The Fifth-Largest Diamond In History Was Just Discovered

Shares of Gem Diamonds surged +15% on Monday after the miner said it had unearthed one of the biggest diamonds in history. According to Bloomberg, Gem Diamonds Ltd. discovered a massive 910-carat diamond, about the “size of two golf balls” from the Letseng mine in Lesotho, the highest dollar per carat diamond mine in the world.

The diamond is the largest ever recovered from Letseng and is classified as a D color Type IIa diamond, which means it has very few impurities or nitrogen atoms. More importantly, the diamond is the fifth-biggest ever found.

“Assuming that there are no large inclusions running through the diamond, we initially estimate a sale of $40m,” said Richard Knights at Liberum, citing the 1,109-carat Lesedi la Rona discovered in 2015, and it sold for $53 million.

“This would imply a $43m price tag for the Letseng diamond, but we place large caveats on this estimation, given that the pricing is rarely linear,” he added.

Clifford Elphick, Gem Diamonds’ Chief Executive Officer, commented in Monday’s press release:

Since Gem Diamonds acquired Letseng in 2006, the mine has produced some of the world’s most remarkable diamonds, including the 603 carat Lesotho Promise, however, this exceptional top quality diamond is the largest to be mined to date and highlights the unsurpassed quality of the Letseng mine. This is a landmark recovery for all of Gem Diamonds’ stakeholders, including our employees, shareholders and the Government of Lesotho, our partner in the Letseng mine.

The Letseng mine resides in the kingdom of Lesotho, located inside South Africa, and at an elevation of 10,000 feet, it is the world’s highest mine. Perhaps, there is a correlation between the elevation and diamond size and quality since Letseng is famous for its high-quality diamonds.

The company’s official press release on Monday gave very little information surrounding the value of the diamond, or if there was even a buyer.

Its value will be determined by the size and quality of the polished stones that can be cut from it. Lucara Diamond Corp. sold a 1,109-carat diamond for $53 million last year, but got a record $63 million for a smaller 813-carat stone it found at the same time in 2015.

Shares of Gem, which list in London, advanced 14.25%, valuing the company around £126.59M. Since 2012, a lack of significant discoveries coupled with deteriorating financials has declined London shares more than -78%. Monday’s press release of the discovery could bolster the company’s cash position upon the sale of the diamond.

“The successful sale of this stone will be supportive for Gem’s balance sheet and push the company into a free cash flow positive position this year,” said Richard Hatch of RBC Capital Markets.

Last week, the company recovered 117-carat and 110-carat rocks from its mine. The three significant discoveries back-to-back could be an upward turn for the company and allow investors to ‘b-t-f-d’.

Here are some diamonds recovered by Gem include:

• 2006 – Lesotho Promise (603 carat)
• 2007 – Lesotho Legacy (493 carat)
• 2008 – Leseli La Letseng (478 carat)
• 2011 – Letseng Star (550 carat)
• 2014 – Yellow (299 carat)
• 2015 – Letseng Destiny (314 carat)
• 2015 – Letseng Dynasty (357 carat)
• 2018-  Letseng (910 carat)

Bloomberg identifies the world’s largest diamond finds:

The biggest diamond discovered is the 3,106-carat Cullinan, found near Pretoria, in South Africa, in 1905. It was cut to form the Great Star of Africa and the Lesser Star of Africa, which are set in the Crown Jewels of Britain. Lucara’s 1,109-carat Lesedi La Rona is the second-biggest, with the 995-carat Excelsior and 969-carat Star of Sierra Leone the third- and fourth-largest.  

Weaker demand for diamonds, coupled with a growing supply glut, has pushed the IDEX diamond index lower and lower. With the industry in free-fall, has Gem with its monstrous 910-carat rock produced an artificial bottom or is this a head fake?