Diamond miners feeling the synthetic squeeze

The first part of that comment in Hemingway's novel, The Sun Also Rises, could describe a recent run of poor results by diamond miners and the industry's one-time marketing guardian, De Beers.The second part, a sudden fall, could be what's brewing as laboratory-grown gems, which are diamond in every facet, win market share from their mined cousins.Last week's story in Mining Journal about falling diamond sales covered one side of the diamond industry, traditionally mined, cut and polished gems.Two weeks earlier, another side of the diamond industry was covered by the Bloomberg news service which reported strong sales by the Danish jewellery chain Pandora which is riding high on demand for lab-grown gems.Dismissed as cheap baubles for much of the past decade by diamond miners and the downstream processing industry, lab-grown diamonds are starting to capture a significant share of the diamond jewellery market.The shift can be seen in several ways with share prices a useful starting point for investors with Gem down 45% since the start of the year and Petra down 27%.Pandora, listed on the Copenhagen stock exchange, is up 42% with much of the rise credited by management to demand for lab-grown gems which have put sparkly jewellery within easy reach of poorer customers.The cut-price jeweller dropped mined diamonds from its offering two years ago saying that lab-grown gems had a lower carbon footprint and did not involve human rights abuses, claims which are arguable but which appeal to younger buyers.Demand has been so strong for lab-grown diamonds that Pandora has lifted its full year profit guidance by 5%.Exports of cut and polished gems from India, the world's major diamond processing country, are also showing the impact of lab-grown stones, rising from 1% of total shipments five years ago to 9% today.The threat of synthetic diamonds to the mining industry has been growing steadily but the latest developments point to sales of lab-grown gems moving closer to a "take-off" point with criticism of them not being real diamonds being washed by the price advantage.The consumer debate about whether to buy mined or lab-grown even reached the Ethicist column of the New York Times newspaper last week.A reader asked whether he could buy his fiancée an engagement ring containing a lab-grown diamond and tell her it was mined even though she wanted a "real diamond ring".The answer, from an ethics specialist, did not address the differences in the gems just whether it was advisable to start a long-term relationship by lying about the origin of a diamond.Just how tough conditions have become in the traditional mined diamond sector was reported last week by the Rapaport diamond news services."The RapNet diamond index for one-carat diamonds fell by 10.9% in the first seven months of the year, having declined by 10.7% in 2022," Rapaport said."The index is now 1.2% below its pre-Covid level record in January 2020 having wiped out gains made during the (post-Covid) recovery."The lab-grown diamond rush has been the focus of other recent reports covering the price-sensitive engagement ring sector where stones weighing one-to-two carats have fallen sharply, prompting a marketing response from De Beers.According to Bloomberg price reductions of up to 40% have been applied by De Beers to a category of rough stones called "select marketables", those measuring between two and four carats which can be cut to half that size for bridal rings, though they are not flawless.Early last month, De Beers reported a sixth successive decrease in sales in its "sights" process during which it offers parcels of gems to sightholders on a take-it or leave it basis.De Beers attributed the fall to "seasonal trends" with participants in the sales process continuing to take a cautious approach in light of economic challenges.The threat of lab-grown diamonds might also become a problem for Australian-listed Burgundy Diamond Mines which earlier this year bought Canada's original diamond mine, Ekati.The acquisition was described in Mining Journal earlier this year as facing a challenge from lab-grown gems (Diamond deal will test the gem business, MJ, July 10). That that could be the case as weakening diamond prices are depressing the company's share price which has fallen by 18% over the past month.Diamond miners can take some cheer from the De Beers defence of seasonable trends to explain weaker prices.They can also counter the Hemingway "going broke" analogy by referring critics to Mark Twain's famous quip about "the reports of my death have been greatly exaggerated".

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