President of major Russian diamond mining group Alrosa has warned that the precious gem industry is suffering from a number of reputational risks as a growing number of "synthetic" or altered diamonds have entered the jewelry market.
President of the state-backed mining company, Andrey Zharkov, said the future health of the diamond industry relied on the value of "natural stones", which have increasingly been threatened recently by a flood of fake gems.
"We cannot be not concerned by the fact that unfortunately at present time there are growing occasions on the market when natural diamonds are mixed with synthetic diamonds, or when the stones are worked on for the purpose of their improvement," Zharkov said, speaking at the World Diamond Council meeting in Moscow late Tuesday.
"We see that one of our functions is to set apart synthetic and natural diamonds," he said, adding that Alrosa were conducting research to create effective ways to detect an regulate against the turnover of synthetic stones in the diamond industry.
Synthetic or man-made diamonds are grown in labs and sold in some retailers as cheaper alternatives to naturally mined stones. Synthetic gems are very difficult to distinguish from natural stones, so much so that De Beers, the biggest diamond producer in the world by revenue, said they had created their own gems in a laboratory earlier this year that are not for sale, but to help experts detect fakes.
"I am sure that all participants of our market realize collective responsibility for the market's further development, which priority should be the value of the natural stones. We all understand that the future of our industry depends on the development of effective distribution of the goods," Zharkov said.
Alrosa account for over 25 percent of global diamond production in terms of carats according to their own data and currently own and operate the largest diamond mine in the world according to data from Mining Global magazine.
"The Jubilee diamond mine in Russia is the epitome of producing mines. The site is estimated to contain more than 153 million carats of recoverable diamonds, including 51 million carats of probably underground reserves," according to Mining Global.
Demand for diamonds in China has slowed this year, data from diamond market information source Rapaport shows and De Beers is said to have lowered prices earlier this year on falling demand according to reports.
"Currently the diamond sector is trying to digest oversupply from 2014, but the move to go direct to consumers rather than through intermediaries is no doubt a concern to diamond traders. For now however, we hope for a strong Thanksgiving and Christmas period to re-invigorate the sector and help generate liquidity," mining and strategy analyst at Investec, Jeremy Wrathall said.