Egg-sized diamond sold to Hong Kong jeweller for a record $35m

A Hong Kong jeweller paid a record price for an uncut diamond yesterday when it bought the egg-sized "Cullinan Heritage" for $35.3m (£23m).

Chow Tai Fook Jewellery emerged as the successful bidder for the 507-carat diamond, the 19th biggest ever found, after a tender held by Petra Diamonds. The Jersey-based group mined the diamond at its Cullinan site in South Africa in September last year.

"We are obviously ecstatic," said Adonis Pouroulis, the chairman and founder of Petra Diamonds. "Of course, in a sealed tender you never know how well it's going to go, but if you consider that the next highest price ever paid for a rough diamond is $18.4m, this is a great result."

The value of a diamond is not determined by its size, but by its clarity. Mr Pouroulis described the Cullinan Heritage as "flawless". The selling price also dwarfed the expectations of analysts, who had predicted a value of between $25m and $28m.

Mr Pouroulis said that the Cullinan Heritage had cost just $250 to produce. The amount paid for the Cullinan Heritage also eclipses the previous record for an uncut diamond. In December 2008 Graff Diamonds paid $18.4m for the 478-carat "Leseli La Letšeng". It was mined in Lesotho by another British listed company, Gem Diamonds.

Petra plans to reinvest the money in its South African operations. The company currently mines 1.2 million carats a year and plans to increase production to 3 million carats a year by 2014. The group will also use the proceeds to develop the nearby Williamson mine.

Petra was part of a consortium that bought the Cullinan mine from the diamond giant De Beers for $148m in 2007. The group recently acquired the 37 per cent of the mine it did not already own. Last year, the company received a record $9.4m for a 7-carat blue diamond produced at the mine.

Cullinan has an enviable history of producing the world's largest diamonds. The biggest ever, the 3,016 carat "Cullinan", was mined there in 1905. It was bought by the Transvaal government and given as a gift to Edward VII. It was eventually cut to form the Great Star of Africa and the Lesser Star of Africa. They were then placed in the Sceptre with the Cross, which forms part of the Crown Jewels.

Yesterday's sale also confirms Chinese and Hong Kong investors as major investors in the precious gem market. China is now the world's second biggest diamond buyer, having overtaken Japan last year. Petra's blue diamond was bought by another Hong Kong investor, Joseph Lau.

Unlike most other commodities, diamonds have continued to rise during the economic downturn. In the first 11 months of 2009, diamond prices increased by 48 per cent, according to the independent valuer WWW International Diamond Consultants.