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Synthetic diamonds likely to bridge natural gem shortfall

Bloomberg  |  Mumbai 

Synthetic diamonds may make up for a shortfall of small diamonds in the "near future'', a consultant for independent stockbroking company Hoodless Brennan said.
Diamonds, the hardest substance in the world, formed in primeval carbon rock structures known as kimberlites at least 150 km (93 miles) underground, and volcanic activity brought the gems closer to the surface. Synthetic diamonds are created in a laboratory environment that simulates this process and at a faster pace.
"A synthetic diamond is 40 per cent cheaper than a normal diamond,'' David Hargreaves, a gemstone consultant who has followed the diamond-mining industry for 25 years, said in an interview in London."The industry should be very concerned about this. Synthetic diamonds may not come out of the ground or the sea and are manufactured, but they are the real thing and will pass any test.''
Hoodless Brennan, founded in 1993, offers share-dealing services for private clients, investors and companies, according to its website. Hargreaves, a trained mining engineer and geologist, is a former head of mining research at stockbroker James Capel.
BHP Billiton and De Beers, the world's largest diamond company, have forecast production shortfalls because of a lack of deposits that can be mined. Hargreaves said the market for rough, or uncut diamonds, will be "tight'' for the next three years and demand may outpace output by up to as much as 10 million carats a year during that period.
At least three-quarters of annual rough-diamond production of 170 million carats is cut into stones smaller than 0.5 carat, Hargreaves said. "That is a lot of stones,'' he said. "If there is going to be a shortage of small stones, synthetic diamonds could fill the entire gap.'' About one million carats of synthetic diamonds may be sold "within the next two to three years'', as companies such as Sarasota-based Gemesis Corp step up production, Hargreaves said.
"The technique is fairly simple, so supply is infinite.'' John Teeling, founder and chairman of African Diamonds, a Dublin mining company in which De Beers has a stake, said synthetic diamonds probably aren't a threat to the rough-gem industry.
"If you meet a woman that you are going to spend the rest of your life with and have babies with, are you going to give her a diamond made in a lab in Pittsburgh or are you going to give her the real thing?'' he said at the Diamond Day conference in London today. "I'd be killed if I did that. It's like the choice between a Mercedes 500 and a Lada.''
The rough-diamond industry "is not going to stop'', the entry of synthetic diamonds into the market, Hargreaves said. "You can't stop technology.''
Rough, or uncut, diamonds don't trade on commodity exchanges. Instead, Johannesburg-based De Beers, which sells 60 per cent of the world's uncut gems, holds 10 sales a year, known as sights, to a select group of customers called sightholders from countries known for diamond cutting, including Belgium and Israel.
De Beers is 45 per cent owned by London-based Anglo American, the largest mining company in the world after Melbourne-based BHP.

First Published: Fri, March 09 2007. 00:00 IST
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