Focus:Small rock, big diamond

Like all mega-diamonds, the multimillion-dollar lump of perfect carbon that has just emerged from a mine in Lesotho, southern Africa, is not much to look at. Just a couple of inches long, it weighs 478 carats, which is just under 100 grams, or three and a bit ounces. The 20th largest diamond discovered in history, the find was announced on Monday, though the rock was unearthed on Sept 8 at Letseng, the same mine which has produced two other monsters in the past two years. Respectively the 17th and 18th largest diamonds in history, they weighed in at 603 and 493 carats.

The government of Lesotho, the minority shareholder in the mine, named the first the Lesotho Promise and the second the Letseng Legacy. The latest diamond - the Lesotho authorities have yet to exercise their naming rights - has been tucked away by Gem Diamonds, the mining company which has the majority share in Letseng, in a vault in an undisclosed location, probably in Antwerp, Belgium, the centre of the world diamond trade.

Because of its unremarkable size, one could easily mislay the stone, which would be annoying because even in its present state this rough diamond, awaiting cutting and polishing, is worth upwards of US$10 million (Dh36.7m). Depending on the advice of the cutting experts, the diamond could yield a single giant gem or a series of smaller stones, worth between $40m and $60m. If it became a single gem, the final product, says Gem Diamonds, could weigh up to 150 carats, which is 30 grams, or one ounce. Because of its existing structure it would be round and would be the largest such gem in the world.

For context, a forerunner is the Koh-i-Noor diamond, reputed to have been discovered 5,000 years ago in India and swathed in so much legend that it is priceless; also round and 105 carats, which until recently had been thought remarkable. It has been part of the British Crown Jewels since Queen Victoria became Empress of India in 1877. Clifford Elphick, the chief executive of Gem Diamonds, said: "Preliminary examination of this remarkable diamond indicates that it will yield a record-breaking polished stone of the very best colour and clarity."

Glenn Turner, 47, a director of the international company who is based in London, was even more enthusiastic: "It is absolutely top, top class. It is as good as you get. It is flawless." Stones like this one, said Mr Turner, explained why diamonds had entranced mankind over the centuries. To the Greeks they embodied strength. Plato thought diamonds were living spirits. The Romans called them "tears of the gods". Many have believed that diamonds possessed magical qualities, to heal or to bring great luck, or misery.

The likely buyer of the Lesotho diamond will be one of the world's elite jewellers, who have built multibillion-dollar empires based on their relationships with the super-rich. These include Britain's Laurence Graff, reportedly worth £1.5 billion (Dh 9.75bn) and the UK's 36th richest person. One of his aides said that Mr Graff, believed to be in his late 60s - he is famously coy about his age - would inspect the diamond personally in Antwerp before deciding whether to bid for it.

"He will know immediately if he wants it," said the aide. "He has seen so many fantastic diamonds over the years that he won't need any advice." Precedent suggests there will be a sealed-letter auction, with Graff Diamonds outbidding rivals. If that happens, Graff's experts will then spend months analysing the diamond, using computers and hi-tech scanners, similar to those used in medicine. Only when they are sure they have established the best and safest way to cut the stone will they actually touch it. It is likely to take a year, possibly longer, to transform the rough diamond into a magical gem or gems. In the process, it will lose much of its weight - probably around 70 per cent - during the cutting and polishing. Then it would be shipped to London for the company's designers to conceive a suitably gracious display form, such as a necklace.

There is a slim chance that the cutting of the Lesotho stone - which even with today's technology is risky, since a tiny miscalculation would wreck the diamond - could take place in Dubai, which is fast emerging as a rival to the traditional diamond centres of Antwerp, New York and Tel Aviv. Mr Turner said: "If the buyers come from the Middle East then they might well want it cut in Dubai." He said that Gem Diamonds would be importing the necessary technology into the emirate next year. It was also conceivable, he added, that the buyers might just keep the stone in its rough form as an investment.

It is easy to see why Gem Diamonds is speculating about ways to avoid selling its find to Graff Diamonds. In the autumn of 2006 Graff paid the company $12.4m for the Lesotho Promise. Gem Diamonds thought this was a great price - until it heard that Graff Diamonds had transformed the 603-carat rock into an exquisite necklace, consisting of four large and 24 smaller gems, weighing just over 223 carats.

Discretion is integral to the business of these jewellers, as with the top end of the art market, but it is rumoured that the necklace is being sold for between $50m and $60m. Graff Diamonds stands to make a similar profit from the 493-carat Lesotho Legacy, which it bought from Gem Diamonds for $10.4m last November. That stone is now being cut in Antwerp but Graff Diamonds will not give any clues about its likely shape.

This kind of mark-up is normal in the diamond industry. One source said that $7bn in rough diamonds were mined around the world last year, but as jewellery they fetched $70bn. Whatever its final form, there is no doubt about the kind of people who will want the Lesotho diamond. "The buyers will be billionaires," said Ines Chenniki, sales director in London for Leviev, the jewellery empire founded by the Soviet-born billionaire Lev Leviev.

"They could come from Russia, China or they could be of Indian birth. They might be from the Middle East but many of the sheikhs there already have fabulous jewel collections. "They will be people who want the exceptional, what is absolutely rare. They could be collectors or they might want discreet, portable wealth." Everything would depend, she said, on the cutters and the designers turning the perfect raw material into a magical piece of jewellery. "The skill comes in highlighting the beauty, bringing it out. That is the genius, that is why I love diamonds."

This is a world where credit crunches have no impact. Another expert said that buyers for diamonds such as this were simply not affected by the vicissitudes of stock markets, any more than bidders at major art auctions worried about exchange rates. Much has changed in the diamond industry in recent years. First, mines are now automated and computerised. Mr Turner of Gem Diamonds said the Letseng mine was typical. "People think of a guy standing in a river panning or digging underground," he said. "Those days have gone. It is hands-off today. The diamond we found in Lesotho would have appeared on our X-ray screens. It is not as romantic but it is more efficient."

This technology is one of the reasons why elite mines such as Letseng are producing extraordinary diamonds. At lesser mines - and Letseng has special geological qualities which mean it produces these monsters - new technology ensures that small diamonds which might have been missed in the past are now spotted. Partly because of this, there are now more mines. Southern Africa still dominates, as it has done since the late 1800s, but many other countries - in Central and West Africa, Canada, Russia, Brazil and Australia - are now serious players in the diamond business.

Technology has also transformed the process of transforming rough diamonds into gems. Once, cutters simply used their eyes and rudimentary instruments to decide how to tackle a stone. If they were wrong, it could crack disastrously. The Cullinan diamond, at 3,106 carats the largest rough stone in history, was discovered at a mine in South Africa in January 1905 and presented to King Edward VII. The Dutch cutters charged with turning this remarkable stone into gems studied and argued and then had to act. They cut the stone, and hoped. It has long been rumoured that when it split, as they had calculated, into two, one cutter fainted with relief.

New cutting centres have opened, notably in India, using cutters who are paid much less, though they are no less skilled, than their counterparts in Europe or the US. These craftsmen produce gems that are smaller and cheaper than would be economically viable elsewhere. The monopoly of De Beers, the company founded in 1880 in South Africa by the British imperialist Cecil Rhodes, has been eroded in the past 20 years by legal actions in the US and Europe. De Beers remains dominant but now it has competitors.

One of them is Gem Diamonds, set up in 2005 to exploit the opportunities of a freer market. Mr Turner had been a barrister in South Africa and joined De Beers in 2000 to help the company defend itself from attacks in the US and Europe. He left for Gem Diamonds in 2006. And, as important as new technology, cheaper cutters or more competition, the industry is trying to show that it is no longer a source of misery throughout the developing world. The industry was indicted in the 2006 film Blood Diamond, starring Leonardo DiCaprio, which portrayed how ruthless, often criminal "freedom fighters" in Africa are financed by the illegal trade in diamonds.

The industry realised this state of affairs could not continue. Not only was it morally unacceptable, it was also bad for business, as a 20 per cent drop in sales showed; people did not want to think their engagement ring might have paid for guns used to kill children in Africa. Since 2004, the industry has put in place measures meant to ensure that only diamonds mined by legitimate governments or companies can be sold on the international market.

sfreeman@thenational.ae