Chatham On Synthetic Diamond: “We’re Still Working On It”

Rumors that synthetic diamonds are infiltrating the gem trade have ripped through the world’s diamond centers. But the only person to announce publicly that he was producing such a line says he’s still a long way from market.

Tom Chatham, president of Chatham Created Gems, San Francisco, says that continued setbacks have thrown his schedule so far off that “we have no viable date for production start up.”

The problem, says Chatham, is that he needs large quantities of easily identifiable synthetic diamonds of whitish color and reasonable clarity grown to specific size (one carat). The Russians can’t produce them yet, and can’t say when they will be able to.

Chatham announced his synthetic line in 1992 amid much press hoopla, culminating with an appearance on Dateline, the NBC news show, earlier this year. The delays have meant eating a certain amount of crow – which Chatham freely admits. They’ve also taught him that the fundamental law for dealing in today’s Russia was written by Murphy (“What can go wrong, will go wrong”).

In Chatham’s case that’s been just about everything.

“I’ll admit I was naive at the time I went into dealing with the Russians,” he says. “Now I know not to believe anything until it’s actually happened.”

The adventure begins: Before dealing with the Russians, Chatham had tried the Japanese. “When Sumitomo announced it had developed large, gem quality synthetics [for industrial use], I went to Osaka [Japan] to see if I could buy some of their crystals for a gem diamond line,” recalls Chatham. “They told me flat out they weren’t interested in the gem business.” But he never stopped looking for sources.

His Russian adventure began three years ago after a chance meeting with Dr. Viktor Vins, deputy director of the Institute of Monocrystaline Research in Novosibirsk, a city on the western edge of Siberia. Vins and his boss, Dr Bukin, had developed production of hydrothermal synthetic emeralds in the 1960s.

“These people had studied methods of producing synthetic emeralds and were very familiar with my father’s writings,” says Chatham. (His father, Carroll Chatham, pioneered the “luxury” flux grown method of making emeralds.) “So they were very anxious to talk with me.”

Chatham went to Novosibirsk, partly to exchange information, but mainly because a lot of Russian synthetic emeralds were leaking into the market at cut-rate prices. He found a number of institutes there were engaged in crystal-growing research, though some had been cast off by the government after the breakup of the Soviet Union and cancellation of many military projects.

A number of private labs operating within government facilities were looking for work, says Chatham. “I also found that Vins’ lab was doing synthetic diamond as well as emerald.”

They were using the Bars Method, which differs from techniques used in the West, notes Chatham. (This method applies pressure of 1 million pounds per square inch on all sides of a crystal instead of just on the top and bottom.) Growth chambers also were larger than those used in the West.

The problem with this method was that diamond “presses” could not be constructed to withstand such pressures without being damaged. Thus after taking three to four days to make one crystal, the press would be disassembled, have its parts reformed in the machine shop next door, then be reassembled. Downtime was at least a day.

“Fortunately the machine shop was in the same compound, which made things easy to fix,” says Chatham, “but there still were too many problems.”

The Russians had three or four presses in one facility and another dozen or so in another nearby. Chatham recalls they said they’d been selling some synthetic diamonds to a dealer in Antwerp. “I asked about that several times, but after a number of evasive answers, I knew not to ask again,” he says.

Chatham saw a ripe opportunity: idle diamond presses in Russia and a $50 million yearly potential demand for synthetics in the U.S. When the Russians said they needed about $20,000 to get the idle presses started, Chatham put up the funds, then returned to the U.S. to announce his new “Chatham Created Diamond” line at the summer 1992 JA International Jewelry Show.

Continuing education: Several weeks later, Chatham learned another Russian business lesson. The price for refurbishing the diamond presses had climbed to $300,000. “Of course they were gouging me,” says Chatham. “I eventually got them to agree to everything they had initially proposed, but things still didn’t work.”

Meanwhile, the Novosibirsk facilities were churning out synthetic emeralds – still the mainstay of Chatham’s business – in such quantities that prices threatened to crash through the floor. Chatham opened an office in Moscow to buy excess supplies of these stones in an attempt to stabilize prices.

Ironically, as soon as the Russians discovered that Chatham was a willing customer, they sent their emerald crystal growers into hyper-drive. “I think their production went up ten-fold because they knew I was buying it,” he says. “Finally, I said ‘no more,’ and stopped.”

Eventually the Russians sold most of their inventories at distress prices to several Thai firms. “It appears now that they will be getting out of the emerald business,” says Chatham.

While emerald production was bloating, the diamond operation fell apart completely when Vins and Bukin were dismissed abruptly by top government officials. Chatham thinks the firings were instigated by De Beers, which wanted to put the kibosh on the project.

De Beers spokesman Andy La mont emphatically denies this, saying there’s “no basis whatsoever for Mr. Chatham to assume that. If he wants to know why the government did what it did, he should talk to people in the government.”

Soon an American go-between offered Chatham contact with another facility far from Novosibirsk – and reportedly far ahead in synthetic diamond technology. Chatham won’t reveal the name of the facility for fear of having the government close it to him as well, but says it is indeed far superior to the Novosibirsk facility.

“They claim they were the first in the world to produce synthetic diamonds,” says Chatham. He believes that a threatened suit from General Electric was quashed because the industrial giant couldn’t prove the Russians didn’t have it first.

“They have three different systems for synthesizing diamonds: a method adapted from the GE process; the Bars method and a method adapted from De Beers technology,” says Chatham. He says the facility has been producing large quantities of synthetic diamond powder for 20 years at a dime a carat.

Technical difficulties: Just when it looked as if things would finally get underway, Chatham found the facility couldn’t produce caraters in the qualities and quantities promised. “We need to produce 14,000 diamonds a month, with the bulk being carat sized,” says Chatham, who wants to sell at an average price of $300 per carat, about one-tenth the cost of a comparable-looking natural. “They kept pushing small goods at me, in much smaller quantities.”

And larger stones presented problems. “They were very difficult to cut and had a lot of stress and uneven growth due, I think, to the fact that power outages were common. A lot of these stones had so much stress that they would come apart on the wheel.”

Then came more shakedowns, he says. “They were always telling me that they’ve got the carat-sized goods ready, but need thousands of dollars here and thousands of dollars there to finish. When I go over there, they’ve got nothing for me.”

Chatham still believes he can work with this group, but has to give them some incentive to develop reliable, consistent production.

“Since then a third Russian agency, claiming to be highly placed in the Russian [natural] diamond industry, has contacted me because they are anxious to compete with De Beers’ synthetic research,” says Chatham. “So I hold the threat going off with this ‘new group’ as an incentive for my current producers to work harder to develop something I can use.”

His aim still is to develop a line of half-carat to one-carat polished with clean white appearance. (“We’re still experimenting,” he says, on which crystal face to grow from to yield the best color and clarity.) And he wants stones with a distinctive metallic content in the crystal structure to permit easy detection. The metals – including nickle, iron and several others – help counteract the effect of nitrogen, which is added to make crystals grow more quickly but also turns them a dingy yellow, much like the Sumitomo products.

If the Russians produce diamonds exactly to Chatham’s specifications, they’ll be easily to detect by testing magnetic response. He won’t elaborate further, because he doesn’t want to give too much away.

“This will keep my synthetics a legitimate product,” he says. “I don’t want them to become like synthetic amethyst or synthetic white sapphire where detection is so difficult and costly that it undermines the market for natural material.”

Chatham still believes that a strong market awaits his synthetics. After the Dateline report he was deluged with calls from consumers, jewelers and even diamond dealers.

“It’s certain there’s a good market – $50 million a year or more – for legitimate synthetic diamonds. I know I went public early, maybe too early, but synthetic diamonds are coming. If it’s not me who’s first in the market, it will be someone. I wanted to announce it, not keep it secret.”