When Eira Thomas was 26 she helped her Welsh father discover one of the world’s largest diamond mines. Now, as chief executive of Lucara Diamond, she hopes to change the way the precious stones are traded and shake up a $14bn-a-year industry that has long been dominated by companies such as De Beers and Alrosa.
Ms Thomas, who took over as chief executive of Vancouver-based miner Lucara Diamond in February, is talking with some of the largest jewellery manufacturers about selling diamonds directly via a digital platform backed by secure blockchain technology, which would cut out the middlemen in the industry.
“We’ve all been selling our diamonds the same way for over hundred years,” Ms Thomas, 49, said. “Technology has now positioned us to change this.”
Ms Thomas, who is called the “Queen of Diamonds” in Canada, said the industry was “inefficient and entrenched and really right for disruption”.
She believes the miner’s Clara digital platform can increase transparency and reassure consumers about where their diamonds come from. That’s especially key for millennial consumers “who are more concerned about ethical sourcing than their parents”.
The matching algorithm behind Clara was developed by members of a Canadian diamond manufacturing family and after being introduced to the company, Ms Thomas pitched it to Lukas Lundin, the Swedish-Canadian billionaire who is Lucara’s main shareholder.
Lucara snapped up Clara for 13.1m of its shares in February, worth $29m at the time. Ms Thomas personally invested $3m in the company.
Lucara’s acquisition comes as the diamond industry grapples with some of its biggest challenges since De Beers cemented the idea of the diamond engagement ring in the minds of consumers after the second world war.
There are two key threats: a new generation of millennial consumers are marrying later or not at all, while diamonds identical to their natural counterparts can now be produced in a laboratory at a fraction of the cost.
Because every diamond is unique and not traded on any exchange, the market and pricing of diamonds is shrouded in secrecy. Diamonds can change hands many times before ending up in a jewellery engagement ring — passing through trading hubs such as Antwerp or Hong Kong.
De Beers sells 90 per cent of its diamonds at events dubbed “sights”, which are held 10 times a year in Botswana. Buyers are allocated batches of rough diamonds and sell on the ones they do not want.
Ms Thomas likens the process to selling boxes of Smarties, chocolates with multicoloured shells.
“You take it home and open it up and you don’t know exactly what you’ve got,” she said. “Sometimes you get five pinks, sometimes you get two. Ultimately what we’re saying is you don’t have to buy Smartie boxes any more — you can buy individual smarties.”
Clara will enable immediate tagging of the diamond at the mine site, allowing manufacturers to search for the exact individual stone they want. The use of blockchain, the distributed ledger technology behind bitcoin, will also help keep information confidential and secure.
“This is the first time ever that manufacturers will be able to buy the diamonds that they need,” Ms Thomas said. “They don’t have unwanted inventory.”
That should boost margins for jewellery manufacturers such as Signet or Chow Tai Fook and increase prices for miners, she said. It should also avoid diamonds being sold on to the secondary market by middlemen, or being wasted, she added.
“Some diamonds never actually make it to their rightful home,” she said. “But there’s no such thing as an undesirable diamond.”
Lucara hopes to make money from the spread between the buying and selling prices of diamonds on the platform and it will also sell some of its own diamonds. Longer-term, Lucara could consider spinning off the business, Ms Thomas said.
Still, Ms Thomas faces an uphill battle: Lucara is a small producer of diamonds with one mine in Botswana that accounts for less than 1 per cent of the global market compared to two-thirds for Alrosa and De Beers. Its shares have fallen 24 per cent so far this year. That compares to a 31 per cent rise for Russia’s Alrosa and 70 per cent for London-listed Gem Diamonds.
Last year, De Beers also launched its own blockchain-based platform to trace diamonds from mine to consumer, called Tracr.
“Lucara seems too small a company to really move the needle in that area,” said Paul Zimnisky of Diamond Analytics in New York.
“She’s good, she could do it, but the problem is the stock is at a multiyear low. The company from a shareholder standpoint is not doing so good right now.”
Lucara has discovered eight diamonds greater than 100 carats from its Karowe mine since the beginning of the year, including a 472-carat diamond in April.
However, it fell to a net loss of $7m in the first quarter, in part due to higher production costs. The company, which has $43m of cash on hand and no debt, is looking to extend Karowe deeper underground to extend its life to 2036.
A geology graduate, Ms Thomas is one of a few women in the global mining industry. She is also among a minority who has actually helped discover a new mine.
Braving the isolated conditions of Canada’s Northwest Territories, in 1992 Ms Thomas helped her father, who had begun his career working in a Swansea coal mine at the age of 16, discover the deposits that would turn into the giant Diavik mine.
Since taking over as head of Lucara, Ms Thomas has boosted the number of women in the senior leadership team, hiring Zara Boldt as chief financial officer. This month she appointed Ayesha Hira, a Canadian geologist, as Lucara’s vice-president of corporate strategy.
Ms Thomas said the industry needed to cultivate professional women who can afford their own purchases rather than focus on engagement rings and marriage — the main driver of diamond demand since De Beers launched its “a diamond is forever” campaign in 1948.
“I buy all my own diamonds,” she said.
Source: FT.com
