Search

# Rough Diamond Buyer Niche | Cutting Costs on Rough Diamond

With an already established experience in dealing in polished diamonds, the buyer will know what his or her particular market is. This may be a very narrow niche or a very broad spectrum of different qualities and sizes. If the buyer plans on manufacturing goods in the United States, the focus must be placed on value. If a buyer purchases a 500 carat lot of .50 carat average sized pieces that will finish 0.10 to 0.25 carat each, then other cutting centers of the world will be more suitable to keep the manufacturing costs to a minimum. At an average cuttingt cost of \$100 per carat and a minimum that is usually higher, it is obviously important that the labor cost does not exceed the value of the finished product. Even if the labor cost makes up just 20% of the finished value of the stone, it is an unrealistic scenario. Of course all this would be at the discretion of the investor.

Example:
0.75 ct. rough diamond @\$200 per ct.
=\$150 net (hypothetical value)
Cutting cost \$100 per ct., \$100
minimum = \$100
Finished Cost = \$250 (with cutting fees)
Finished 0.30 ct. I color SI2 clarity
Wholesale value = \$200

In this example there is a \$50 loss since the labor to value ratio was unfavorable. By cutting the stone in India, perhaps the investor could have potentially made a profit by reducing high labor costs.

For higher-value rough, high labor costs could easily work out in the investor’s favor. By employing more- skilled cutters, the 2% of additional weight that could be salvaged in cutting a very fine make, could far exceed the additional labor cost increment. Look at the following examples:

Scenario 1
4.97 ct. rough diamond @ \$3000
per ct.= \$14910.00 (hypothetical value)
Cutting cost \$100 per ct. \$497.00
Finished 2.01 F VVS2 Very Good
specs and proportions
Wholesale value = \$20,261.00
Profit = \$4,854.00

Scenario 2:
Same rough diamond

4.97 ct. rough diamond @ \$3000 per
ct. \$14,910.00 (hypothetical value)
Cutting (overseas) \$40 per ct. =\$199.00
Finished 1.97 F VVS2 Fair specs and
proportions
Wholesale value = \$15,760.00
Profit = \$651.00

Of course this is all hypothetical, to illustrate the point.

Again, if the plan is to manufacture and sell in the U.S., then higher value rough pieces are advised for purchase. But perhaps the buyer’s niche is in lower- quality goods, where the cutting expertise isn’t as critical. A lower labor rate such as India’s, would then be appropriate.