Diamond auctions not for ever: Rio Tinto to sell final Argyle red

When traces of garnet and chromites were found in a creek that flowed into Lake Argyle in a remote part of Western Australia, explorers backed by Rio Tinto hoped that they might have beaten rivals in discovering the first significant deposit of diamonds on the Australasian continent.
What they could not have anticipated in 1979 was stumbling upon the largest cache of coloured diamonds ever found.
The Argyle diamonds, most famously pink, but also blue, brown and red, that emerged onto the market in the early 1980s were “revolutionary”, according to Vivienne Becker, a jewellery historian. “People had never seen diamonds of that particular shade of pink, and in that quantity,” she said. “They’re still incredibly rare.”
The mine operated by Rio Tinto, the FTSE 100 miner, in the east Kimberley region closed in 2020 after 37 years and about 900 million carats of production.
On Monday, bids opened for 48 lots of differently hued pink and grey-violet diamonds and the final fancy red, in what might be one of the last annual auctions of Argyle diamonds.
With the mine being decommissioned, this year seven lots of diamonds named the “Old Masters”, which have been lying in the safes of collectors, sometimes for decades, will be resold.
The “Beyond Rare” auction is by invitation-only. Viewings of the diamonds have started in London, before they are taken around the world — to select cities, which include Singapore and Antwerp, the diamond capital — and then final sealed bids are submitted by November 18.
The secrecy around the tender is part of a careful marketing strategy to clientele who range from luxury jewellers to those searching on behalf of extremely wealthy individuals. Those attending the viewings often have the type of specialist diamond expertise that you would not find in a public auction, the company said.
“The difference between a deep pink or a red can sometimes mean the difference of hundreds of thousands, if not millions of dollars,” Patrick Coppens, a sales and marketing specialist at Rio Tinto’s diamond business, said.
At its peak in 1994, Argyle produced 42.8 million carats of rough diamonds in a year, and about 40 per cent of the world’s total diamond output by volume in the mid-1990s. The pink stones typically accounted for just 0.1 per cent of the mine’s output, despite it producing about 90 per cent of the pink diamonds that have ever been found.
The entirety of Argyle’s annual production of pink diamonds could be held in the palm of a hand. Blue are the most rare, but the red stones, of which only 35 were ever discovered, have become the most coveted for their depth of colour, according to the company.
While other mines have sporadically produced coloured diamonds, Argyle was marked out by the consistency of its output over the life of the mine. “I find it amazing how a tiny, tiny percentage of the mine’s output, could just make or break that year’s or that month’s production,” Sinead Kaufman, head of Rio Tinto’s minerals business, said.
Unlike other coloured gemstones, which gain their colour through a chemical reaction, scientists believe that the Argyle diamonds gained their pink hue through pressure during formation, which caused a distortion in their crystal structure.
That formation process is probably the reason the stones are relatively brittle compared with other diamonds, which meant that Rio Tinto had to develop new cutting and polishing techniques to maintain the integrity of the stones. Larger stones are rare — the largest Argyle diamond up for sale this year is a 2.63 carat purple-pink old master.
“I think we’re lucky to get anything, and it’s a piece of history that we’re buying now,” said Jody Wainwright, managing director of high-end jeweller Boodles, who has been invited to the auction. “So there’s less of a filter for me now, the price is, yes they’re high, but they were high for years, and we always used to say ten years ago, ‘can they go any higher?’ And they always did.”
The Argyle diamonds typically sell for between 20 and 25 times the price of the equivalent white diamond. The highest price recorded for a diamond is $71.2 million in 2017, a 59.6 carat vivid-pink that was resold at an auction in Hong Kong.
Such is the rarity of the Argyle diamonds, that they have been untouched by the boom in lab-grown diamonds and downturn in luxury spending that has devastated prices for the white stones.
Prices realised by De Beers — a company that is owned by Anglo American, Rio’s FTSE 100 market rival, and which once controlled the diamond market — fell 25 per cent last year, De Beers has reduced its planned production this year in response to weaker demand.
“The value of these stones is not something that you can compare to the current diamond market for smaller white diamonds or lab-grown diamonds … the economics behind them are not quite the same,” Kaufman said.
Rio points towards its New York tender, held on the day that the Lehman Brothers bank collapsed, triggering a global market panic, in 2008. A diamond sold that day set a fresh record for Argyle.
However, the markets in which demand grows most strongly “moves with GDP”, Kaufman said. Japan started as the most important market, a crown that has since spread to America, the Middle East and China.
Diamonds still have “global appeal”, Coppens said.
The only diamond mine that Rio now operates is Diavik, near the Arctic Circle in Canada, which produces mainly white stones, along with a small proportion of yellow ones. Despite the market’s troubles, the miner is open to exploration for new diamond mines, Kaufman said.
“We’ve been around for 150-plus years now, so we try and think long term … but it is getting harder and harder to find diamond pipes in the world,” she said.