and it isn't always the same. I mention it because this is already the case. Big, expensive rocks are already sold this way and have been for decades. This is just lowering the threshold a bit.

I too find it interesting, and it may turn out to importantly change the game by empowering some smaller companies, but it’s not as revolutionary as they’re suggesting.

 

[Karl_K]

One area where it might be interesting is cut to order.
If they provide the scans so one could preplan the rough to make sure your custom cut fits, it might increase the possibility to cut to order.
Since they are special order the cutter can charge a premium.

 

[denverappraiser]

The current method for higher end makers is to buy a big parcel, cherry pick out the ones that meet their personal specs, and sell the rest to someone else who then does the same. Not everyone is looking for the same things so everyone can end the day happy. At the end, someone just keeps and cuts what's left and they can aim for a price point. This leads to a lot of fingers in the deal and remarkably opaque pricing, but it works pretty well. As an example: If a dealer buys a bag full for $1M, picks out 4 stones that they like, and sells the remainder for $950k to someone else the next day, it’s easy enough for them to know how much they paid for what they got, but it’s impossible to look at the remainder and decide what it’s ‘worth’ without evaluating every stone. Really not even then. Did they get a deal on their 4 stones, or did they overpay? Did they get a markup on the remainder of that parcel? Both? That’s the inefficiency supposedly being solved. A parcel can pass through several sets of hands quite quickly with minor or even no changes, and it can get quite complicated to deconstruct. I have my doubts that this will really solve that, but it does minimize the above process so things move a little faster. More importantly, in my mind, is it puts a great deal of faith in Sarine. Perhaps more than is deserved. It'll be interesting to see as this develops.

 

[Garry H (Cut Nut)]

One area where it might be interesting is cut to order.
If they provide the scans so one could preplan the rough to make sure your custom cut fits, it might increase the possibility to cut to order.
Since they are special order the cutter can charge a premium.

Check out the link for the 2008 power point in Sergey's post Karl - it is exactly that - a plan to provide a custom cutting service.

 

[Paul-Antwerp]

When Sergey clarifies that miners historically are constantly depriving cutters from added margin, resulting from innovation, I am in agreement.

But it goes further than that. I see not only the cutters suffering, but also consumers being deprived, or at least actual consumer-demand not being served.

As far as I can see, there are two major concerns for a consumer when purchasing a diamond:
1. Budget needs to be met, as it is generally set, and cannot be stretched.
2. A consumer wants the diamond to sparkle, the more the better, as this is going to guarantee decades of joy, wearing the diamond or seeing the diamond being worn.

On the other side of the spectrum, miners desire to maximize the dollar-value of their output. In this, they are using the 4 C’s, with three of the four developed and detailed to the extreme:
- For Carat Weight, there are multiple size-breaks with dramatic price-changes if the weight can be pushed over the next hurdle.
- For Color, there are multiple color-grades with dramatic price-change for differences, very hard to observe.
- For Clarity, there are multiple clarity-grades, again with dramatic price-change for unperceivable differences, definitely to the naked eye.

In comparison, the C of Cut Quality, one of no concern to the miners as they do not produce it has long been completely neglected in the diamond-industry. Many retailers still present that C as shape. And with GIA finally issuing a cut-grade for round brilliants since 2006 (only!!!), the top-grade is extremely wide and contains various levels of cut-quality, easily visible with the naked eye.

As marketing of diamonds has been dominated by miners, we now have the situation that the entire diamond-industry down to the retail-level continues to present diamonds to consumers, in a way most favorable to the miners, generally not in line with underlying consumer-desires.

For comparison, consider how other gemstones are presented. Rubies, sapphires, emeralds do not have the following:
- Enormous price-differences for stones just reaching a size-bracket. Granted, so-called ‘native-cuts’ close to the mine tends to produce ‘heavy’ gemstones, but not to the extreme where a 1.00 is 25% more expensive than a 0.95.
- Prices can go extremely high for specific colors in these gemstones, but this is always based upon clearly observable differences.
- And in Clarity, there is little to no appreciation for gemstones being ‘cleaner’ beyond the eye-visible level. To the contrary, completely ‘clean’ gemstones tend to be less favored, as it becomes more difficult to ascertain the stone is not synthetic and/or treated.

To me, as long as we continue repeating the 4 C’s as the basis for a diamond’s value and/or price, we are serving the interests of the miners, and not the consumers. It is the constant repetition from our side of the 4 C’s, and the resulting brainwashing, which leads to consumers over-paying for a ‘mind-clean’ thing they essentially did not want, in the end benefiting the miners.

In this, I think that PS can play a positive role. We cannot completely ignore or detract the 4 C’s, unfortunately, but we can assist in reducing their importance, based upon the miners’ desires. It will help consumers satisfy their underlying desires more, while saving money (or at least spend their set budget in a better way).

Live long,

 

[Garry H (Cut Nut)]

When Sergey clarifies that miners historically are constantly depriving cutters from added margin, resulting from innovation, I am in agreement.

But it goes further than that. I see not only the cutters suffering, but also consumers being deprived, or at least actual consumer-demand not being served.

As far as I can see, there are two major concerns for a consumer when purchasing a diamond:
1. Budget needs to be met, as it is generally set, and cannot be stretched. I do not believe that
2. A consumer wants the diamond to sparkle, the more the better, as this is going to guarantee decades of joy, wearing the diamond or seeing the diamond being worn. I remember when James from JA posted many years ago that in his experience carat weight and size was very important to many shoppers. We know that weight and size are not the same thing, and that well cut diamonds look bigger than the same diameter bad cuts.
I think most people think all diamonds sparkle - and way less than half know that some can sparkle a lot more than others. Most think the difference is small. Hopefully the people with the biggest budgets are the ones that do the most research and find out - but that is hope - not born out from my 43 years of retail experience. But of course the best moment to teach someone these things is when they are about to buy (and my people do this).
John Pollard has spent a lot of time training retail sales people these differences. I am sure he will back me up that only a small % of salespeople even 'get it' let alone are competent in delivering the message.

On the other side of the spectrum, miners desire to maximize the dollar-value of their output. In this, they are using the 4 C’s, with three of the four developed and detailed to the extreme:
- For Carat Weight, there are multiple size-breaks with dramatic price-changes if the weight can be pushed over the next hurdle.
- For Color, there are multiple color-grades with dramatic price-change for differences, very hard to observe.
- For Clarity, there are multiple clarity-grades, again with dramatic price-change for unperceivable differences, definitely to the naked eye.

In comparison, the C of Cut Quality, one of no concern to the miners as they do not produce it has long been completely neglected in the diamond-industry. Many retailers still present that C as shape. And with GIA finally issuing a cut-grade for round brilliants since 2006 (only!!!), the top-grade is extremely wide and contains various levels of cut-quality, easily visible with the naked eye.

As marketing of diamonds has been dominated by miners, we now have the situation that the entire diamond-industry down to the retail-level continues to present diamonds to consumers, in a way most favorable to the miners, generally not in line with underlying consumer-desires. This is an excellent point. But the miners are backed up by the retailers and consumers mentioned above who simply don't care. A carat is a carat in so many minds. And carat weight is usually the only thing any consumer remembers about their diamonds 4C's

For comparison, consider how other gemstones are presented. Rubies, sapphires, emeralds do not have the following:
- Enormous price-differences for stones just reaching a size-bracket. Granted, so-called ‘native-cuts’ close to the mine tends to produce ‘heavy’ gemstones, but not to the extreme where a 1.00 is 25% more expensive than a 0.95.
- Prices can go extremely high for specific colors in these gemstones, but this is always based upon clearly observable differences.
- And in Clarity, there is little to no appreciation for gemstones being ‘cleaner’ beyond the eye-visible level. To the contrary, completely ‘clean’ gemstones tend to be less favored, as it becomes more difficult to ascertain the stone is not synthetic and/or treated.

To me, as long as we continue repeating the 4 C’s as the basis for a diamond’s value and/or price, we are serving the interests of the miners, and not the consumers. It is the constant repetition from our side of the 4 C’s, and the resulting brainwashing, which leads to consumers over-paying for a ‘mind-clean’ thing they essentially did not want, in the end benefiting the miners.

In this, I think that PS can play a positive role. We cannot completely ignore or detract the 4 C’s, unfortunately, but we can assist in reducing their importance, based upon the miners’ desires. It will help consumers satisfy their underlying desires more, while saving money (or at least spend their set budget in a better way).

Live long,

I do not want to seem like I am disagreeing with you Paul, I am interested in discussing and getting ideas on the table.
I do not believe we are going to change the 4C's and raise another topic - that since the advent of GIA (not the miners) inventing a standardised grading system followed by Martin Rapaport ascribing a price list that purports to represent the market trading prices - we have what we have.
There are no widely used coloured gemstone grading standards or pricing reports (unrelated- the GemGuide suggests unheated nice 1ct rubies are selling for 4 times heated stones! That blew me away and I wonder if the huge price difference is caused by the GemGuide or is it the market?).

 

[Serg]

There are price-lists( stock market price) for commodity products and there is not any pricelist for any luxury product.
Gold and gold alloys have pricelist, gold rings have not "pricelist". Gold ring price depends from material , design, brand , service .

Until diamonds are commodity product its will have a pricelist.
We need stop treat( produce, promote, sale) diamonds as commodity products then 4C and Rapaport pricelist will have much less influence to the industry.
Concept of Ideal Cut supports 4C, Rapaport pricelist business models( reference and discounts)
Variety of fancy cuts with optical performance greater than RBC performance will reduce 4C influence .

 

[Paul-Antwerp]

Hi Garry,

Not disagreeing either, just looking for what can be done.

I agree, the 'system' has long history and is omnipresent. But the sad reality that you and I probably cannot change or improve the 'system' should not keep us from discussing it, no?

On the specific C of Carat weight, I have seen you observe regularly that there is an over-supply of 1.0x versus an under-supply of 0.90-0.99. That is a direct result of the 'system' as it is, and it is in no way protecting consumers.

Yes, there are highly vested interests in grading labs and printers of pricing-lists, not to mention the mining-industry this time. And while they all together as a 'system' are too strong for us to change the system, we can and should (I think) question the system and educate the PS-readers, such that they will not be fooled by the 'system'.

To me, that would be the next step in the legacy of PS. A lot has changed because of almost 20 years of PS-education and information-sharing, but we can achieve still far more, together.

Live long,

 

[Garry H (Cut Nut)]

 

[Garry H (Cut Nut)]

This is what the natural distribution would look like if there was no swindling (in a perfect world).

 

[Paul-Antwerp]

Thank you for these charts, Garry. We are completely on the same page.

And I would add:

The red line would be close to the actual distribution of other gemstones (in shape).

Live long,

 

[OoohShiny]

There are price-lists( stock market price) for commodity products and there is not any pricelist for any luxury product.
Gold and gold alloys have pricelist, gold rings have not "pricelist". Gold ring price depends from material , design, brand , service .

Until diamonds are commodity product its will have a pricelist.
We need stop treat( produce, promote, sale) diamonds as commodity products then 4C and Rapaport pricelist will have much less influence to the industry.
Concept of Ideal Cut supports 4C, Rapaport pricelist business models( reference and discounts)
Variety of fancy cuts with optical performance greater than RBC performance will reduce 4C influence .

Hi Serg

I may be misunderstanding the discussion, but are we saying here that the diamond market needs to move from pricing based on the 4Cs (so fairly transparent, or at least understandable to the average purchaser) to pricing based on other aspects, including what a jeweler/supplier thinks they can get for a stone, disregarding (or minimising the influence of) the 4Cs?

I entirely understand and support the concept that the market needs to capture 'beauty' as a pricing criterion but, personally speaking, if doing that means moving away from the 4Cs (partly or entirely) it could risk making the industry a lot less transparent, which might reduce buyer confidence.

After all, if one is looking to buy from any given product market with no/minimal knowledge of current pricing trends and standard 'measurements of value', it does increase the risk that one will get a 'bad deal' or simply 'ripped off' (unfortunately ) so, for buyers like me, I would actively avoid purchasing from that market - I'm afraid that I don't trust some people not to rip me off given an opoportunity to do so!

We've all heard about dodgy 'wholesalers' selling crap stones for high prices to unsuspecting customers - how would this be avoided if there is no way to compare one vendor's offering to the wider market?

IMHO 'beauty' and any other similar criteria would have to sit alongside the 4Cs, in order to influence pricing but not be the-be-all-and-end-all?

 

[Serg]

Hi OoohShiny,
Does a buyer of gold ring to know gold purity ( Carats) ?
Yes, it is very important for him confidence .
Does gold mass define price of gold ring ? not always . in some countries most consumers buy gold jewelry with very simple design for almost stock market price. In other countries consumers pay more for design , brand . There are not global pricelist for gold jewelry. Does it reduce consumer confidence ?

Does price jump between IF and VVS1, D and E , 0.99ct and 1ct increase consumer confidence ?

Did you see a pricelist for Fancy color diamonds? for 3-5 ct Fancy intense , Fancy vivid yellow? for 0.5ct Fancy vivid blue, red ?
did you see pricelist for 10ct colorless diamonds?

Did you see pricelist for 5 doors Luxury sedan 3 litres engine ? Does it reduce your confidence for BMW< Mercedes , Lexus(Toyota), Rolls-Royce ?
But absence a direct communication between Producer and end consumer reduce consumer confidence .

 

[diagem]

When Sergey clarifies that miners historically are constantly depriving cutters from added margin, resulting from innovation, I am in agreement.

But it goes further than that. I see not only the cutters suffering, but also consumers being deprived, or at least actual consumer-demand not being served.

As far as I can see, there are two major concerns for a consumer when purchasing a diamond:
1. Budget needs to be met, as it is generally set, and cannot be stretched.
2. A consumer wants the diamond to sparkle, the more the better, as this is going to guarantee decades of joy, wearing the diamond or seeing the diamond being worn.

On the other side of the spectrum, miners desire to maximize the dollar-value of their output. In this, they are using the 4 C’s, with three of the four developed and detailed to the extreme:
- For Carat Weight, there are multiple size-breaks with dramatic price-changes if the weight can be pushed over the next hurdle.
- For Color, there are multiple color-grades with dramatic price-change for differences, very hard to observe.
- For Clarity, there are multiple clarity-grades, again with dramatic price-change for unperceivable differences, definitely to the naked eye.

In comparison, the C of Cut Quality, one of no concern to the miners as they do not produce it has long been completely neglected in the diamond-industry. Many retailers still present that C as shape. And with GIA finally issuing a cut-grade for round brilliants since 2006 (only!!!), the top-grade is extremely wide and contains various levels of cut-quality, easily visible with the naked eye.

As marketing of diamonds has been dominated by miners, we now have the situation that the entire diamond-industry down to the retail-level continues to present diamonds to consumers, in a way most favorable to the miners, generally not in line with underlying consumer-desires.

For comparison, consider how other gemstones are presented. Rubies, sapphires, emeralds do not have the following:
- Enormous price-differences for stones just reaching a size-bracket. Granted, so-called ‘native-cuts’ close to the mine tends to produce ‘heavy’ gemstones, but not to the extreme where a 1.00 is 25% more expensive than a 0.95.
- Prices can go extremely high for specific colors in these gemstones, but this is always based upon clearly observable differences.
- And in Clarity, there is little to no appreciation for gemstones being ‘cleaner’ beyond the eye-visible level. To the contrary, completely ‘clean’ gemstones tend to be less favored, as it becomes more difficult to ascertain the stone is not synthetic and/or treated.

To me, as long as we continue repeating the 4 C’s as the basis for a diamond’s value and/or price, we are serving the interests of the miners, and not the consumers. It is the constant repetition from our side of the 4 C’s, and the resulting brainwashing, which leads to consumers over-paying for a ‘mind-clean’ thing they essentially did not want, in the end benefiting the miners.

In this, I think that PS can play a positive role. We cannot completely ignore or detract the 4 C’s, unfortunately, but we can assist in reducing their importance, based upon the miners’ desires. It will help consumers satisfy their underlying desires more, while saving money (or at least spend their set budget in a better way).

Live long,

I am in full agreement with everything Paul has written above but wanted to add that miners are not the only ones to blame for the disparity of prices and other issues like innovations weighing in on the old marketing models of the 4C’s.

Another huge issue that is disrupting the whole chain of production (from mine to polished) are the financial institutions and the methods they are pushing on the rough dealers and manufacturers.

As most of you are aware but I will try to explain in a few short words...
There are two major supply models which are currently used by miners.

1) monthly allocations of rough assortments sold in bundles (e.g. monthly sight boxes) where such allocations are made of specific shape, size and quality ranges. As one example, a 2 to 4 carat sawable rough box which will yield a combination of 0.75 - 2.00 +/- carat polished sizes in a range of colors like D-I and SI1 - VVS clarities. There are quite a variety of such shape/weight/clarity combinations from smalls (melee) to specials (10.80 carat plus sizes).

2) approximately the same allocations but sold in an auction model called “tenders” where diamantaires have the option to view the goods beforehand and then submit their highest offer in order to win the said allocations. In such models usually the highest bids wins the lots. Production out of such models usually begin with very high costs and are naturally translated all the way down to the consumers.

Because the rough and manufacturing sector have been suffering from liquidity issues for a few good years now, the financial institutions have been forcing stringent financing models and are currently willing to finance “only” original untouched or un-opened rough allocations..., this translates to rough dealers and/or manufacturers will only get fully financed for rough boxes purchased as long as they are either manufactured or further sold “as one whole” (untouched or opened).

Because of this nature, most rough allocations are being manufactured by huge companies en-mass. The reason we keep seeing the same old over & over again.
It’s becoming harder and harder for small-medium manufacturers to be able to purchase the rough they require for their specialities, called selected purchases. Instead of opening or widening the supply potentials, most small-medium cutters are turning into recuting polished to their speciality cuts if economics allow.

So I for one am welcoming such news as Garry wrote on the first post of this thread, the Clara project. Maybe someone has finally seen the light , even though I must admit that I am still skeptical.

As a side note, I also fully agree with Sergey, even though diamonds are not a commodity IMO (as reflected by Rapaport’s many unsuccessful attempts for commoditization), the price-lists currently available and practiced in general are part of a primitive model which doesn’t help anyone but the miners and financial institutions, but this whole issue is for another post.