My Secret Diamond Mine

Conventional wisdom holds that we are suffering from a shortage in rough diamonds. Rough traders in Antwerp, Mumbai and Ramat Gan keep repeating, almost as a mantra, that "we need to source more rough." I bear some good news – and here is my secret, right off the bat – I found a diamond mine that very few know of!

In many ways, it's hiding in plain sight. Proof of its existence is that the country where this mine exists, exports more rough than it imports. Oddly, while many of us in the industry have visited this country, none of us visited the mine.

Here are some more details, for the benefit of the entire diamond industry: The goods are low cost, and the mine is not very rich, but cost of production is close to zero. The profit margins should be huge. According to the latest figures supplied by that country's government, in the first four months of 2010, net exports totaled 171,468 carats, at an average value of about $278 per carat – a small stream of $47.7 million worth of goods.

In 2009, the country exported, on average, a net of 19,214.40 carats of rough every month at an average value of $310.58 p/c – nearly $6 million worth of rough every month, about $72 million for the year.

According to (yet to be published) Kimberley Process documents, Belgium and Dubai were the leading destination by value of these exports, followed by India, Ireland, China and Hong Kong. Why the Irish are buying low-cost rough diamonds is unknown, but in this day and age, I guess you are always happy with a paying customer, even if the motives for buying are unclear.

One last fact about the country: Its KP certification policies are so lax that NGOs around the world are surely losing sleep over this rogue country. In fact, one must wonder how KP is letting this happen right under their nose, without sending a review mission to investigate this covert supply to the market.

Earlier this month, I took four flights over this country, and searched intently for this mine. It was hidden well and we were unable to spot it from above. I do, however, trust the strict documentation as proof to the mine's existence – how else could a country export more than it imports?

This clandestine mine lives and breaths not in Africa or South America. It's in no other but the good ol' U.S. of A.

The existence of the mine is not a bona fide fact, but a conclusion. How else can the U.S., month after month, export more diamonds than it imported? Pre-KP stocks, perhaps?

Maybe the answer is not a diamond mine or existing stocks. At one of the recent KP/Zimbabwe sessions, Chaim Even-Zohar said during his presentation that exporting Marange goods to Dubai was a mistake. Zimbabwe should have exported the diamonds to the U.S., ensuring that no one would find out about it.

The sad conclusion is that, based on official Department of Commerce and KP figures, many goods must be smuggled into the U.S., and then exported directly into the legitimate stream. In its commitment to privatization, there is currently no real rough diamond imports oversight in the U.S.

Basically, anyone can bring goods into the U.S. and later fax the documents to the relevant government authority. No government Diamond Office like in Antwerp or Ramat Gan that specializes in diamond shipments, no KP trained custom officers that know how to identify goods like in Africa, not even an agreed Monitor tasked with signing off the shipments, like we have in Zimbabwe.

If we don't find that elusive mine in the U.S., maybe we should look for ways to close a loophole in our most important consumer market and save us from the embarrassment that comes from a front page article in the New York Times or the Wall Street Journal.