Graff Jewellers Purchases 493-Carat Letseng Legacy Diamond

Gem Diamonds and its partner, the Lesotho government sold the Letseng Legacy 493-carat diamond to Graff Jewelers for $10.4 million. This rough diamond, the 18th-largest diamond every found, was discovered September 7th at the Letseng-la-Terai Mine in the Kingdom of Lesotho. Graff’s production company, Safdico, acquired the Letseng Legacy diamond and will be responsible for cutting the stone in Antwerp.

Graff Jewellers was also successful a year ago when it purchased the Lesotho Promise 603-carat diamond for $12.4 million from the same diamond mining company. The Letseng diamond mine is famous for production of large, valuable diamonds.

Gem Diamonds recently announced that they are doubling the size of the Lesotho mining operations and expects to discover more large (over 100 carats) diamonds. Three of the twenty largest diamonds every found were discovered at the Letseng-la-Terai Mine.

The market is hot for large, expensive diamonds and the two-year-old Gems Diamonds Company has already made quite a name for itself with the Lesotho operations as well as mines in southern and central Africa and developing operations in Indonesia.

Aber Diamond Is Now Harry Winston Corporation

Aber Diamond Corp. changed its name to Harry Winston Diamond Corp. November 19. The company, trading on the New York Stock Exchange, is the largest publicly traded diamond company.

The company is a major player at both ends of the diamond supply chain. The mining operation, with revenues of about $400 million per year, owns 40 percent of the Diavik Diamond Mine in the Northwest Territories of Canada. This equates to roughly three percent of the world’s rough diamond production. At the other end of the diamond supply chain, the retail operation with annual revenues of about $300 million, owns 18 Harry Winston stores worldwide including New York, Beverly Hills, Paris, Tokyo, and Hong Kong. Plans are ongoing for new stores in Beijing and possibly Shanghai and Mumbai to take advantage of the two fastest-growing economies, China and India.

On first look, Harry Winston Diamond Corp. appears to cover the vertical spectrum in the diamond industry but the company still must outsource the cutting and polishing process that is required to transform the mined rough diamonds into the finished gems sold at the retail level.

With the rapidly growing demand for diamonds and the decreasing production from many of the larger, older mines, the quest for diamond mines is very dynamic. There are many mining companies investing in new exploration and enhanced production techniques in older mines. Diamond mines have become a scarce and valuable resource drawing the attention of big dollars. Since developing new diamond-producing mines is a long, expensive process, growth for the Harry Winston mining operation will most likely come from acquisitions of producing facilities or mines close to production. The most likely scenario for growth would be purchasing the other 60 percent interest in the Diavik Diamond Mine, currently owned by Rio Tinto.

Beware of Jeweler's Lifetime Guarantee

Hardly a day goes by that some client asks us if we have a lifetime guarantee. We immediately know they have been pitched the lifetime guarantee gimmick at some jewelry store. We ask them what kind of guarantee and the answer always has something to do with getting their jewelry item every six months and the jeweler providing fee cleaning but gets a little fuzzy about what the guarantee actually provides. They think it protects them against loss and damage but they are not sure on the specifics.

Of all the shoppers who have mentioned a lifetime guarantee, not one had the guarantee in writing.

The jeweler’s requirement that every item be inspected every 6 months gets customers into the store on a regular basis with the hope they will purchase something else. It is also common for these regular inspections to discover a mounting needs replacement, repair, or an upgrade, at the consumer’s expense. If the consumer has his or her jewelry maintained or repaired by anyone other than the jeweler, the action voids the warranty. This marketing gimmick keeps the customer not only coming back on a regular schedule to the jeweler; it keeps them out of other stores.

The danger with these lifetime guarantees is that shoppers assume they are covered for all problems and therefore do not purchase jewelry insurance. The fine print in most of these guarantees stipulates the warranty does not apply to lost, stolen or abused merchandise, but who ever sees the fine print.

We found one guarantee with the following wording:

Your diamond is warranted against loss from the original mounting for the lifetime of the purchaser, providing it is examined at least every six months by a (jeweler’s name) authorized inspector and documented on this certificate. This warranty covers only loss, which is incurred through normal wear, and any unusual damage or accidental mishap will nullify this protection. Prongs must be intact and not separated, and any necessary repairs found during inspection must be made by (jeweler’s name) at the consumer’s expense. In the event of loss, (jeweler’s name) will replace your diamond with another of equal value. ($5,000 maximum merchandise liability)

Take a close look at this warranty from the consumer’s perspective.

• The consumer must pay for regular maintenance found at the six-month inspections or they void the warranty. The jeweler decides what is required, even if it is new mounting, or they can void the warranty.
• The jeweler defines “normal wear” so any “unusual” wear voids the warranty.
• An accident voids the warranty so any event the consumer did not intend to do will void the warranty. Can you think of what could happen to damage an item of jewelry that does not include “unusual damage or accidental mishap?”
• If the prongs are not intact or are separated (bent), the warranty is not valid. The real question is how can the diamond be lost if the prongs are intact and not bent? The language of the warranty excludes everything that could happen to cause the loss of the diamond if the prongs have to be intact and unbent.
• The warranty implicitly excludes loss, theft, or damage, which are covered by jewelry insurance.
• It is obvious that the lifetime warranty is a valuable marketing gimmick for the jeweler, but what value is this warranty to the consumer?

In other words, the only thing they “might” cover is the jeweler’s negligence. Jewelry insurance covers all the things that typically happen to jewelry (loss, theft or damage) and the jeweler’s “warranty” covers none of it. The biggest loser is the shopper who does not get insurance because they believed they were covered by the guarantee. They are in for a rude awakening if anything ever happens to their jewelry item.

Remember Jewelry Insurance for Holiday Gifts

As the holidays approach and shoppers are busy picking up special gifts, it is time to give some attention to making sure you have adequate insurance for your personal valuables. Most items you purchase are receive a gift are covered as personal property under your homeowners or renters insurance. Therefore, your new flat screen TV, iPod, computer, golf clubs, sofa, or lamp is probably covered if your house or apartment is insured.

However, some articles (jewelry, coins, stamps, furs, firearms, and silver flatware for example) have limits to their coverage. Since my business is diamonds, I will focus on the jewelry category.

Most homeowners’ policies have a limit of $1500 to $2500 for jewelry per event. That means if someone breaks into your home and steals all of your jewelry, you only get the $1500 to $2500 limit of your policy. While most policies cover damage and theft, many policies do not cover accidental loss so if you lose your engagement diamond ring you might be getting nothing.

To adequately protect your jewelry items, you need to add a special rider to your standard policy. This rider, also called a schedule, typically required to provide a record of value that schedules the item’s coverage limit. For jewelry, an insurance appraisal is often required to accurately describe and value the scheduled item. Unlike most other property insurance, the scheduled property rider generally does not have a deductible. The scheduled rider provides coverage for loss, damage, and theft.

Unlike your sofa, whose value automatically inflates each year with most replacement types of homeowners’ policies, the scheduled property rider for jewelry limit of coverage stays at the value listed on the insurance appraisal. That means that if the value of your jewelry appreciates over time, the cost to replace your jewelry in the future could be substantially more than what you paid. Make sure your insurance coverage keeps up with the replacement value of your jewelry. Most insurance companies recommend updating jewelry insurance appraisals every 3 to 4 years.

The price of jewelry insurance varies by insurance company, value of the jewelry item, and geographic location but typically runs in the 1 to 2 percent of value range for annual premiums. We are amazed at the number of clients who do not get jewelry insurance, thinking they will save a few dollars in premiums. When something happens to their valuable diamond ring, they learn the meaning of “penny wise, pound foolish” the hard way.

Gold and Platinum Prices Expected to Increase

Gold prices have increased nearly 20% this year and were at an all-time high last week of $989.30 an ounce. Investors seem to be reluctant to push the price over the $1000 an ounce barrier but industry experts predict the price to push past $1,100 an ounce sometime this year. The price increases are being driven by a weak US dollar and escalating inflation fears. Commodities markets are bullish on gold and hedge funds have increased buying the precious metal, driving the price up.

Platinum hit record high prices Monday and then again on Tuesday (March 4) as it hit $2,275 an ounce. The increase in platinum prices is also pulling up palladium prices to a 6 1/2-year high of $588 an ounce. Platinum’s price increase appears to be more supply and demand oriented. Its use in jewelry and auto catalysts to clean exhaust fumes increases and supplies were disrupted by mining problems.

In the retail jewelry market, the record gold and platinum prices will likely result in a focus on lighter gold pieces and alternative metals like steel and silver.