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Industry analyst: Undisclosed synthetics problem will only get worse

By Jacquie De Almeida

2751993-mainThe technology to produce lab-grown diamonds is less complicated than it once was and more easily accessible, opening up the possibility of more undisclosed synthetics entering the market.

That’s the message from industry analyst Chaim Even-Zohar speaking at the Prospectors & Developers Association of Canada (PDAC) annual conference in Toronto.

With chemical vapour deposition (CVD) reactors costing anywhere from $30,000 to $50,000, the temptation to produce synthetics to pass off as natural may be too great for some. It’s a business proposition with significant growth potential, he says, all the more frightening in the eyes of an industry operating on trust and working toward ensuring consumer confidence.

“You still need expertise to operate them, but you can buy reactors on the market [without too much trouble],” Even-Zohar tells Jewellery Business in an exclusive interview.

“There are estimates that between four and six per cent of one- or two-pointers in Surat are synthetics, but who cares. The problem arises when you’re talking about half a carat.”

This was exactly the situation last year when International Gemological Institute’s (IGI’s) Antwerp lab discovered 600 colourless lab-growns. The stones averaged .50 carats, the so-called bread and butter of the diamond industry.

Even-Zohar says greater awareness is needed, particularly since synthetics are ending up in finished goods coming to North America.

Although the outcry following a discovery like IGI’s can be significant, Even-Zohar says police investigations usually do not result in criminal charges and the culprits are rarely identified publicly.

While comments on message boards abound about naming names, Even-Zohar says a “conspiracy of silence” exists within the industry.

“One doesn’t point the finger at another in the industry,” he explains. “We’ve seen it in many cases. People will settle things among themselves. There’s too much of a penalty involved by going public. They’re good people, but there’s an ancient guild—a fraternity. It’s not as open as it should be.”

In other diamond news, Even-Zohar says rough diamond prices are expected to stay flat over the next two or three years, although bank financing will be a factor in how that plays out.

“If downstream companies don’t have liquidity, there is no money to buy rough, and there is no money for prices to go up,” he said. “Downstream is very much dependent on borrowing. However, bank borrowing is becoming more problematic in the diamond business. Some banks are exiting, not because they believe the diamond business is not good business, but because it is not transparent. There are no true balance sheets. If a company doesn’t earn money on paper, a bank won’t finance it.”

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