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The world of diamond mining is undergoing fundamental changes.
While jewellers such as Harry Winston already own stakes in diamond mines, Rio Tinto, the globe’s third largest miner, is following top resources company BHP Billiton, in looking at ways to completely exit the business.
Apart from BHP and Rio changing strategy, the founding family of De Beers last year sold out completely from the company most closely associated with the gems after three generations steering the business.
And Russia’s Alrosa, which overtook De Beers in 2009 as the world’s number one supplier of rough and after decades of being a secretive state-owned organization, is in the process of readying a global public offer.
What could further transform the industry are moves to mimic the success of exchange traded funds backed by gold and make the last “uncommoditized commodity” appealing to retail and institutional investors.
The New York Times reports “a small number of investment professionals around the world are competing behind the scenes to turn the gem into a commodity that would be available to investors in the way that gold has been traded through funds on exchanges:”
The Securities and Exchange Commission is reviewing a proposal to create the first diamond-backed exchange-traded fund, which would be available to anyone with an online trading account. It would buy one-carat diamonds and store them in a vault in Antwerp, Belgium, providing daily values with an as-yet-unnamed index. The fund is backed by a New York company, IndexIQ, that has brought 14 other exchange-traded funds to market in the last five years.
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In perhaps the most developed plan, the largest publicly traded diamond company, Harry Winston, is working with a Swiss asset manager to create a $250 million fund that is set to begin buying half-carat to six-carat diamonds this year with money from institutional investors like hedge funds and pensions. The fund would own diamonds bought and sold in Harry Winston stores and sell shares to private investors.
Continue reading at The New York Times
