It's A Rough World by Louis Pearl G.G.

  Posted on February 19, 2014 by Wyatt Yeager

  Comment

Rough Diamond Trading:

The mining and trading of rough diamonds is worldwide today. When we look at the industry, we can find diamond mining and or diamond trading on every continent except Antarctica.

Africa: Windhoek Namibia, Botswana, Luanda Angola, Kinshasa DRC, Cape Town, Pretoria, Johannesburg South Africa, Conakry Guinea, Nairobi Kenya, Freetown Sierra Leone, Nigeria, Zimbabwe, Cameroon, Ghana., Zimbabwe.

Europe: London, England, Yakutia, Moscow Russia, Geneva, Zurich Switzerland, Antwerp Belgium,

Middle East: Tel Aviv Israel, Dubai,

Asia: Hong Kong, Shangri La, Shanghai China, Mumbai (Bombay) India.

Americas: Northern Canada, New York, Los Angeles U.S.A, Brazil

South Pacific: Australia

Some countries are sourcing markets of rough diamonds, others are trading markets for rough diamonds. Regardless of whether mining is alluvial, hard rock or industrial bort, it is essential that all trade is of non-conflict origin, criminal-free and terrorist-free. Although blood diamonds are pretty much non-existent today, there are still a couple of countries who do not use the best judgment in bringing goods to market.

As long as the rough diamond seller can supply the necessary documents for exporting, including Kimberly Certificates, export documents etc., it is not a problem to ascertain the rough is conflict free (Zimbabwe is the exception).

What is more difficult to determine is whether a particular buyer or seller is legitimate. I have seen rough diamond buyers come to the TTM (Table Top Meeting) with proof of funds or POF using leased financial instruments. They may be Bank Guarantees, Standby Letters of Credit, 103/23 etc. It is not that these instruments are not real; rather the problem is that the buyer has no access to the funds other than for the sole purpose of a POF (Proof of Funds).

Buyers use leased instruments to get the seller to bring the goods to Malca-Amit or Brinks. However, they have no ability to actually buy the goods and are dependent upon a third party to buy the goods at the Table Top Meeting. You don’t have to be a genius to see that this is a recipe for disaster. I have experience with these instruments and I can help you determine if you have a real buyer.

Sellers are also guilty of shenanigans. I have never seen a manifest that matched the parcel contents. The less detailed the manifest, the more likely it is far from accurate. When a manifest details the shapes (sawable, makeable, cleavage, flat etc.), and the clarity details are given (internally flawless, VVS, VS, SI, I) ,and color details are given (D-Z) it shows that the parcel was actually graded with the proper criteria.

However, it does not mean it was graded accurately. The only way you can determine if a diamond manifest is accurate is to examine the goods at the TTM or before they leave the source country. This requires expenditure either way. However, the cost of going to a Table Top Meeting is usually many times the cost to accomplish this task in the source country. Additionally, when you peruse goods in the source country, you can look at exactly what you want, and you have greater flexibility in choosing, rejection and pricing. You also know your purchase is legitimate.

Going to a source country can have its perils. There is an old quote; “Those who have the money will get the experience, and those who have the experience will get the money”. You can travel to the source country without much risk if you have a good understanding of that country and if you have vetted your supplier. It is irrelevant if you buy goods using the Rappaport Report or Adtec as your pricing guide. What is important is experience and wisdom.

Mining Your Own Business

I cannot count all the “opportunities” I have been presented with in the mining sector of the diamond business. I was a past Vice President and board member of Sao Luis Mining, a publicly traded mining company out of Brazil. It took us years to lose our money, but in the end we were successful in doing just that.

All of us in the venture were experienced in diamonds, mining, finance and public offerings. Despite our many talents and skills we were unable to take a property with a large supply of diamonds and make a go of it. Why we failed is a book in itself. I won’t bore you with the details. What I will do, is show you what is involved in putting together a mining operation and it will be self evident why there are so few successful mining operations.

The pictures in the slide show display our property, some of the diamonds on our property and a detailed layout of the diamond equipment needed in a modern alluvial mining operation. This information provided to you free of charge, would cost you many thousands of dollars if you were to pay someone to do the research and put it together for you. It is especially valuable to anyone thinking of investing in mining or to someone who has a concession and is trying to get it financed.

We spent years completing our environmental studies, getting our licenses, permits, geological reports, assays, financial feasibility and cost and income reports. It was a never ending cycle of stop and starts, ups and downs; all the while the money is flowing out like the Amazon into the ocean. The other money eating monster is one that cannot be considered in your projections. I call it the ‘X’ factor. This is when something goes wrong that no one could have imagined. Except that it happens far more often then even the most pessimistic person could imagine.

Just as an example, the DMS or Dense Media Separation Machine a $600,000 beauty is made in South Africa. When you ship this monster (see slide show below) you need to tell the truck driver not to go faster than 3-5 miles an hour down your unpaved road or you can destroy the insides. (It will be out of balance) Wait until you see how much fun you can have trying to get it repaired in your remote location. You will roar with laughter when they tell you how long it will take to get the parts and how much this small problem is going to cost you. Good times had by all!

Because you are nearly always working in a third or forth world country, you can expect that everything will take three times as long as projected and will cost two to three times as much as you were told it will cost. Most companies fail because they run out of money before they have a chance to be successful. Other companies fail because the owners just get sick and tired and no longer wish to sit in the bush
with the bugs, snakes and local bandits, some of whom wear uniforms, ties and suits.

There are a million reasons why a mining operation will fail. There are few companies who have the knowledge and resources, both human and financial to succeed. To do a mining operation properly, it will take approximately $7-12 million investment and two to three years.

There is an exception to this rule. If you have a concession and you have enough money to buy a pan and some camping equipment and food supplies, you can make a good living going into the mud yourself for a few months at a time. It is not a romantic as having a publicly traded diamond mining company, but you have a better chance of making money.

For the full article including pictures click here: http://roughdiamondgemologist.com/its-a-rough-world.html