27 Oct

The Argyle Legend Lives On

We are almost into the final two months of 2023, with market volatility picking up again, geopolitical conflict a front-page news item again, and the twin challenges of higher inflation and higher interest rates continuing to spark investors to ask the most important question of all…

What should I do with my portfolio?

Given the broader economic and financial market backdrop, combined with the unique supply and demand fundamentals underpinning the pink diamond market, we believe that this niche asset class remains a go-to solution for at least a portion of any portfolio.

This week, we are delighted to share some news from the pink diamond industry itself which highlights the enduring legacy of these assets, and why their investment potential remains undiminished.

The Argyle Legend Lives On!

The pink diamond industry was abuzz this week with news that Rio Tinto are taking a never before seen collection of precious stones to market via a new tender-style event, to be known as The Beyond Rare Tender.

The collection itself, titled the ‘Art Series’, consists of 48 lots of polished diamonds which include the remaining pink and red diamonds sourced from the Argyle Mine prior to its closure, as well as some large yellow diamonds sourced from Rio Tinto’s Diavik diamond mine, located in the Northwest Territories of Canada.

The inclusion of the yellow diamonds is a nice touch in our view, with Patrick Coppens, General Manager of Sales and Marketing for Rio Tinto’s Diamond Business noting that, “the inclusion in the inaugural Beyond Rare Tender of two Fancy Intense Yellow diamonds from Rio Tinto’s Diavik diamond mine, located beneath a frozen lake in the Barren Lands of Northern Canada, is a beautiful counterpoint to the pink and red Argyle diamonds from the remote East Kimberley region of Western Australia. Yellow diamonds make up less than one percent of Diavik’s production, a rarity in a diamond mine otherwise known for its highly coveted white diamond production.

The 48 lots will be showcased in Australia, including in Sydney, as well as Switzerland and Belgium.

In total there are 87 diamonds included in the Tender, with a combined weight of 29.96 carats. This is actually quite small in terms of total weight, especially given the fact that it has been bolstered by the large yellow diamonds from Diavik. It’s a very strong indication of the fact that all but a few of Argyle’s pinks have already been sold into the market, and that there is precious little new supply coming to the market since the Argyle mine, which was responsible for supplying 90-95% of global pink diamond production, closed in late 2020.

This red Signature Tender diamond is nearly six times the size of the headline stone in the new Argyle Beyond Rare Tender.

Most of the series contains very small stones, albeit in top colours. The headline Fancy Red diamond included in the Tender is also in the collectible range in terms of size, weighing 0.14 of a carat. They pack a punch however, with APD’s business development manager Heidi Creech quoted as saying that these diamonds sell for “multimillion-dollars” per carat.

We are excited to see this initiative launched by Rio Tinto and look forward to seeing the results come through in due course, with bids for these stones closing on the 20th November.

If history is any guide, the news that this Tender generates will be beneficial for the industry, and for pink diamond owners everywhere, with prices for Argyle pinks across the board tending to increase after a Tender closes.

We expect that it will happen again this time around, especially given how fierce competition for these stones is likely to be, given how few stones Rio Tinto must have left in their inventory.

This feeling is echoed by Rio Tinto itself, with Patrick Coppens also noting that; “The market fundamentals that drive value appreciation for Argyle pink and red diamonds have never been stronger – a combination of severely constrained supply, with the closure of Argyle, and unwavering global demand for truly scarce gems.”

We couldn’t agree more.

Invest for the long-term

This week’s news reinforces the reasons why we have always spoken of pink diamonds as a long-term investment. When you invest in them, you are buying more than just a physically exquisite asset.

You are buying a piece of history, and one of nature’s finest works of art.

As such, while there can be time periods where liquidity places some limitations on turnover in the pink diamond market, like we are seeing today, and there can be long periods of calm where the pink diamond market gradually drifts higher without much fanfare, long-term investors who are willing to stay the course will continue to benefit from long-term outperformance, diversification benefits, and inflation protection qualities.

As always, we hope you’ve enjoyed this week’s edition of “In the Loupe” and we look forward to any questions or comments you may have.


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