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LUC - Lucara Diamond News Story

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Market Cap £185.8m
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Tennis ball-sized 'diamond in the rough' too big to sell

Mon 17th July, 2017 12:01pm
By Susan Taylor 
    TORONTO, July 17 (Reuters) - In the mysterious world of 
diamond mining, it turns out that some stones are too big to 
sell. 
    Canada's Lucara Diamond Corp  LUC.TO  will have to cut its 
tennis ball-sized rough diamond to find a buyer, industry 
insiders say, following Sotheby's failed auction for the world's 
largest uncut stone last summer. 
    It's not the ending that William Lamb wanted for his 
1,109-carat stone, named 'Lesedi La Rona', or 'Our Light' in the 
national language of Botswana where it was mined.  
    "It's only the second stone recovered in the history of 
humanity over 1,000 carats. Why would you want to polish it?," 
said Lucara's chief executive. 
    "The stone in the rough form contains untold potential...As 
soon as you polish it into one solution, everything else is 
gone." 
    Lamb had gambled that ultra-rich collectors, who buy and 
sell precious art works for record-breaking sums at auction, 
would do the same with a diamond in the raw.  
    The unprecedented bet failed. 
    Bidding for the 2.5 to 3 billion year old stone stalled at 
$61 million - short of the $70 million reserve. 
    "When is a diamond too big? I think we have found that when 
you go above 1,000 carats, it is too big - certainly from the 
aspect of analyzing the stones with the technology available," 
said Panmure Gordon mining analyst Kieron Hodgson. 
    "At the end of the day, it's about understanding what the 
stone can produce. And the industry now doesn't work on hunches 
as much as it used to 20-30 years ago." 
    An arcane business, the diamond industry has no spot market 
trading, no guarantee that 'roughs' will yield any value, and a 
punishing grading system that can dramatically swing values. 
    Stones in the hundreds of carats come with additional risk, 
from the multi-million-dollar price tags and cutting process 
that can take months or years, to capricious customer demand. 
    There is a "very, very small universe" of companies with the 
skill, money and network to polish and sell the Lesedi, which 
will likely take two to four days for the first laser cut, said 
Lamb. 
    But after Lucara's public auction, potential buyers now know 
what the market is willing to pay, said Edahn Golan, of Edahn 
Golan Diamond Research & Data. "Maybe it's worth waiting a 
couple of years," he said. 
    While Lucara does not need the money, investors may not have 
that patience. 
    Lamb said the unsold stone "weighs heavily" on the stock, 
which is down more than 30 percent from late last year. 
    To be sure, Lucara has seen other benefits from the stone, 
said independent diamond analyst Paul Zimnisky. 
    "There's the value of a particular diamond, but then there's 
also a story behind the second-largest rough diamond ever 
recovered in modern time," he said.  
    "Just from a publicity standpoint, nobody knew what Lucara 
Diamond was when they recovered that stone ... now they're 
probably one of the most recognized names." 
    Lamb, a former De Beers  AAL.L  executive, says it's 
unlikely Lucara can sell the stone for its desired price and 
polishing the Lesedi itself is risky. 
    Another option is for the Vancouver-based miner to partner 
with one or more companies to cut and sell the stone. "We've 
already done our homework," Lamb said. "You don't take a stone 
like this and give it to the second best." 
    Industry sources agree that high-profile British diamond 
dealer Laurence Graff makes the list of potential partners, but 
beyond that, opinions vary. 
    Lucara could work with a consortium, sources said, including 
Cora International, Diamcad, the so-called 'King of Diamonds' 
Lev Leviev, Mouawad, Tache Diamonds, Optimum Diamonds, the 
Angolan President's daughter Isobel dos Santos, Swissdiam 
International and Rare Diamond House (RDH).  
    It would be a mistake for Lucara to hold onto the Lesedi, 
said Oded Mansori, RDH managing director. "Maybe next week, 
there will be a larger stone."  
    New technology means miners like Gem Diamonds  GEMD.L , 
Lucapa Diamond  LOM.AX , Petra Diamonds  PDL.L  and Letseng 
Diamonds are unearthing more mega-stones intact rather than 
breaking the brittle crystals. 
    Lucara, which installed a Large Diamond Recovery machine, 
using X-ray transmission sensors (XRT), recovered the Lesedi, an 
813-carat and 374-carat stone over two days. 
    A Dubai trading company paid a record $63 million for 
Lucara's 813-carat 'Constellation', while Graff bought the 
374-carat stone for $17.5 million. 
    "Miners have more advanced technology, this is why we see 
these large stones coming up all of a sudden," said Mansori. "I 
think that Mother Nature has some more surprises waiting for 
us." 
    Lamb won't take that bet. 
    "Don't hold your breath. There's no guarantee that there's 
going to be a next one," he said. 
 
 (Reporting by Susan Taylor) 
 ((susan.taylor1@thomsonreuters.com; +1 416 941 8083; Reuters 
Messaging: susan.taylor1.thomsonreuters.com@reuters.net)) 
 
Keywords: LUCARA DIAMOND CUTTING/
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