In June, before the eyes of the whole world, Lucara Diamond Corp’s 1,109-carat Lesedi la Rona, the largest diamond recovered in a century and Botswana’s pride, failed to sell at auction. The failure, it has since been revealed, was the result of industry sabotage. With fresh viewings set for September, Lucara President, William Lamb, pulls Staff Writer, MBONGENI MGUNI, into his confidence on the plan to outfox the hounds
“We would not go back to auction; there’s a lot more we need to do on that side in terms of maturity where people will start to appreciate it. “We will not even put it out on tender because the market has had the opportunity to see the stone. “It will be by private sale, but there are certain people that are on our blacklist for now,” William Lamb, Lucara’s CEO and director said.
In the aftermath of the failed June sale of Lesedi la Rona, Lamb and his brains trust have returned to the drawing table on how to extract maximum value from the historic stone.
Part of that plan includes excluding certain buyers who Lucara believes were involved in a plot to sabotage Lesedi la Rona’s sale by putting out negative signals into the market and depressing bidding at the auction.
“As I live, those companies will never buy that stone.” The story around the stone began when the giant stone was pulled out of the sands of the Boteti sub-district last November. Approximately the size of a tennis ball, the 1,109-carat stone triggered global astonishment and awe for its sheer mass, clarity and rarity, being the largest since the 3,106-carat Cullinan Diamond discovered near Pretoria in 1905.
Lucara Diamond Corp, the Canadian miner responsible for the find, quickly set about strategising how to retrieve value for the stone. An auction sale was chosen and the giant stone was taken on a global tour through glittering cities such as Hong Kong, Singapore, Dubai, New York and Geneva, amidst frenzied media coverage.
Lucara chose legendary auctioneers’ Sotheby’s of London to conduct the auction and on June 29, a roomful of potential buyers waited anxiously for bidding to start. A historic event, the auction was livestreamed across the world and all eyes, particularly those of ordinary Batswana, were on Lesedi la Rona.
Lesedi la Rona failed to sell after the highest bid failed to meet the reserve price and the analysis began. Perhaps it was the prevailing market, Brexit, the room did not have the right people, or the stone was simply overpriced.
Lamb says unbeknownst to the livestreamers, there was a sinister undercurrent in the auction room that day, a plan that had been set in motion in the lead up to the sale, specifically to push down Lesedi la Rona’s price. Prior to the auction, it had been estimated the diamond would fetch at least $80 million and it was insured for $120 million.
The auction room had two types of buyers; wealthy private investors interested in the diamond as a personal asset and traders, or middlemen interested in the diamond to cut and polish it for jewellery. Of these two, the traders were more sophisticated and understood the value of the diamond. The investors waited to take their cue from them.
“If the private person wanted to understand the value, they would see it from the trade bidding. When we started and got to $50 million, we should have seen bidding very quickly rising up and that intensity would have helped the private buyers understand the value of the diamond.
“That was missing.”
According to Lamb, the traders not only plotted in advance
“Two weeks before, the traders began talking Lesedi la Rona down. They were saying buyers would only get a 25% yield from the stone, which was not true; even Sotheby’s expected between 30% and 40%.
“If you did not want the stone to be bought by the private investors, then that’s what you would do. They did not like the public auction as they said they would have to pay Sotheby’s also.
“They did not like the public nature of the auction, with their names up in lights.”
That a plot had been woven to ensnare Lesedi became clear in the aftermath of the auction.
“When the hammer went down, three people from the trade came so close to me that I could smell what they had for lunch. They said we needed to talk in the next few weeks and I thought ‘why didn’t you put up your paddle’?
“Within 40 seconds, I had someone ask me for a private meeting. Someone else approached three people close to our company and their efforts were to try to push the price down.”
A stone that by some estimates, had been exposed to two billion people in the world, was suddenly out of sorts, with Lucara eager to restrategise around extracting its value.
Lamb says the starting point is to have Lesedi la Rona properly analysed to truly understand its value.
“Because everyone keeps saying this is what the stone contains, we have to actually get it properly analysed, which is something that rough diamond miners don’t usually do because it takes away the illusion of the stone.
“But to truly understand its value, an analysis is next on our list.” There are also plans to have the stone monographed as a way of selling the polished outcome. Lucara will be foregoing the auction or tender route and will instead opt for a private sale leveraging on its database of wealthy individuals.
A proper valuation and the private sale, with certain buyers blacklisted, will by-pass efforts to manipulate the diamond’s value.
The private sale is in line with Lamb’s desire to see the stone sold and kept as a rough diamond for historic purposes, rather than being broken and polished after sale. “This is historic. Before November last year, no one alive had seen a stone of that size before and there should be a historical premium for keeping it rough, even though the market did not see it that way.
“I don’t think the stone should be polished as it is unique. However, my job is to look after my shareholders and if they feel getting into a partnership where we benefit from the stone being polished is the way, that’s another opportunity for us.”
Lamb says emailed enquiries are being received everyday for the stone and the desire to buy it has not diminished. With the first three private viewings of the stone set for the first week of next month in London, the CEO is hoping buyers understand the piece of history and value on offer.