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Diamonds may be sparkling, but would you invest?

In a world where yields are tough to find, investors see themselves scrambling for new assets to include in their portfolio. But sometimes these come at a price. Such is the case with diamonds.

William Lamb, President & CEO at Lucara told CNBC Tuesday that if you are looking at investing in diamonds, the price point is generally going to be higher than $50,000.

"When we look at investment stones, we generally look at a price point of anywhere between $100,000-$250,000. Those diamonds, because of their rarity, have always appreciated in value so there is a price point in terms of where the investors will start to see the sustainable growth and the store of wealth which is what an investment diameter represents."

This however is contrary to the sale of rough diamonds that have been facing a tough time. Earlier in June, Ernie Blom, President of the World Federation of Diamond Bourses, described the diamonds industry as being battered by a "perfect storm" of problems ranging from decreased manufacturing profits to lack of liquidity in the markets and the general criticism around the diamond industry.


A model shows off the 1109 carat "Lesedi La Rona," the largest gem quality rough diamond discovered in over 100 years, during a sale preview at Sotheby's auction house in London, June 14, 2016.
Dylan Martinez | Reuters
A model shows off the 1109 carat "Lesedi La Rona," the largest gem quality rough diamond discovered in over 100 years, during a sale preview at Sotheby's auction house in London, June 14, 2016.

The week after Brexit, Lucara – a Canadian diamond exploration and mining company was offered $61 million for its tennis ball-sized diamond at Sotheby's but that wasn't enough to meet the $70 million reserve price threshold. The Lesedi La Rona was the largest diamond discovered in a hundred years and the second largest ever.

Lamb told CNBC that there were a number of challenges in this trade. " I think in terms of the exposure the stone got, we took it all over the world and if you look at our share price, every time we actually exposed the diamond to a potential set of investors we had a very positive reaction," Lamb explained.

He however describes part of the problem to be people's outlook towards the auction process. "Buyers did not like the auction process where the auction house would have a fee that would be on top of that $61 million."

Lamb also explained that both the polished and the rough diamond market haven't seen much increase in consumption.

"The U.S. will always be one of the largest consumers of polished diamond. In Asia, India is a growing market but we are not seeing growth there. There seems to be a glut in the amount of polished goods that is available and if you are not getting that moving, it is very easy to justify where we expect the rough diamond prices to go."


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