guide to recycled diamonds€¦ · in the world, such as the koh-i-noor, have passed through many...

GUIDE TO

RECYCLED DIAMONDS

NPA Booklet v 6.indd 1 11/07/2013 17:08

Recycled diamonds are diamonds removed from jewelry and aggregated for resale back to the whole-sale diamond market for jewelry production. Billions of carats of diamond mined since the 19th century remain in circulation and, due to the mineral’s hard-ness and durability, can be recycled for reuse. The increasing cost, both financial and environmental, of mining, and the huge dollar value of the existing “urban diamond mine” means recycling diamond makes good business sense.

This guide is aimed at those with ongoing sizeable volumes of diamond stock who want to understand how the recycled market works and how to maximize the value of their inventory.

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2

What .sort .of .diamond .can .be .recycled? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Two .separate .recycled .diamond .markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

Where .can .you .sell .recycled .diamonds? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Why .White .Pine? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

About .White .Pine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

INTRODUCTION

CONTENTS


Recycled diamonds may come from old lines of unsold jewelry scrapped by jewelry stores and manufacturers to release capital or from second-hand jewelry bought directly from the public and scrapped by precious metal buyers and pawnbrokers.

Large diamonds have always been recycled back into new jewelry, and some of the most famous diamonds in the world, such as the Koh-i-Noor, have passed through many (famous) owners since first being discovered. However, until recently, the cost in terms of time spent removing small-sized diamonds from jewelry has outweighed the recovery value of the diamond itself. Only in the last few years has a new market for recycling smaller diamonds developed. New processes to recover small diamonds cost effec-tively from recycled jewelry and the increase in value of small diamonds have allowed this market to flourish.

A recent study* estimated that recycled diamond now forms between 5-7% of the total value of wholesale polished diamond market demand and is worth $1.2bn a year. We think that even this figure is a significant under-estimate of the total size of the market. An esti-mated 5.69bn carats of diamond has been mined since the first diamond mines were discovered, of which around 1-1.5bn carats are still in consumer hands with a value of $750-1,000bn at current prices. Diamond is the hardest natural substance known to man, and although it can chip and fracture, it tends to survive the recycling process well. At current consumption levels, Tacy’s estimates that this existing volume alone could supply us for 40-50 years, and every year more and more diamonds are both mined and recycled.

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* Tacy’s 2012 Diamond Pipeline – published by Tacy Ltd. April 2013

WHAT SORT OF DIAMOND IS RECYCLED?


TWO SEPARATE RECYCLED DIAMOND MARKETS

Recycled diamonds broadly fit into two different groups:

Large .Diamonds: .diamonds of around half a carat and above are traded and processed by the industry individually whether or not they are recycled or obtained directly from mined “rough”. Each stone has its own unique attributes and a corresponding market price. A recycled diamond with exactly the same characteristics (including carat weight, color, clarity and cut) as a diamond that is freshly cut from rough will be valued in exactly the same

way. A grading report from an internationally respected lab will improve its chance

of achieving maximum price on sale because this so-called “certifi-cate” will give a buyer an objective view of the grade

of the diamond. Trained diamond

graders will also rely on their own grading of

the stone to price it because not all characteristics of a diamond are contained in a certificate.

Because of the inter-changeability of recycled for freshly mined diamond, the price for a large certifi-able recycled diamond is fairly easy to determine. Larger diamonds are priced with reference to industry price lists, such as that published weekly by Rapaport. The Rapaport list gives a price per carat for a number of different color and clarity grades of diamond. The industry will generally refer to a diamond’s price as a percentage discount or premium to the price in that list. For example a single certified diamond traded in the market at half of the


“Rap” price is referred to as “50(%) back”; in demand diamonds trade at less of a discount, or even a premium, to the Rap price.

Many diamonds cut 20 years ago or more were manually cut using traditional methods that today would achieve a poor cut grade. Diamonds are now cut using lasers and tools that allow them to be cut more accurately and consistently. Many older diamonds will not achieve premium cut grades commonly demanded by manufacturers today, and recycled larger diamonds may need to be recut to achieve the maximum price for the stone.

Small .Diamonds: .diamonds of smaller sizes (generally less than half a carat, called “melee” after the French word for mix) are traded wholesale in parcels of matched stones. Melee diamonds are treated differently to larger individual stones. A single melee diamond is worth very little by itself, and is never certified individually. It is only of use to the industry if it can be matched with diamonds of exactly similar size, cut, shape, color and clarity to be used in a line of diamond jewelry, such as in a pave setting. If not matched a melee diamond looks out of place, and each piece of jewelry must be priced individually due to the price differ-ences between each stone.

Recycled melee recovered from lines of jewelry or from scrap will never match. Even if the color and clarity are the same, cut will be different, particularly if recovered from old jewelry. Recycled melee is not interchangeable with freshly-cut melee until it has gone through a number of processes to make it suitable for reuse in jewelry manufac-ture. This includes cleaning, sorting and re-cutting to produce a consistent parcel. There is no industry standard for recycled melee as each parcel will have different mixes of sizes, shapes and cuts even if the color and clarity are the same.

Creating recycled melee suitable for the wholesale market can be done only if the volume of stones is great enough to allow picking of consistent parcels of size, color, clarity and cut. Even the largest nation-wide jewelry manufacturers, retailers, pawnbrokers or gold buyers rarely have large enough quantities for this.

The market for specialist melee diamond trading has grown because aggregating recycled diamond melee from a number of sources and picking out semi-matching parcels for re-cutting creates value where previously there was none.

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WHERE CAN YOU SELL RECYCLED DIAMONDS?

There are a number of options available to a jewelry manufacturer, retailer, gold-buyer or pawnbroker wanting to sell recycled diamonds:

1 . .Diamond .TraderMany diamond dealers who sell diamonds also buy back recycled, both in larger sizes and melee. Some who supply will allow returns, or give credit for future purchases of diamonds. This can make sense for a retailer or manufacturer with future diamond supply needs. Diamond traders gener-ally pay immediately and often in cash, meaning a simple one-off transaction for a seller.

But all diamond traders are intermediaries. They ultimately link a seller to a manufacturer. A trader can only purchase for the best price if he achieves the best price on sale. Many traders do have an excellent network of buyers, but due to the vast


range of grades, sizes and shapes of diamonds, they cannot hope to have an outlet for every diamond. In fact, many diamonds will need to go through a great number of traders and sorters before they get to a manufacturer, each taking a margin on sale. A trader must take on the risk of the market going down and must account for cost of capital, all of which reduces the price you achieve further. And cash purchases can be a security risk and lead to accounting problems.

2 . .Jewelry .ManufacturerSelling directly to a manufacturer is the best way to ensure that your recycled diamonds achieve the highest price in the wholesale market by getting closest to the end-consumer. There are no dealer middlemen so manufacturers can pay the best prices.

However, as we’ve noted previously, manufacturers generally have require-ments for one particular and very specific type of diamond. They will only use exactly matching stones in a line of jewelry. So it is unlikely that they could make full use of a typical mixed recycled parcel, full of all sorts of shapes, sizes, cuts and grades. They might, if they are large enough, be able to use a proportion for manufacture, but ultimately they will have to sell on those diamonds they cannot use, generally the vast majority of a mixed parcel. In short they will pay the most in the market for the diamonds that they need, and very little for the ones they don’t.

3 . .Selling .At .AuctionIn a typical diamond auction buyers are invited to review and make closed bids for a parcel of diamonds, or for individual certifiable larger stones. This can be done at a show, privately at the seller’s offices, or through an auction house. The highest bid will win, and a competitive environment should mean you achieve a good price for your diamond parcels.

But buyers never know if their bids are successful until after the end of the auction, and cannot rely on the auction to satisfy their manufacturing needs meaning they are willing to pay less. Melee auctions generally offer mixed parcels of melee, in which case a successful buyer will acquire a parcel in which some diamonds fit their manufacturing requirements, but most will not and will need to be sold on to other dealers. An auction generates good prices in a very strong market, where manufacturers are fighting to purchase enough diamond content

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and are outbidding one another to secure volume. But in a flat or downward trending market prices achieved at auction can be significantly less than market prices achieved elsewhere.

4 . .White .Pine .Sales .Events .And .Diamond .BrokerageWhite Pine’s platform for selling diamonds through its sale events and brokerage is the evolution of the auction. Rather than relying on both the right buyer being present at an auction and a bullish market, you can ensure the highest prices for your recycled diamond in the market at any time. Sorting recycled diamond melee into separate and consistent size and grade parcels, and matching them to a buyer who has those particular manufacturing needs will achieve the maximum price in the market. A buyer is willing to pay a higher price to secure a sorted parcel of diamond melee rather than wait until the end of an auction to see if his bid was successful.

Brokerage operates on a continual process, and does not rely on waiting for an auction event to take place. Continual buying and selling takes place as and when manufacturers needs arise. Sellers can wait to sell to the right buyer rather than sell to the highest bidder in an auction. If a manufacturer with a demand for your sorted parcel doesn’t attend an auction, then the highest auction bid might well not be the best in the market. Sales events are still a good way to generate interest in diamonds for sale, but we are finding higher prices are sometimes achieved outside of the sales event environment.


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WHY WHITE PINE?

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Sorting .ConsistencyWe sort the diamonds into more than 20 different grades in each size category, and our category parcels are consistent every time. Our buyers are generally jewelry manufacturers who need a particular grade of stone to put into a line of jewelry. They pay more for what they want, and less for what they don’t. Buying consistent parcels of matching diamonds, buyers have reduced risk, so can pay more for the diamonds they need. Many buyers will purchase particular grades and sizes of diamond “unseen” based on buying the same parcels regularly over a long period of time.

Numbers .Of .BiddersWe have hundreds of buyers from across the world and up to fifty come to a sales event where they view many diamond parcels. Not all bid for each parcel, but they will bid for the goods they need, and pay the highest prices in the market for those goods. Many sellers think that they can carry out their own “mini-auctions” by taking diamond melee to jewelry shows to sell, or inviting buyers to review and bid on recycled diamonds at their premises. But without finely sorting the goods into highly demanded parcels or having a large number of bidders with different manufacturing requirements, highest prices cannot be achieved.

Wider .Geographical .CoverageWe carry out sale events in New York, Hong Kong, Dubai, and Mumbai, and have buyers from across the world. You cannot achieve the same geographical coverage by inviting bidders to your premises or taking goods to a single show.

Operational .EaseArranging your own mini-auction takes a great deal of resource and time. White Pine Sales is a one-stop shop, we diligently qualify buyers, do the sorting and


marketing and manage the entire sale, while you concentrate on running your core business.

White .Pine .Owns .Goods .In .SaleA great deal of the diamonds owned and sold by White Pine are sold through the Sales Events. We have more incentives than other auction houses to achieve best prices as our goods are sold side by side with third party diamonds.

Buy .NowWe utilize the Buy Now formula for our Sales Events. Rather like eBay, a buyer can secure a diamond parcel at a higher price than market in order to not lose out during an open auction process. As a seller, you will achieve higher prices using this method of selling.

No .Obligation .To .SellIf you don’t like the prices we set, you don’t need to sell and we send you back the goods. We only need to agree on prices before starting to sell.

Cash .AdvancesWhite Pine pays up to 70% of the expected sales value of recycled diamond parcels once received in our New York office as a secured loan. You don’t need to wait for payment while parcels are sold, removing cash flow problems while ensuring you achieve the best prices for your diamond goods.

White Pine specializes ONLY in recycled diamonds: there are many larger diamond companies than White Pine, but we only work with recycled diamonds, not with fresh polished or rough, making us one of the largest operators in our sector. We are specialists with unrivalled knowledge in managing the sale process of recycled diamonds. If you want to maximize the price of your recycled diamond stock, you should talk to the experts.


ABOUT WHITE PINE

White Pine Trading LLC is a well-established recycled diamond company, with offices in New York, Barcelona, Birmingham (UK) and Tokyo and buyers across the United States, United Kingdom and Europe.

White Pine buys recycled, polished diamonds of all sizes and grades either loose or in second-hand diamond jewelry, from the smallest melee to diamonds one carat and above. We remanufacture chipped, damaged and poorly cut diamonds in order to homogenize appear-ance. We use our stock for jewelry production, and we sell large volumes of sorted recycled diamond melee and certified stones, to a network of industry participants, including retailers, jewellery manufacturers, diamond manufacturers and dealers through our White Pine Sales Events and Brokerage division.

White Pine follows the Kimberley Process and the DTC Best Practices Principles. It is a proud member of the Jewelers Board of Trade, the Jewelers Vigilance Committee, The British Jewellers’ Association and National Pawnbrokers Associations of the US and UK. It has received full accreditation from the Better Business Bureau.


+1 (646) 758-0255 | [email protected] | www.whitepinesales.com

535 5th Avenue, 18th Floor New York, NY 10017


guide to recycled diamonds€¦ · in the world, such as the koh-i-noor, have passed through many...

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