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.

"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.

David Fuller's view

I am struck by the 1,111-carat synchronicity of this gem, which may suggest almost talismanical powers to some collectors and investors.  No, I have not become a new-age type but unusual events can have an influence on investor psychology, particularly at extreme price levels.  This discovery of a very large diamond will generate interest and coincides with today’s extremely depressed levels for all so-called hard or industrial commodities, and most agricultural resources as well.  The Dollar Index’s pullback from the higher side of its range certainly helped today. Might these factors and some supply cuts generate enough interest to shake investors and dealers out of their torpor towards deeply oversold commodities and increase interest in this important sector?   

That would be timely because a rally in commodity prices, particularly the industrial sector, would supply a missing ingredient in prospects for global economic recovery.  It would also allay deflation fears and encourage some reaccumulation of resources.   

Lucara Diamond Corp (weekly & daily) certainly sparkled today on the news of this discovery, and the share is not expensive (est p/e 8.00 & yield 1.91%), according to Bloomberg.  However, I am not sure if these measures reflect today’s share price jump.