Its starting point is the market price of polished diamonds, which informs the estimated price that a rough diamond parcel is expected to fetch once polished, based on the characteristics and the yield of the various stones composing a parcel of rough diamonds.
It covers single rough stones, defined assortment groupings and the complete production of all run-of-mine types, in terms of size, shape, color, clarity and other measures of quality.
Mercury’s rough diamond pricing system is currently used to price rough diamonds worth approximately $2 billion per annum in wholesale polished value.
Two key aspects of the system enable it to comprehensively price all rough diamonds from the cheapest to the most expensive in a unique way.
1. Forecast of polished stones from a rough diamond parcel
Mercury has developed a proprietary method to estimate the typical composition of a run-of-mine parcel, based on a statistical prediction of the aggregate run-of-mine production.
The type of polished stones that a rough parcel can be expected to yield is derived by considering the different possible results and evaluating the stones physical properties, including whether it is makeable, sawable or cleavage.
Polished stones are distributed across size, shape, color and clarity dimensions, depending on the rough diamond’s characteristics. The price tag attached to those stones depends on the country and mine of origin.
Mercury uses data collected over decades in the field. This data has been used to develop the statistical composition of aggregate run-of-mine production. The data originates from a range of run-of-mine sources as well as from results achieved by various users. The information is routinely revised and tested.
To account for regional differences, Mercury has analyzed the predictable mine output from various regions and modeled run-of-mine fingerprint to within relatively tight deviation bounds. This method enables a calculated forecast of the polished stones that a rough parcel or a specific assortment of any size, shape, color, quality or clarity or run-of-mine can be expected to contain.
2. Polished diamond price value of the rough parcel
To estimate the prices within this parcel, Mercury uses a reverse engineering matrix based on its Polished Pricing system, which classifies the prices of all rough diamond types across run-of-mine.
Deductions are made to the polished price to reflect direct costs, such as labor, associated with polishing. This reverse engineering matrix produces the "Rough Baseline Price".
In addition, the system takes into account rough market sentiments that may affect the direct relation between rough and polished transaction prices, which we call the “Rough Trading Price”.
An innovation in rough diamond pricing
This system enhances the traditional valuation of rough diamonds:
The system includes a range of reports and calculation formats.