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The 1,109-carat Lesedi La Rona diamond failed to meet the minimum selling point Lucara Diamond set for its auction at Sotheby’s. The highest bid was $61-million (U.S.).BEN STANSALL/AFP / Getty Images

Shares of Lucara Diamond Corp. of Vancouver nosedived on Wednesday after the giant gemstone it discovered last year failed to sell at a London auction.

The top bid of $61-million (U.S.) fell short of Lucara's minimum selling price for its historic discovery. Slightly smaller than a tennis ball, the 1,109-carat stone is the largest diamond unearthed in more than a century.

Lucara's shares plunged as much as 17 per cent in the hours after the auction and finished the day down 14.5 per cent. The stock had doubled in price over the past year as Lucara produced a stream of supersized diamonds from its Karowe mine in Botswana.

It named the biggest of its discoveries Lesedi La Rona, which means "our light" in the Tswana language of southern Africa. Sotheby's, the auction house, had predicted that the stone could fetch $70-million when it went up for bids on Wednesday.

Instead, bids fell short of Lucara's so-called reserve price – the lowest price it would accept for the stone – and the company announced that it would retain its prize find.

"People think I must be really upset," William Lamb, chief executive officer of Lucara, said in an interview. "But I'm really not."

Mr. Lamb emphasized that it is not typical practice in the diamond industry to sell uncut stones through a fine-art auction house like Sotheby's. Lucara decided to go that route because it wanted to see if there were ultrarich buyers who would value the Lesedi La Rona as a one-of-a-kind collectible.

He said the auction was designed to answer a question: "Are there people who buy $100-million Picassos who would potentially acquire this stone as a collector's item?"

He declined to name the reserve price, but he said he had been approached within seconds of the end of the auction by a diamond dealer who wanted to discuss a possible deal.

But Mr. Lamb stressed that he is under no financial pressure to do anything immediately and wants to weigh options for extracting value from the diamond.

One possibility would be to sell it to a traditional diamond dealer, who would cut the stone into smaller gems. Another would be for Lucara to do the cutting itself. Yet another option would be to exhibit the stone in museums while weighing alternatives.

"We don't have to sell the stone," Mr. Lamb said. "Lucara has a very strong balance sheet, with no debt, so we're not going to rush into anything."

Lucara, part of the Lundin mining empire, has prospered during a tough time for the diamond industry by focusing on the production of exceptionally large stones.

Its ability to produce those giants reflects fortunate geology at its Botswana mine as well as innovative X-ray technology in its sorting system that allows it to spot big diamonds before they are fractured in the milling process.

The Lesedi La Rona is the second-largest diamond in history, exceeded in size only by the Cullinan, a 3,106-carat colossus unearthed in 1905 that has since been cut into smaller stones that make up part of Britain's crown jewels.

In addition to the Lesedi La Rona, Lucara has also unearthed the Constellation, a giant 813-carat stone. In May, it sold the Constellation for $63-million to Nemesis International, a Dubai-based trader. The price was the highest on record for a rough diamond, according to Lucara.

In contrast, prices for smaller diamonds have been under pressure from ample supply and underwhelming sales in Asia. The giant producer De Beers closed mines last year as prices for rough diamond fell by about 20 per cent.

Mr. Lamb shrugged off suggestions that the disappointing auction on Wednesday might reflect any softening in demand for large diamonds. He calculated that the top bid, with all auction fees included, worked out to about $61,000 a carat – a figure in line with what the industry has been paying for other large, high-quality diamonds.

"This doesn't change Lucara's fundamental financial status," he said. "We still retain the stone, we know what people are willing to pay for it. This is not the end because the world's largest diamond failed to sell."

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