Today, blue is the color of money

LONDON — Economies the world over might be struggling amid the global economic downturn, but as luxury labels collapse it seems there’s one high-rolling category that’s lost none of its sparkle: big blue diamonds.

Even as the diamond market tumbles, the blue gems — the rarest of all diamonds — have broken records.

The latest offering, a 7.03 carat “fancy vivid blue diamond” unearthed last year in South Africa, has just pirouetted around the world’s auction houses, lapping up attention in Hong Kong, Paris, New York and London. It might be the size of a thumbnail, but the internally flawless 58-faceted sparkler could break all records for the highest amount paid per carat when it is auctioned May 12 in Geneva.

This blue diamond is not embroiled in the controversy surrounding "blood diamonds" because it is from the historic Cullinan mine where companies comply with state regulations and union contracts that maintain wages, health and safety conditions.

Owners estimate the gem will fetch from $5.8 to $8.5 million. Should it top that, it would beat the record-breaking $1.33 million per carat paid for a 3.73-carat pear-shaped vivid blue diamond that fetched $4.6 million a year ago.

It’s not impossible: When the 35.56 carat Wittelsbach diamond — a deep grayish-blue in color — went for $24.3 million at Christie’s Auction House in November 2008, not only did it sell for almost twice the hoped-for sale price, it became the highest price at auction for any stone in the history of gems. And all this after a calamitous stock market crash in September. Blues mean business.

“We’re quietly confident,” David Bennett, Chairman of Jewellery at Sotheby’s told GlobalPost. “Blue diamonds are in a sense outside the whole diamond market simply because they are so rare,” he said of the stones, which make up less than 0.0001 percent of the world’s diamonds. “If you’re a buyer for a blue diamond you don’t get many opportunities.”

It took a team six weeks to cut and polish the stone. It was led by Gary Monnickendam, a fourth-generation expert diamond polisher whose family business started in Holland in 1890. For him it was a task of love as well as money.

“To cut a blue stone I would pay them,” said Monnickendam, who said he has polished 12 of 40 blue diamonds that have emerged in the last 20 years. “Blue diamonds have always been enormously rare, and sought after since the 17th century,” he said. “It is an event when they turn up.”

The gem, which will be named by the new owner, owes its high-rolling colour to boron, a chemical element that brings out the blues.

If it performs as well as expected the diamond could be a useful stimulus. Panic selling hit the diamond industry hard at the top of the world credit crunch, and diamond prices have plunged since July last year, registering a 16 percent fall on the International Diamond Exchange (IDEX) price index. Overall sales fell about 30 percent since the September crash.

“Some diamonds dropped 60 percent, but since then they’ve come back a bit again,” said Adonis Pouroulis, chairman of Petra Diamonds, the world’s largest independent diamond producer and owner of the Cullinan mine, northeast of Pretoria, South Africa, where this diamond was discovered last year. Petra is putting this latest blue up for auction. The same mine also produced the whopping 3,106-carat great Cullinan stone a century ago.

As demand has dropped off, diamond-mining giant De Beers — which handles about 40 percent of all rough diamonds — quickly responded by pushing production down 91 percent in the first quarter of the year, and it has laid off a quarter of its British staff. Although it has now re-started production at its three Bostwana mines, De Beers will still reduce its annual production by 40 percent overall. A fourth Botswana diamond mine remains on hold for the rest of the year.

In Angola, the world’s biggest miner, BHP Billiton, withdrew from diamond exploration projects last year to help cut costs. In India, 200,000 diamond cutters and polishers have been laid off — a quarter of the diamond workforce. Meanwhile, traders in Belgium’s diamond cutting and selling capital, Antwerp, struggle with high debt as stones go unsold.

Even Petra – bullish about this latest blue – has scaled back its exploration ventures in Sierra Leone and Botswana, and closed down its diamond mine in Angola altogether. Despite that, it has acquired new producing mines and hopes to boost considerably its output from 200,000 carats last year.

“We’ll do 1.5 million carats this year,” said Petra’s Pouroulis, who earlier this year took a 4.95 percent stake in the company. “You can’t stop your business.”

With a bullish attitude, slick marketing and the odd rare find, the interest piqued by the as yet un-named blue stone might just help stave off the diamond blues.

More GlobalPost dispatches on  mining:

Gold mining loses its luster

Even as gold prices rise, South Africa's miners struggle

Ghana weighs boosting tax on gold