Last year, President Joe Biden banned the import of Russian diamonds along with caviar and vodka in response to Kremlin’s invasion of Ukraine. The tightened supply chain for diamonds has put a spotlight on lab-grown diamonds (LDG), which offer shoppers bigger stones for less money.
Since the US is the world’s largest diamond jewelry consumer, Scottsdale, Arizona-based high-tech diamond company Adamas One Corp. (NASDAQ:JEWL), is the right company, in the right place, at the right time.
More importantly, as the only pure play lab-grown diamond producer on the Nasdaq, Adamas offers investors a chance to invest in jewelry which has become the fastest-growing division in the luxury goods sector.
Adamas One’s disruptive technology utilizes a Chemical Vapor Deposition (CVD) process to create single-crystal diamonds in a factory in Greenville, South Carolina.
“The result is stunning. We pride ourselves on manufacturing a larger diamond with high-quality, better clarity, and color at scale than the competition,” Adamas founder and CEO Jay Grdina told Proactive.
“When you buy one of our diamond stones, you know what you're getting — the highest-end lab grown diamond that you can get in the market.”
As one of the founders of ammunition maker AMMO Inc and several other ventures, Grdina has the chutzpah to take his ideas and build it into a business.
Adamas founder and CEO Jay Grdina
He credits this drive to growing up in a “very entrepreneurial environment.”
“My dad was a serial entrepreneur and very successful at it. He was a guy that just didn’t give up even if there were adversities. I try to mirror him,” said Grdina, who was born into a wealthy cattle ranching family in Ohio.
Art of investing in distressed assets
In September 2018, Grdina incorporated Adamas and moved quickly to acquire Scio Diamond Technology’s assets, including its diamond growing chemical reactors and intellectual property.
“If you look at my history, I hunt for distressed assets that have great technology. After I take control of the enterprise, I put a good management team around it,” said Grdina.
“We now have 36 patents, 28 domestic and 8 international. We are a technology company first — it’s our advanced diamond technology that gives us the ability to thrive in the luxury goods industry as well as the industrial and tech industries,” he added.
The firm’s technology delivers cost-effective lab-grown diamonds because its custom-designed reactors control diamond deposition with high precision over a larger growth area, resulting in large batches of diamonds.
In 2022, Adamas rode the lab-grown diamond growth wave to close an $11.03 million IPO and list on the Nasdaq.
Robust revenue
It’s been a busy spell for Adamas, which expects to generate additional revenue by mid-2023 based on current levels of production following a ramp-up of its expanded factory facilities in Greenville, South Carolina.
The company now has 12 full-capacity reactors that are growing diamonds at a rate of approximately 3,000 rough carats a month.
With the reactors at their full production capacity and aggressive marketing underway, Grdina anticipates over $12 million in annual sales revenue from the current factory.
“We are geared up in such a way that our top line revenue on a monthly basis will be approximately $1.2 million at full capacity. That gives us a really nice, strong bottom line,” noted Grdina.
“We are looking forward to expanded sales and distribution of our high-purity lab-grown diamonds into a waiting market,” he added.
Blueprint for growth
In February this year, Adamas said it had negotiated a new lease to allow for the expansion of a second facility in South Carolina to hold up to 400 reactors to produce lab-grown diamonds.
“We actually have a secondary facility at a separate location, but it’s also in Greenville, South Carolina. It’s just over five miles away from the current facility,” said Grdina. “We will continue operating in the current facility even when the second one is up-and-running. There's about $6.5 million spent on the current facility so we will maximize our investment.”
Adamas said the first phase of expansion will consist of the installation of 100 reactors, which at full capacity will generate up to $30 million in topline revenue, or $14 million in earnings before interest, taxes, depreciation and amortization (EBITDA) on a monthly basis.
A back of the envelope calculation shows that this will amount to over $300 million in topline revenue, and $150 million in EBITDA on an annual basis.
“In Phase 1, we want to build 100 reactors. Realistically, that's about 18 months out just because all our reactors are proprietary. It’s just the time it takes to build and get those up-and-running and commissioned,” said Grdina.
“The first 26 will come in six-to-eight months from now. And, then after that it's about 13 every month – at least we gauge that, so we are looking at massively increasing our output capacity in the US.”
After completing the phased expansion, Adamas expects to house close to 400 of its proprietary CVD reactors at the second facility in South Carolina.
Newly sustainable alternative
Mined diamonds have a controversial history that’s tied to the use of child labor in some African diamond mines, as well illegally traded “blood diamonds” that fund conflict in war-torn areas.
Moreover, bulldozers need to move 2 million pounds of earth to mine one carat of diamond, and less than 30% are gem quality, say analysts.
“I feel that there are two separate markets and consumers for lab grown and mined diamonds. Some people look at the mined diamonds and feel they're destroying the ecosystem. There’s also the blood diamond aspect that goes along with mined diamonds that are often considered conflict diamonds. There is a new set of diamond buyers that are gravitating towards lab-grown diamonds. These buyers may have never considered buying a diamond previously because of the eco and social issues,” said Grdina.
Through careful control of its CVD manufacturing processes, Adamas produces sustainable diamonds.
“As a US-based company — and there's not many of us out there — we are a true ESG company,” said Grdina. “Our energy is nuclear powered, so we have almost no carbon footprint from a power standpoint. We recirculate our water and utilize less than 18 gallons of water a year.”
At the Adamas facility, thin slices of diamond seeds are carefully prepared. Then the diamond seeds are loaded on a proprietary grower plate in a custom-built reactor. After about a month, a 6-carat plus rough diamond is formed. Adamas does some clean up on the rough stone and then sends it off for to get cut and polished. From there it goes off to be certified by the Gemological Institute of America (GIA).
Lab-grown and mined diamonds are certified using the same process. The GIA and the International Gemological Institute grade them on the four Cs: carat, cut, clarity, and color, ensuring that lab-grown and mined diamonds meet the same high standards.
Gem of an investment
Lab-grown diamonds may turn out to be an investor’s best friend.
Almost 90% of diamonds flooding the US market are non-domestic with around $20 billion worth of diamonds being imported annually. However, the sustainable ‘Grown in the US’ diamond story is beginning to resonate with consumer’s decision-making, especially Millennials and Gen Z, with their eco-conscious mindset and ethical concerns.
This is where Adamas scores big by bringing a better quality, bigger diamond with a sustainable and attractive Made-in-USA brand story to the market.
“The Adamas stock is at a great price right now (averaging around $0.80) when you consider that we're also the technology leader. We own all the base patents. And we're in a category that's exploding,” said Grdina.
“Most of all, we have fun at Adamas. I am blessed with a great team and we are in an amazing and fast-growing category. It's a glamorous industry and we have a company with a sparkle,” he added with infectious enthusiasm.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
Follow her on Twitter: @UttaraProactive