Diamond mining on the cusp of exhaustion

Since 1990s no new Tier-1 diamond mine has been discovered and only around 30 significant mines are currently producing diamonds, according to Petra diamonds. Charles Skinner, De Beer’s head of exploration agrees. In the recent Kimberley Diamond Symposium, he mentioned that out of the 8,000 kimberlites found till date, only 67 have diamonds that make the mine economically viable and 7 mines generated 65% of total global rough diamonds by value.

However, most of these significant mines are fast depleting. According to Bain, global output of 128 million carats in 2012 was 27 percent lower than that in 2006. De Beers has predicted that global production will decline from 2020, sparking a rise in prices. Bain has also forecasted that in 2019, production will decline by nearly 2% and loss would continue for at least five years.

De Beers might end its involvement in Kimberley. It has already sold its underground mine to Petra Diamonds back in 2010, as the operations were not economically viable for De Beers to continue its presence. It is retreating its tailing dump, which would come to its end of life in 2018.

Voorspoed mine has life till 2021 and Venetia mine has exhausted its supply from open pit mine, forcing De Beers to move to more costly underground operations. Alrosa faced a decline in its production capacity in first half of 2014, and company’s profits came from weakening of Russian ruble against the dollar.

The newly operational mines such as Gem Diamonds’ Ghaghoo mine do not come close to the production capacity that De Beers had in Kimberley. Kimberley generated 755,000 carats for De Beers in 2012 whereas forecast for Ghaghoo mine is only 200,000 carats.

Though production is rapidly dwindling, the demand for diamonds is only soaring, fuelled by rising middle class in China and India. Bain projects rough diamond demand to climb to $26 billion by 2023 from about $15 billion in 2012. The widening demand-supply gap will only increase the diamond prices in the near term but may shift the consumer demand to other luxury goods once diamond prices reach a break-point.

Unless some substantial find is made, Diamond industry faces a mammoth problem with serious shortage imminent.



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