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A 1,111 carat gem-quality diamond, second in size only to the Cullinan diamond cut into the British Crown jewels, has been unearthed by Lucara Diamond Corp. in Botswana.

The Type-IIa stone, just smaller than a tennis ball, is the largest diamond discovery for more than 100 years, according to Vancouver-based Lucara. It was recovered by machines at the south lobe of Karowe mine in central Botswana, the company said in a statement.

1,111 carat diamond discovery Source: Portland Communications

"We’ve always thought very highly of our resource," William Lamb, chief executive officer of Lucara, said on a call with investors Thursday. “You’d have to be a very brave person to predict a stone like this.”

Lucara’s Karowe mine in Botswana is rivaling Gem Diamonds Ltd.’s Letseng operation in Lesotho as a source of the world’s biggest and best stones. Gem Diamonds previously held the record for the largest discovered this century with the 603-carat Lesotho Promise.

"It is almost impossible to estimate a value for such an extraordinary stone given that a valuation is highly dependent on the color, clarity and cutting and polishing characteristics," Edward Sterck, a London-based analyst at BMO Capital Markets, wrote in a note Thursday.

Lucara sold a 341.9-carat Type-IIa diamond in July for $20.6 million, or $60,000 a carat, Sterck said. The company’s shares jumped as much as 37 percent in Toronto trading, the steepest intraday gain since 2008.

The value of the find and who will want to buy it will depend on the size and quality of the polished stones that can be cut from it. While Lucara will likely sell it at a tender in Botswana, the cutting, polishing and eventual sale to a final owner may take many years. Antwerp and New York are the leading cutting centers for exceptional gems.

Stone’s Value

Lamb said it’s unlikely the stone will be sold this year. It’s too big to fit in their scanner and will have to be taken to Antwerp where he hope’s there will be a larger scanner.

“We need to see how best we can actually get maximum value for the stone,” Lamb said. “It’s going to take time for us to get a full understanding of the stone.”

Typically, a jeweler such as Graff Diamonds Corp. or a group of investors would buy the gem and use computerized scanning technology to decide how to most profitably cut the stone into several pieces and mount them in jewelry, according to Maurice Mason, a mining analyst at Stifel Nicolaus Europe Ltd. in London.

Graff is the most prolific buyer of big stones, including Gem Diamonds’s Lesotho Promise, for which it paid $12.4 million for. Graff cut it into 26 flawless diamonds, including a 76.4 carat pear-shaped gem, and fashioned them into a single necklace. The necklace hasn’t yet been sold. The Cullinan was cut by hand into nine major stones and 96 smaller ones.

"The end-buyer will likely be an ultra-ultra high-net-worth diamond collector," said Martin Potts, a London-based mining analyst at FinnCap Ltd. "There will be huge prestige in owning the largest diamond that’s not part of a royal collection."

Sotheby’s Auction

Last week, Hong Kong billionaire Joseph Lau paid 48.6 million Swiss francs ($48.4 million) at Sotheby’s in Geneva for a 12.03-carat blue diamond, the most spent on a jewel at auction. A day earlier, he paid 28.7 million francs for a 16.08-carat pink diamond. Both purchases were for his 7 year-old daughter, his office said.

So far, the largest diamonds are resisting a price slump that has hit the wider industry. Prices for Gem Diamonds’ stones that are larger than 10 carats have fallen about 5 percent in the past year, Chief Executive Officer Clifford Elphick said last week. That compares with declines of as much as 30 percent for some smaller gems.

The biggest diamond discovered is the 3,106-carat Cullinan, found near Pretoria in South Africa in 1905. It was cut to form the Great Star of Africa and the Lesser Star of Africa, which are set in the Crown Jewels of Britain.

Lucara also said it found two other very large white diamonds. The first weighs 813 carats before cleaning, meaning it’s likely to rank among the 10 largest found. The second is 374 carats.

“This is a balance-sheet-changing development ” for Lucara, Investec Plc said in a note on Thursday.

( Updates with CEO comments from third paragraph. )