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Diamond trade gets ready for face-off: Are synthetics `real'?

Pratap Ravindran

Pune , Aug. 6

SYNTHETIC diamonds are so tacky, right? You wouldn't, for instance, want to give your fiancée a synthetic diamond, would you? Wrong. And wrong again.

Last year, a well-known diamond wholesaler in Mumbai bought a batch of synthetic diamonds worth about $35,000 from Gemesis and flogged the whole bunch at a 10-20 per cent profit... without telling the buyers that they were picking up research stones.

The wholesaler gleefully told a journalist - Ms Joshua Davis, Contributing Editor with Wired magazine who first broke the story on the changes in the industry - that his customers didn't know that the stones were synthetic and that they didn't care one way or the other anyway.

You might well have been one among those who bought these stones. And you wouldn't have found them tacky at all because Gemesis products are not cubic zirconium but synthetic diamonds that are still diamonds, physically and chemically.

The trade being what it is, nobody knows for certain how many of these gem-quality, multi-carat synthetic stones are being sold in India and other countries as natural diamonds.

But there are enough of them going around the markets to make De Beers Diamond Trading Company, the London-based cartel that has monopolised the diamond business for 115 years, push the panic button.

The fact of the matter is that the De Beers monopoly today faces an unprecedented challenge from two American startups that threaten to change the $7-billion diamond industry with their range of inexpensive, mass-produced gems.

Gemesis, located near Sarasota, Florida, uses a technology based on one deployed in Russia to grow diamonds.

The company is headed by retired Army Brigadier-General, Mr Carter Clarke, who learned of the technology during a 1995 business trip to Moscow and then developed it to make it commercially viable.

Gemesis has 27 diamond-making machines running at its Florida facility and plans to have 250 in operation soon.

Another company in the reckoning, the Boston-area Apollo Diamond, founded by Mr Robert Linares, a reputed researcher in advanced materials, along with his son, Mr Robert, uses what is known as the chemical-vapour disposition (CVD) technique to manufacture diamonds.

With this technique, a diamond crystal is formed when a plasma cloud of carbon is deposited onto diamond wafers. The wafer seeds grow into small diamond bricks, rough diamonds that are sliced into wafers and then cut and polished into diamonds. When the bricks are cut and polished, they are said to be indistinguishable from natural diamonds.

Mr Robert Linares is known by his company, Spectrum Technology, which pioneered the commercialisation of gallium arsenide wafers, the microchip substrate that succeeded silicon.

He built a hush-hush diamond research laboratory using the company's sales proceeds, and, in 1996, successfully worked out the combination of temperature, gas composition and pressure that would cause the formation of a single crystal. He holds the US patent for the technique, which he is now using to create flawless synthetic diamonds.

Both the companies' products are bigger, better and brighter than earlier synthetic stones.

Gemesis is already selling its fancy yellow synthetic diamonds through retail jewellers at a recommended retail price of $3,250 per carat, significantly lower than the price of natural yellow diamonds.

Apollo reckons that it will be able to sell synthetic diamonds at prices 30 per cent less than those charged for "naturals". Neither company, as of now, is selling colourless diamonds through retail stores.

What, then, is to become of De Beers, 45 per cent of which is owned by Anglo American Plc and the rest by South Africa's Oppenheimer family and the Botswana Government and which controls roughly 60 per cent of the world's diamond supply?

As it turns out, De Beers, in anticipation of the arrival of mass-produced gem-quality synthetic diamonds, has put in place the so-called Gem Defensive Programme under which it supplies gemmological labs around the world, free of charge, with machines to help them distinguish man-made from mined stones. The testing machines are known as DiamondSure and DiamondView.

Gem labs, which were earlier required to analyse and certify the colour, clarity, and size of diamonds, now have to distinguish between man-made and mined ones.

The DiamondSure shines light through a stone and analyses its refractory characteristics. If the results are "suspicious", it must be tested with the DiamondView, which uses ultraviolet light to reveal the crystal's internal structure.

De Beers scientists had noted in 1996 when the company unveiled its plans to develop authentication devices.

"Ideally, the trade would like to have a simple instrument that could positively identify a diamond as natural or synthetic. Unfortunately, our research has led us to conclude that it is not feasible at this time to produce such an ideal instrument, inasmuch as synthetic diamonds are still diamonds physically and chemically."

As it happens, that's precisely what the Gemesis and Apollo Diamond people are saying too.

Given this situation, the outcome of the market face-off between the feisty start-ups and De Beers will depend upon whether the latter is able to persuade people about two propositions.

One, that "if people really love each other," then they will give each other "real diamonds". And, as De Beers loses no opportunity to point out, that a diamond created last week cannot possibly be a symbol of eternal love.

And the other that the real value of a diamond inheres in its rarity - there are just so many diamonds around. Actually, this proposition is not factually true: De Beers is known to have stockpiled an enormous amount of diamonds but controls supply tightly in order to keep alive the rarity myth.

As far as the first proposition goes, a Reuters report on the subject claimed that dealers in New York's 47th Street, home to more than 2,500 diamond shops and factories, dismissed the appeal of synthetic gems.

However, other media reports stressed the fact that the retail trade is enthusiastic about synthetic gems because, in the words of Apollo Chairman, Mr Robert Linares, they are "real" and meet every measure of diamonds - aesthetic, chemical, physical and optical.

Peeved by the turn of events, industry groups led by the Jewelers Vigilance Committee tried to get the Federal Trade Commission to force Gemesis to label its stones as "synthetic".

In a somewhat ambiguous ruling, the FTC said it would be "unfair or deceptive" to call a man-made diamond a "diamond".

However, it did not offer any opinion on the designation of these stones as "cultured" diamonds. And so, Gemesis is running with "cultured" diamonds.

In a display of pure chutzpah, Gemesis has come out with a marketing campaign to portray synthetics as superior to naturals. The sub-text is that buyers of cultured diamonds don't have to worry about supporting the trade in "blood diamonds" - diamonds sold illegally by African rebels to fund wars and revolutions.

Nor do they have to feel bad about doing business with a cartel which, over the years, has been accused of suborning Governments, exploiting mine workers, ruining the environment and violating anti-monopoly laws.

As for the second proposition, Mr Clarke gleefully points out that while the Gemesis output now may not equal that of even a small mine, things will change radically indeed when production is stepped up.

Price fixing case ends

DE Beers, the global diamond producer, recently agreed to plead guilty to criminal price fixing, thereby bringing to an end a case in the US that has spanned over a decade.

The case focused on the fixing of prices for industrial diamonds, and was brought after a three-year investigation that concluded in 1994.

General Electric was accused of conspiring with a subsidiary of De Beers to fix the prices for the diamonds in the early 1990s.

While the case against GE was eventually dismissed through lack of evidence, De Beers could not be prosecuted at the start because it argued that it was a foreign company and that it refused to recognise the jurisdiction of an American court.

However, with major changes under way in the diamond market, the company is said to be intent on re-entering the US market which is why, according to media reports, it was keen on getting the case out of the way.

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