Diamonds Are Whatever - the Big Money's in the Small Talk

Dozens attended a highly unusual investors' conference in Tel Aviv, recently, hoping to strike it rich with a mineral exploration company courtesy of the Lubavitcher Rebbe.

Rami Shllush

“Wait a minute, are you a journalist?” D. asks me after a short introductory chat and takes me aside. “There’s a Russian I know, he was married to a woman who was a senior geologist in Russia when the Soviet bloc collapsed. When they left, she took these geological maps that the Russians had prepared before the empire fell. The two of them divorced, and he came to Israel with some of the maps. His ex-wife is in Venezuela. She sits in a helicopter in the sky and says, ‘Drill here this way, drill here that way.’”

D. tells me more. “In the meantime, her husband in Israel has these special maps. Maps the Russians photographed from above, to map out where there’s oil in the world. Now you only have to do a survey that costs $1 million, based on the information on the maps. I tried to fix him up with someone who could help with the financing, but I wasn’t successful. If you have someone you think might be interested, give me a call. And if you’re involved, you could also make some money. Half a percentage point of something like this can be quite a lot,” he whispers.

Sometimes, faith is all you need in order to make a lot of money. Faith – and being in the right place at the right time. It’s reasonable to assume that one day, when I’m old – contemplating my meager pension – I’ll think back and remember that July day when the gravy train stopped at my station, but I was too blinkered and didn’t listen to fate screaming in my face, “Come, join us, make millions!”

I won’t even be able to tell myself it was a once-in-a-lifetime opportunity, since D. was merely the start on that fateful day: The gates of heaven opened no less than three times in a single morning.

This isn’t surprising, considering the circumstances. It all happened in the conference hall of the Diamond Exchange in Ramat Gan. It was 9 A.M. on a weekday morning, and dozens of people were attending the investors’ conference of the publicly traded Shefa Yamim exploration and mining company. The reason for the meeting was the company’s intention to report to investors on progress in prospecting for gems in the Mount Carmel area in northern Israel.

There are very few companies that were born under such colorful circumstances as Shefa Yamim. Twenty-seven years ago, the then-mayor of Haifa, Aryeh Gurel, visited the Lubavitcher Rebbe, Rabbi Menachem Mendel Schneerson, in Brooklyn. Gurel met the rebbe on a Sunday, when it was the custom of the Chabad Hasidism leader to give out dollar bills to thousands of his followers.

The great Torah scholar gave Gurel a tip in a few unclear sentences: “Haifa sits on the sea, and one shouldn’t be impressed by depth. Haifa has a sea, and it has a valley, and the valley contains good and precious stones. The Lord has done something miraculous: he has hidden the stones deep in the earth, and it looks like they’re deep in the river.”

The rebbe was already 86 in 1988, and it’s not clear whether he understood the financial implications of his words. Anyway, a decade later, a few of his followers turned to a diamond dealer and rabbi named Abraham “Avi” Taub, and showed him the video of the conversation with Gurel – and pushed him to act.

As a result, in 1999, Taub founded Shefa Yamim. Today, there are those among Chabad who interpret the rebbe’s words differently, saying he was misunderstood and certainly wouldn’t have given such an important business tip to the mayor in such a hasty fashion. All he really intended to impart to Gurel, they say, was that belief in the Torah is hidden in the souls of Haifa residents – like precious gems that must be found and excavated. But what does it matter? The Shefa Yamim management refused to even discuss such heresy last week.

‘Buy the rumor, sell the news’

The colorful collection of characters attending the conference didn’t disappoint. There were no institutional investors here, but the sheer number of private investors wandering around partaking in sandwiches and quiche surprised even the organizers, who were forced to add extra chairs. Most looked like ordinary folk: 60 and older, whose common denominator was that they all had time on their hands.

“Which area are they are drilling in now? Is it a secret?” asked one investor. “Maybe there are diamonds in Kibbutz Yagur [south of Haifa]? I served there when I was in the army. If I’d known what was there, I would have gone outside and collected some dirt. Maybe in the area by the Technion? When I studied there and lived in the dorms, maybe I was sitting on a deposit and didn’t know it,” he muses.

“I know the company,” says Eleanor, who is here with her cousin. “My sister-in-law is a geologist and she told me there’s a good chance they’ll find diamonds. Typically in investments, you should pay attention to the wisdom of the masses. When something is written in the newspaper, it’s already old news. As Donald Trump says: ‘Buy the rumor, sell the news.’ Which means the minute Shefa Yamim starts holding conferences for investors – it’s not the time to buy.”

The bottom line is that the company has found some gemstones in the Carmel region – an impressive feat, so long as you don’t ask about the precise amount found or their economic significance.

The company has raised $20 million, but needs more money. Management no longer speaks of the Lubavitcher Rebbe, but of professional reports from geologists. Also, that the international diamond monopoly De Beers has examined and confirmed Shefa Yamim’s findings – and even compared them, in some ways, to well-known deposits in Africa.

Pictures of gemstones the company has discovered are shown on the screen: Diamonds, sapphires, rubies and, above all, a valuable mineral called Moissanite – a rare mineral containing silicon carbide (also known as carborundum). I doubt if any of those present have heard the name before, but it turns out it is extremely rare and valuable.

Shefa Yamim is traded on the Tel Aviv Stock Exchange and has a market cap of over 55 million shekels ($14.5 million). It lost 7.8 million shekels last year.

While Taub serves as CEO, the company’s chairman is Shimon Heiblom, an accountant who’s served in a number of senior executive positions at two banks and a number of well-known Israeli companies. He’s explaining to the attendees that “according to geologists’ opinions and findings at this stage, we are progressing in the right direction. We may be working according to the vision of the rebbe, but we are working to accepted practices and with the support of geologists.” A sentence that is certainly worthy of his 335,000-shekel annual salary.

Heiblom is not the only one in the hall who’s a retired banker. D. is, too. The impact of the banking system’s pensions, which provide these retirees with financial security and allows them to spend a workday at an esoteric investors’ conference searching for an outlet for their money, is noticeable.

A conversation with a third former banker, S., provides me with my second opportunity to make a lot of money. S. has been investing in securities for years. “I invest in nano[technology],” he reveals. “I invested in biotech and made money.” He sees Shefa Yamim as only providing a return in 30 years’ time and is therefore of no interest to him. “I recently received an offer for a partnership in a gold mine in Russia,” he says, lowering his voice. “It’s with the government there. If you have connections, come, join the investment. You’ll make big money – 120 million, easily!”

Eleanor distracts me. “All they want is to raise some money so they can build another laboratory,” she says about Shefa Yamim, and leaves.

The number one tycoon

Now it’s the company attorney’s turn to speak. In the spirit of the times, he talks about the royalties the company will have to pay to the state: 5% according to the mining ordinance. “We went back and checked the matter with the state. We do not believe there’s anyone who will dare not honor agreements,” he explains.

The company’s project manager takes the stage next. Vered Toledo, an intense ultra-Orthodox woman, details how the exploration is being conducted. A film shows a person standing with a pickax and workers sorting small stones with tweezers, but also mobile drilling towers churning out large chunks of earth. “As the company progresses in the exploration processes, the costs grow, but the risk decreases,” she says.

“Every truth passes through three stages: first it is ridiculed; then it is opposed; and finally it is accepted,” she adds, quoting the old proverb.
The investors are starting to become impatient. They want facts about volumes and estimated values, but Toledo stands firm: “Our minerals cannot be valued at the moment.” Taub follows her but provides no salvation on these points, either. He is only willing to declare, “The goal is to open an economic mine.”

A group of investors who arrived late attract my attention. They are young men in their 30s, fashionably but casually dressed, sporting trendy haircuts. They reek of money. Their unbuttoned shirts and bronzed chests make clear that they’ve spent plenty of time on the beach recently. When they leave the meeting, I run after them to understand how, at 30, they’ve reached the stage where they have enough money to allow them not to work. They’re not embarrassed to admit to their wealth, but are not keen to reveal their identities to the press.

“This is the number one tycoon. You don’t know who you’re talking to,” says one of them, pointing at his friend.

What do you do? Are you retired?

“I’m 90% retired,” he says.

And you, tycoon, what about you?

“I have a lot of businesses. But I’m leaving Israel, since they persecute the tycoons here.”

What did you think about the firm? What other things do you invest in? You don’t look like guys who invest in Elbit or Teva.

“In nano, algo [trading], forex, index options. Regarding this company, somebody said something right here: They laughed at [Yitzhak] Tshuva for years. But come on man, let’s not talk here. Come and smoke with us. A little joint outside, we’ll explain it all to you.”

I can’t, I’m working.

“No big deal, but it’ll give you a great story.”