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COLORADO DIAMONDS: TOO LITTLE OF A GOOD THING

Features
By Russell Shor, Senior Editor
This story appears in the July 1998 issue of JCK magazine
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Colorado consumers love diamonds mined at the Kelsey Lake facility on the state’s border with Wyoming. Trouble is, the mine closed last September, pending sale by its majority owner, and supplies are rapidly dwindling.

“Our goods were incredibly well received,” says mine director Howard Coopersmith, who discovered the remote site 8,000 feet up in the Rocky Mountains. Adds Steve Rosdal, co-owner of Hyde Park Jewelers in Denver, “All of the ingredients for success are there. But we need supplies to do a proper marketing program for them.” Hyde Park was the first retail jeweler to embrace Colorado’s diamond shortly after the mine opened two years ago.

The mine ran for about a year at half-capacity, producing some 12,000 carats, until its majority owner, Redaurum Ltd. of London, put all its mining properties up for sale so it could concentrate on exploration. For Kelsey Lake, that meant Redaurum wasn’t going to take the mine from startup to full production. “We reached a point [just before the closure] where we had to increase production to become profitable,” says Coopersmith.

The mine needed costly additions, particularly a larger primary ore crusher. Mining analysts’ reports said Redaurum lacked the capital to make such improvements.

Coopersmith is confident Kelsey Lake will be profitable once a new owner’s in place. He says several offers are on the table from American companies. “We still haven’t begun to touch the potential of the marketplace yet.”

Only six stores carry them. There are still diamonds coming from above-ground finds, plus some goods in stock from last fall. The exclusive distributor is Colorado Diamonds Inc. of Boulder, which sells through six “authorized” retailers in the state: Hyde Park in Denver, Master Goldsmiths in Boulder, Weiss Jewelers in Greeley, Jewelry Emporium in Fort Collins, Megel & Graff in Colorado Springs, and Armstrong Jewelers in Pueblo.

Stephanie Williams, a partner in Colorado Diamonds, says her company still has a range of goods for sale from melee to 2 carats, but the inventory is slowly running out. Most of her sales are mounted Diamond “C” Collection pieces created by Colorado Diamonds. “We incorporated the ‘C’ motif from the Colorado flag into a very simple, stylish piece,” says Williams, who notes that it’s “by far the best seller.”

Participating retailers agree. Mary Beth Trevino, manager of Master Goldsmiths, says pendants with a quarter carat are very popular, although they cost about 10% more than such pieces without the Colorado cachet. “People buy it because it’s a Colorado diamond, and a few tell me they like them because they’re more politically correct” than South African or Russian diamonds, she says. “In either case, they don’t mind paying a premium.”

Jewelers who advertise the collection agree that running out of goods is not just a lost Colorado diamond sale but a lost sale of any kind. “When people come in asking for a Colorado diamond, you can’t talk them into another one,” says Hyde Park’s Steve Rosdal.

Some customers want the stones to be set in engagement rings, but the vast majority of buyers are locals who just want to have a diamond from their own state. Even jewelers in ski resort areas say that most buyers are from the state.

Creating a media frenzy. Hyde Park launched its Colorado diamond promotion in 1996 in conjunction with the William Goldberg Diamond Co. in New York, which polished a number of larger diamonds collected from the site during exploration and mine construction. They were graded by the International Gemological Institute of New York, which added a “state-of-origin” note on its reports,

“The first day we offered them was a media frenzy. We had all the local TV stations and got lots of free press,” says Rosdal. The largest diamond, a 5-ct. yellow, sold before the day was out.

Business has since fallen off because of the irregular supply.

Hyde Park was the only source for the diamonds until last summer, when the mine’s management firm, Diamond Company NL of Fort Collins, enlarged the network of retailers.

“We sent out information packages to jewelers all over the state,” says Stephanie Williams of Colorado Diamonds. “We received a lot of favorable response and selected reputable companies that do a good business.” Like most diamond concerns, memo is a big part of the business – 50% in her case.

Williams believes the demand for the diamonds will return in force once the mine gets back into full production. There are still no plans to market outside the state.

Just before the shutdown, the mine was actually looking at an expansion project, incorporating a smaller kimberlite called the Maxwell pipe into its production. Maxwell’s yield is small, but 60% to 70% gem quality, with nearly a third of the

diamonds larger than a carat, says Coopersmith, noting that’s a little better than Kelsey Lake itself. The plan for Maxwell is to prolong mine life, not increase yearly production, says Coopersmith, who maintains that 25,000 carats yearly is the mine’s optimum output.

He’s also optimistic that a qualified buyer for Kelsey Lake will step forward because the mine has yielded several big diamonds. Among these was the largest ever found in the United States, a 28.2-ct. stone. It became a 16.86-ct. cushion cut and was auctioned off. The mine also has produced a 14.2-ct. rough.

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