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A 552-carat diamond discovered in the Northwest Territories was put on display in Manhattan on Jan. 30. The egg-sized fancy yellow diamond was discovered in October at the Diavik diamond mine, about 300 km northeast of Yellowknife.

Carlo Allegri

Some of the world’s largest diamond miners are betting on blockchain technology to modernize their supply chains and to ensure the authenticity of their precious stones.

Producers such as British-based De Beers Group and Vancouver-based Lucara Diamond Corp. have set up blockchain-enabled platforms to help trace and sell diamonds.

De Beers' Tracr platform tracks diamonds across the supply chain, while Lucara’s Clara platform matches buyers and sellers to individual stones. Both platforms not only help to verify the legitimacy of diamonds in the supply chain but also to reduce diamond companies' risk, which, in turn, increases buyer and investor interest.

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Blockchain, best known as the platform behind the cryptocurrency bitcoin, is considered a near incorruptible transaction and record-keeping technology that helps to improve transparency and to reduce the risk of fraud. Other mining sectors, such as gold and rare-earth metals, are also working with blockchain to track and trade their commodities.

For diamond companies, which are under increasing scrutiny to ensure their products don’t come from conflict zones where gems may be used to finance violence, blockchain technology helps to provide a digital footprint of their products across the supply chain. Most consumers and investors want diamonds that are produced and sold ethically – and may be willing to pay a premium for it.

“You can essentially prove the provenance of a diamond, from mine to finger, using blockchain technology,” says Louisa Bai, a senior manager and market lead for blockchain at Deloitte Canada in Toronto. “There is a great deal of value that can be extracted from a technology that can give you that assurance."

Clara Diamond Solutions is a secure digital sales platform that uses blockchain technology to sell rough diamonds individually, instead of in batches, which has been the long-standing tradition in the industry.

“For a whole host of reasons, the way we’ve sold diamonds traditionally no longer makes sense,” says Eira Thomas, president and CEO of Lucara Diamond, which bought Clara in 2018. “Until five years ago, we didn’t have any way to change this. Technology has given us that opportunity.”

Clara matches sellers with buyers, but it’s not a bidding platform, Ms. Thomas says. Instead, Clara securely and confidentially stores the asking prices for individual rough diamonds from the producers, as well as the bid prices for individual polished diamonds requested by the buyers. Ms. Thomas says Clara finds “the optimal rough diamond match” for each polished order, based on specific characteristics of size, colour and quality.

Eira Thomas, CEO of Lucara Diamond Corp., says the traditional ways of selling diamonds no longer make sense with the advent of blockchain tracking.

DARRYL DYCK/Globe and Mail

The system is helping to transform the sales process, Ms. Thomas says, making it more transparent for buyers and creating a more efficient market for producers and sellers.

“With Clara, the connectivity between rough and polished markets is much tighter,” she says. “Producers are able to set prices that work for them and the manufacturers are able to purchase diamonds stone by stone, rather than in whole assortments. For the first time, manufacturers are only buying what they want at prices they know they can make money at. They’re not forced to overpay for goods.”

It’s a unique business solution that Ms. Thomas believes is long overdue in her industry “and necessary to create efficiencies and unlock value for buyers and sellers alike.”

The company is now building up the platform for use by what it hopes are various players across the industry.

“In my mind, this isn’t about if this is going to work, it is working,” Ms. Thomas says. “The question is how long it will take to get broad industry buy-in. I think we’re absolutely going to get there, it’s the pace we have to manage.”

With Tracr, the diamond industry blockchain traceability platform from De Beers, a division of mining giant Anglo American, the company is able to securely track a diamond across the supply chain – from mine to cutter and polisher through to the jeweller.

De Beers says the Tracr platform helps to give consumers confidence that registered diamonds are natural and conflict-free, “improving visibility and trust within the industry and enhancing efficiencies across the diamond value chain.”

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Tracr is also working with the diamond industry’s existing initiatives and regulations around producing and selling conflict-free diamonds, including the Kimberley Process Certification Scheme, World Diamond Council System of Warranties and Responsible Jewellery Council Code of Practices.

Tracr CEO Jim Duffy describes the platform as a “critical piece of infrastructure,” which is helping to improve the overall supply chain. Blockchain technology is a huge driver.

“Blockchain is really helping the industry optimize itself,” Mr. Duffy says. “[It] gives us a new baseline of trust for trade along the supply chain, where now everyone using this kind of platform is trading goods the same way.”

While blockchain provides numerous opportunities for miners of diamonds and other commodities, the technology alone can’t solve the problem of proving authenticity, says Ms. Bai of Deloitte Canada. She says blockchain needs to be used alongside other technologies to ensure the commodities can be tracked and traced seamlessly and transparently through the supply chain.

“Blockchain is a great technology and something we’re very excited about, but blockchain alone can’t solve all of the problems,” Ms. Bai says.

She says the mining industry as a whole should work more closely together to ensure blockchain technology is adopted with the right regulatory and governance standards in place, which would boost its effectiveness long term.

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“Blockchain isn’t an individual sport. It’s a team sport. You need to collaborate with others within the ecosystem that ultimately have the same goal as you … including competitors,” Ms. Bai says.

Lab diamonds grow

“Is it natural or synthetic?” It’s a question more diamond buyers are asking as the market for lab-produced gems continues to grow.

While synthetic diamonds have been around for decades, new technology is helping companies produce both higher quality and quantities of these human-made stones at a lower cost. Many millennials and other cash-conscious buyers are purchasing synthetics as a starter diamond until they can afford the real thing. Synthetic diamonds are said to cost up to 40 per cent less than mined diamonds and some sellers promote them as having a much lower environmental footprint.

The cost to produce larger, higher-quality synthetic diamonds with the new chemical vapor deposition (CVD) technology has dropped to about US$300-to-US$500 per carat, down from US$4,000 per carat in 2008, according to Bain & Co. It forecasts the current “gem-quality, lab-grown polished diamond market” to grow to between 10 million and 17 million carats annually by 2030, up from about two million carats today.

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De Beers Group, the world’s largest seller of natural diamonds by value, recently started selling lab-produced diamonds for jewellery under a new company called Lightbox. It was a controversial move given the company’s traditional business, although De Beers maintains real diamonds will remain its focus. De Beers CEO Bruce Cleaver has said synthetics aren’t “to celebrate life’s greatest moments, but they’re for fun and fashion.”

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