Investing in Argyle Pink Diamonds

This is the fourth article in the series about the Argyle diamonds. 

The first article introduced the Argyle diamonds.

The second part discussed Argyle diamonds history.

Pink diamonds Investment

Standing in the display room at Kununurra’s Kimberley Fine Diamonds, is an exhibit that represents the nearby Argyle Diamond Mine’s total annual production of rare pink diamonds.  Actually pink diamonds are so rare that they count for only one tenth of one per cent of the Argyle mine’s yearly production. In general, colored diamonds are so uncommon that for every 10,000 white diamonds mined, just one is naturally colored.

 

It is time to give diamonds as an investment some critical thought. 

In recognizing this simple truth, it is quite surprising that investors are not yet fully aware of the incredible opportunity colored diamonds present. More often, when investors think of assets the terms stocks, bonds, mutual funds and even gold come easily to mind: especially in the uncertain market of recent years. However, one investment that is growing in demand, yet is often over-looked, is diamonds: specifically rare natural colored diamonds. 

 

Why Invest in Fancy Colored Diamonds?

In 2008, the world experienced an economic crisis, stocks failed and entire nations went bankrupt. This led many investors to shift their attention to alternative, safe haven and portable investments: something easily observed in recent auction trends. 

Auction houses such as Christies and Sotheby’s have seen a steadily growing interest in specialty items such as unique art, rare wines, and not surprisingly, fancy color diamonds (FCD). In fact, FCDs have been consistently breaking record prices on yellow, blue, pink and other rare colored stones.  It would seem that as the economy fell into a slump, the demand for fancy color diamonds actually rose. 

As a result, Argyle pink diamonds are being purchased as investments at an increasing rate, which has helped to swell prices.

 

So, why did that happen?

The lesson of the recent economic downturn is not to put all of your eggs into one basket: none of us can afford to lose everything. While traditional assets present a fast turnaround there is a lot of risk involved.  However, if a portion of wealth is allocated elsewhere, that diversity may leave investors with something to hold on to…just in case stocks fail. 

It is even better when that allocation has the potential to surpass its buying price. Collectibles and portable assets such as FCDs provide this option; hence, the growing interest that over time promises high returns. Evidence of this can be seen in the soaring prices generated by the recent Rio Tinto 2012 Argyle Pink Diamonds Tender.

 

Why not just any diamonds? 

There is no denying that small white diamonds make beautiful engagement rings. Yet, as an asset, they loose ground when compared to the performance of Fancy Color Diamonds. Because Fancy Color Diamonds are increasingly rare, they do well at retaining their value: this makes FCDs extremely impressive as an investment option. 

The scarcest of all Fancy Colored Diamonds are red stones with only about 30 known pieces existing today. Red diamonds have a great track-record when it comes to performance at auction. 

• In 2001, Sotheby’s sold 0.70 oval Purplish Red for $178,777 per carat

• In 2005, the same auction house managed to sell another Purplish Red of 0.91 carat SI1 for $616,000 per carat. 

That is almost half a million dollar difference in 4 years!

Another very rare colored diamond that has performed well is the blue, which has also experienced big price increase over time. 

• In 1999, a round, 4.77 carat Deep Blue sold for $259,226 per carat at Christie’s. 

• In 2001, Phillips sold a 3.95 carat of old European cut Fancy Deep Blue diamond for $420,698 per carat. 

• In 2010, Christie’s auctioned a 2.88 carat of a heart-shaped Fancy Deep Blue for $579,000 per carat. 

As exciting as this is, it is only the tip of the iceberg. 

Today’s most watched for FCD at auction is the Pink Diamond. Not only is it the hot ticket item among serious diamond enthusiasts, it is the favorite of the fast growing Asian market. Furthermore, recent years have seen highly sought after Pink diamonds become the prized possessions of Nouveau Riche Indian and Chinese collectors. Still more have found a home in Japan: currently the most established market for pink diamonds. 

The Argyle Mine of Western Australia is to date the leading producer of the most spectacular pink diamonds worldwide. Indeed over 90% of today’s pink diamonds come from this mine: now famous for its Annual Pink diamond Tender. 

Although Argyle Mine owner, Rio Tinto does not disclose prices, it is speculated that together these rare diamonds have a value exceeding $65 million.  What Tinto does say is, “As a basic rule of thumb, a pink diamond is worth about 50 times more than a white diamond.”

 

What makes Argyle Pink Diamonds so elite? 

Perhaps the following comment made by chief commercial officer of Rio Tinto Diamonds, Jean-Marc Lieberherr, says it all. 

“These rare Argyle diamonds provide the escalating intrinsic value of an investment and are destined for the exclusive echelons of the world’s most sophisticated collectors.” 

Yet, there are more reasons:

1. Argyle’s unique pinks are more intense than most pink diamonds originating from other mines.

 

2. The high prices Argyle’s Annual Pink Tender commands.  The 2012 tender saw intense bidding for the 56 single pink diamonds (two reds) and 19 blue diamonds. Highlights of this event were:

a. The Argyle Siren, a 1.32-carat Purplish Pink diamond with square radiant cut 

b. The blue Argyle Elektra 

 

3. Supply and demand is the final reason Argyle diamonds are so special. 

c. Recent predictions state that the Argyle mine has a life expectancy of less than a decade. 

d. Experts believe that the mine will cease production by 2018. 

 

Thus far, no new mines with a comparable product exist. Regrettably, even if a new source of pink diamonds were found tomorrow, it will take at least 10 years to bring it to full production. 

 

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