Lucapa Diamond Co. has delivered an exceptional result from its first foray into a cutting & polishing partnership, marking a milestone for Lucapa’s move along the diamond value chain. value chain. The first stone they selected was a 36.20-carat rough diamond from the Mothae kimberlite mine in Lesotho, which was polished in Antwerp in partnership with a leading international diamantaire, yielding six D-color diamonds. The two largest of the polished diamonds were both graded as D Flawless by the Gemological Institute of America (GIA). The largest is the exceptional 8.88 carat pear-shaped diamond (pictured above. To see the rough-to-polished process, see phonto in annex).
Lucapa managing director Stephen Wetherall told the Diamond Loupe in a 2018 interview that the miner would be looking to partner with high-end diamantaires to polish some of the exceptional diamonds frequently recovered at its Lulo mine in Angola and Mothae mine in Lesotho. "There are two aspects as to why a miner would want to go that [polished] route," he told us, "to attract the highest value and to mitigate the risk we take in developing a mine." In yesterday's announcement, he confirmed, "This strategy was implemented to maximise the rough value of our diamond production ... and to access additional revenue streams for Lucapa and our mining partners into the future.” Following this first undertaking, Lucapa confirms that indeed, "The market value of the polished diamonds represents a significant increase over the rough stone." Under the partnership agreements, net profits from the sale of the polished diamonds are shared equally with the diamantaire.
Concerning the first rough stone of their new strategy, Mr. Wetherall told us that the "Polishing progressed relatively quickly once the solution was decided – the complete stone finished within 3 months. It could have been quicker but we wanted to finish two largest stones Flawless." He said the Lucapa was going to increase the rough allocation for polishing in due course, and the company will have more to tell the market about their Lulo partnership agreement "soon." Lucapa and its Lulo partners also look forward to soon announcing the first results from the cutting & polishing of Lulo production - made possible following the significant diamond sector reforms enacted by the Angolan Government in 2019.
When we spoke to the managing director back in 2018, he explained his thinking as follows: "We [Lucapa] take an enormous risk in trying to find a resource, in evaluating that resource and building a mine to extract value out of the ground. We then sell a stone to someone that only takes a risk at that point when they buy it. I am not saying the price is right or wrong, as they have to calculate their own risks in terms of manufacturing it, and whether they can move it. How long they will have to hold it in inventory, and so forth. But when you have very special product like we do at Lulo and Mothae, and you see what happens to those stones down the line and the value that is accreted on the jewelry and polished stones - it would be wrong of me not to assess whether we can recuperate some of that value for our projects. That is what we are trying to do."
"It is a win-win relationship," he added. "There is no arguing over the price of the rough and we share the reward, as well as the risk, from the final product. It is also a protective strategy. If you set a good reserve price on your diamonds and you understand the value of the product as polished, you can set a good strong rough price. If it is not achieved, don’t sell your diamond. Why sell it if you believe it has more value? Don’t sell it, but partner with someone on it."