Emerging diamond producer POZ Minerals has piqued the interest of iconic luxury jeweller Tiffany & Co as well as several Australian jewellers.

Diamond miners looking for the best price for their stones typically need to sign on with a big jewellery house, POZ chairman Jim Richards told Stockhead.

Mr Richards said he recently met with Tiffany in London.

“I won’t say how those meetings went but clearly they’re extremely interested in these stones,” he said.

In the past Tiffany had a six-year deal with Kimberley Diamonds, which once owned the previously operating Ellendale mine in Western Australia which produced more than half of the world’s fancy yellow diamonds.

POZ’s Blina diamond mine surrounds the former Ellendale mine.

In the meantime, POZ (ASX:POZ) will sell through one of diamond auction houses, Hennig or Koin (via international commercial tender) while it looks to lock in a deal with a major jeweller.

Diamonds found in the "Terrace 5" area of the Blina project. Pic: POZ Minerals.
Diamonds found in the “Terrace 5” area of the Blina project. Pic: POZ Minerals.

“[Kimberley Diamonds] was paid a massive premium,” Mr Richards said. “About a 70 per cent premium on top of the market price for their yellows and if you could get something like that then you’re really away.”

The largest yellow diamond that has been recovered so far from POZ’s Blina mine is an 8.43 carat “fancy yellow”, which has a total estimated value of $US44,482 ($60,177) or $US5277 per carat.

“[Tiffany] know the stones very well because they dealt with them for years,” Mr Richards said.

The world’s leading diamond miner, Russia’s Alrosa, recently reported a turnaround in diamond jewellery sales.

Polished diamond prices were last year on a downward trend reflecting soft consumer demand in key markets.

But Alrosa says polished diamond sales grew 7 per cent in the first three months of 2018 “as all key markets enjoyed rising sales on the back of a stronger consumer sentiment and a better macro environment”.

The 8.43 carat "fancy yellow" discovered at the Blina project. Pic: POZ Minerals.
The 8.43 carat “fancy yellow” discovered at the Blina project. Pic: POZ Minerals.

The trend continued in the most recent quarter “in particular in the USA, Europe and China”.

Australia’s diamond industry in trouble

However, the looming closure of Rio Tinto’s Argyle diamond mine — which along with Ellendale once accounted for one-third of global annual production — means Australia’s diamond industry is “just about to fall over”, according to Mr Richards.

Argyle is one of the world’s largest suppliers of diamonds and the world’s largest supplier of natural coloured diamonds.

“With the Argyle diamond mine closing in about 18 months, that is the end of the diamond mining industry,” he said.

There is currently very little government support for the industry.

One point of contention is the high royalty rate of 7.5 per cent that is levied on diamond miners.

By comparison, the royalty rate applied to gold mining for example is just 2.5 per cent.

A royalty review released by the previous Liberal government a couple of years ago recommended that the diamond royalty rate be slashed – a recommendation that was ignored by the government.

Both Rio Tinto and Kimberley Diamonds, however did not have to pay the full 7.5 per cent because they had State Agreements in place that set a lower rate of 5 per cent. But emerging diamond miners, like POZ, would have to pay the full 7.5 per cent.

Mr Richards is currently advocating for greater government support and a lower royalty rate.

“The Labor Party needs to step up if they don’t want to lose the diamond mining industry in this state, they need to step up and they need to step up fast,” he said.

There aren’t many diamond miners on the ASX and POZ is the closest to production in Australia.

POZ expects to begin processing bulk samples in November subject to the approval of its mining proposal and securing funding.

The company thinks the mining proposal could be approved “within weeks” and has had interest from about five parties interested in financing the project.