Local Economist, Keith Jefferies, views government’s move to be given first option to buy diamonds, uncovered in the country’s soil, that are unusually large or have special features to be fine in principal but suspects, in practice, that it may not be used very much.
This amendment refers to the Precious and Semi-Precious Stones Act which contains a new clause that compels any producer that comes into possession of an unusual rough or uncut diamond to notify the minister of mines within 30 days, following which the government shall have the right of first refusal to the stone. According to the draft bill, “The price to be paid by government for a rough or uncut precious stone offered for sale by the producer shall be agreed between the parties in accordance with the current market price of the rough or uncut precious stone.”
“Government will probably find it too expensive to buy,” said Jefferies. He supported his view by referencing that special stones tend to fetch a premium in the market. This means, he says, that government would have to raise the money which will probably result in the purchases to be less frequent. He mentioned the suggestion, which since the announcement of amendment has been considered, of government setting up a museum to showcase the unusual stones but dismissed it on the basis of its relevance. Jefferies then moved to consider another option which government could explore, of re-selling at a better price than it purchased the stone for, and opined that it is a “case that needs to be made.”
The protracted sale of “Lesedi La Rona,” the special stone that was unearthed two years ago by Lucara Diamond weighing 1,109 carats lends credence to Jefferies’ opinion that re-selling would have to be thoroughly examined. This is because the stone failed, at Sotheby’s auction in June 2016, to fetch a price which Lucara had expected which caused its sale to fall through. It was only last week that Lucara announced that the stone had been bought by Graff Diamonds at US$53 million (approximately P530 million), at US$47,777 per carat (approximately P4 777 700 million).
Lucara described the discovery of Lesedi La Rona as a defining event. Had this find happened when the amendment had already taken effect, the stone would have probably followed a different route. Lucara responded, to that effect, positively to the new clause in view that it allows both diamond producers and the country to achieve sustainable revenue at market prices for the sale of the country’s diamonds.
“We took our time to find a buyer who would take the diamond through its next stage of evolution. The price paid is also an improvement on the highest bid received at the Sotheby’s auction in June 2016. Graff Diamonds is now the owner of the Lesedi La Rona as well as the 373 carat diamond, purchased earlier this year, which formed part of the original stone,” commented William Lamb, President and CEO. The statement by Lamb is an admission of market indigestion to a price Lucara believed was worth the stone. This delayed sale process suggests that government, if it explores re-selling, may likely find it difficult to fetch a higher price than it bought the stones for.