A huge diamond owned by Canadian mining company Lucara has been insured for $120m, according to sources in London, suggesting it will comfortably become the world’s priciest rock.
Lucara recovered the 1,109-carat diamond, roughly the size of a tennis ball, from its Karowe mine in Botswana last year. It is due to be auctioned in London this month as the only item in a sale by Sotheby’s.
The stone has been flown around the world since it was found in November on a tightly-guarded tour that was not announced until it was over, touching down in Hong Kong, Singapore, Dubai, New York, Geneva and Antwerp, before going on display at Sotheby’s showroom on Bond Street in London.
The diamond, which was first picked out of Karowe’s plant by a 27-year-old geology graduate from the University of Botswana, has been named Lesedi La Rona, meaning “Our Light” in Botswana. It will be the largest diamond ever to go under the hammer. No diamond “even remotely of this scale” has ever gone before a public auction, according to Sotheby’s. It makes all other diamonds “look diminutive.”
Guesses have been running about how much it will go for. Sotheby’s has announced a pre-sale estimate of $70m (£49m), an assessment that looks “conservative”, according to Avi Krawitz, an analyst at pricing group Rapaport. Lucara’s chief executive William Lamb has said he wants at least $60m, but Lucara’s chief operating officer Paul Day has upped the stakes, saying he expects over $80m. Many analysts privately believe bidding could push through $100m.
The stone’s insurance value offers a glimpse into the upper end of what it could fetch, though insurance values tend to be generous, to play it safe. The 3,107-carat Cullinan diamond, the only diamond ever mined that was bigger, was insured for ten times its estimated value after its discovery in South Africa in 1905, because it was deemed irreplaceable. It was then broken up into several jewels after being presented to Edward VII.
The Centenary diamond, which De Beers unearthed in 1986, was meanwhile insured for over $100m when it was unveiled to the public in 1991. De Beers is thought to have sold the stone, but has never commented on its whereabouts.
Auction houses are liberal in using the word “record”, to encourage the idea that the market is always rising, but 2016 has been a good year for rare gems. In May, rival auction house Christie’s sold a 15-carat blue diamond, The Oppenheimer Blue, for a hammer price of $58m, outdoing a 12-carat flawless blue diamond that Sotheby’s sold last year for $49m.
In a private tender last month, Lucara meanwhile sold another large diamond from Karowe, weighing 813-carats, for $63m. Extrapolating the sales price of over $77,000 per carat onto Lucara’s biggest rock suggests a price of $85m, says Panmure Gordon analyst Kieron Hodgson, making it “an expensive paperweight.”
But some brokers have been more cautious, warning that big stones can be difficult to shift. “The general rule in diamonds is that the price increases exponentially as the size increases,” according to Charles Wyndham at Polished Prices, “but things do tend to plateau.”
Lucara, which has another 374-carat diamond up its sleeve, already has c.$170m in cash. Its share price has rocketed from C$1.61 to C$3.90 since the stones were recovered in November, adding over C$880m ($687m) to its market cap. If its biggest stone is broken apart, preliminary estimates suggest it could yield a 550-carat polished gem, according to William Lamb, which would be the biggest cut diamond on the planet. “There’s just no precedent in the market of how you would value something like that.”
Bidding is due to begin shortly after 7.00pm, London time, on Wednesday 29th June.