Will a Chinese Factory Mass-Produce Synthetic Diamonds Like They’re iPads?

Last week’s announcement that Scio will mass-produce lab-grown diamonds in China raised a lot of questions—as these things now tend to do with some regularity. So for a follow-up, I interviewed Scio Diamond CEO Mike McMahon, who gave me more details and pointed me to the company’s recently filed 8-K.

Not that I received all the answers I sought. For instance, the release says Scio’s two joint venture partners “bring more than 75 years collective experience in the gemstone industry.” But it declined to name them.

The 8-K does list two companies: Michigan-based SAAMABA LLC, and Israel’s S21 Research Holdings. If you have never heard of those companies—and can’t find them on Google—that’s deliberate. McMahon says these entities are connected to bigger companies but “for competitive reasons we have chosen not to name them at this time.”

I also wonder if those companies aren’t willing to identify themselves simply because there is still a bit of an (unfair) industry stigma against lab-grown diamonds. Look how Gemesis is still not very open about its connection to the family of Jatin Mehta.

McMahon is also not divulging what qualities and sizes the factory will produce—also for competitive reasons—though he hints they will be smaller sizes. The stones will be grown by the CVD method, and later treated by HPHT.

The factory is projected to produce about 48,000 carats of rough per 10 growers. Since it plans to have 100 growers, that means the factory could produce some 480,000 cts. of rough a year. That number may eventually be expanded up to 400 growers, McMahon says. That would be a substantial production if all this comes to fruition. But let me caution readers—we have seen many plans of this nature not deliver. And even if it does, those numbers are still far less than the production from most natural diamond mines. (For instance, De Beers’ Jwaneng mine alone produces more than 10 million carats a year.)

It’s also likely that the production won’t be all-gem, as some diamonds will be earmarked for industrial purposes. But McMahon says his intention is to focus on the gemstone business.

Scio will distribute the rough, in conjunction with the joint partners. McMahon estimates that the stones will be sold for half the price of comparable naturals—less than its competitors, who typically sell them for about 20 to 30 percent less than naturals.

“There is a difference between manufacturing them in Washington, D.C., and doing it in China,” McMahon says. “But I honestly cannot sit here and say what our price range is.”

As far as what most JCK readers want to know—whether this material will be disclosed, as required by law in the United States—McMahon says Scio will be upfront about the rough’s origin, but that’s about it.

“We are trying to deal with clientele who have a real good reputation in the industry,” he said. “We will do everything we can do. But there is nothing we can do to make sure that companies down the line mark them as lab-grown. If someone wants to give me a cloak-and-dagger and Columbo trench coat…”

Those comments won’t calm a lot of industry fears; many already worry about selling undisclosed smaller synthetics. Still, McMahon feels the industry is coming around to embracing his product.

“We have requests for 1.2 million carats and that is without one second of marketing,” he says. “We are seeing more of an acceptance that this is here to stay. Diamond mines are really running out of diamonds. And there is truly a demand for lab-grown diamonds, whether it’s environmental types, tree huggers, or what it happens to be. If the industry doesn’t get on board, it is missing out on a significant market.”

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JCK News Director