Alternative Investments and Pink Diamonds

Tuesday, August 17, 2021, by Dr. Mariya Yesseleva-Pionka, PhD

There has always been a great allure to owning diamonds among investors worldwide. Investments in precious stones and gems fall under the category of alternative investments and collectables with a high-risk factor. Argyle mine has been well-known for supplying natural-coloured diamonds, including white, champagne, cognac, blue, violet, and extremely rare and highly-priced Argyle pink and red diamonds.

 

The Argyle Diamond Mine was established in 1983 in the East Kimberley region in Western Australia. Argyle mine quickly took leading positions and was classified as the largest diamond producer based on the volume in the world. Last year, in November 2020, the Argyle mine announced its closure after 37 years of production and delivering a staggering 865 million carats of rough diamonds. This announcement has made a significant impact on the world diamond market due to the fact that Argyle mine was supplying up to 90% of all pink diamonds. Due to the drastic reduction in supply, the anticipated increase in prices is expected to affect the world diamond market. The 2021 Argyle Pink Diamonds Tender is set to present to the world a final collection of extraordinary diamonds, and all the closing bids must be submitted by the 1st of September 2021.

 

There are many layers of certifications that have to be done to assess the precious stones. The price of each stone depends on many factors such as cut, clarity, shape and colour. Typically, darker shades of pink, which are close to purple, are very rare and, as such, have a much higher value. Once you have decided to purchase precious stones from an auction house or dealer, you have the right to insist on independent assessment. Generally, it is common that two different evaluations of stones will provide different prices. Precious stones and gems trading is typically conducted in illiquid markets with quite high sales commissions. There is a drastic difference in the retail and wholesale gemstones prices and quality. It is essential to follow the strategy of buying at a low wholesale price and selling at a higher retail price.  

 

Trading in precious stones presents many challenges due to the lack of stringent taxonomy in the quality standards. For any new investor, it is difficult to distinguish between different types of diamonds and, as a result, they try to seek an expert opinion of value based on the quality of the stone. There are many cases when inexperienced investors become involved in a scam and end up losing their money. Thus, it is vital for any investor to understand, research, and educate yourself about the potential risks associated with precious stones investing choices. For investment portfolio diversification, it is essential to keep in mind not to overexpose their investment position to high-risk investments and keep it to a lower level. Always have proper insurance in place for precious stones and keep in mind that the long-term strategy of owning your investment position might not work to your advantage, should the supply of rare stones, such as pink diamonds, increase due to the findings of new pink diamonds deposits.

Author

Dr Mariya Yesseleva-Pionka is Global Certificates Manager at ICSB, a Higher Degree by Research Supervisor at Excelsia College and Adjunct Academic at the University of Technology  Sydney, Australia. Dr Yesseleva-Pionka held teaching and senior academic management positions in Central Asia (Kazakhstan) and Australia. She specialised in general investments, personal and corporate superannuation investments while working for Westpac Banking Corporation and BT Financial Group in Australia. She was invited to join The Housing Connection, a not-for-profit organisation in Sydney, Australia as Treasurer and Board Member from November 2019. Her research interests include entrepreneurial finance, traditional and alternative ways to finance small and medium enterprises (SMEs), corporate finance, policies for the small business sector, innovation and SMEs, FinTechs and Blockchain. Dr Yesseleva-Pionka is the Associate Editor for the Journal of the International Council for Small Business (JICSB).