Why diamonds will run out sooner than you think

More than 30 major diamond mines reaching their End of Life by 2030, accelerating conditions of dwindling rough supply and resources and other similar indicators are reasons enough to send jitters among the earth mined diamond producers and manufacturers, and which strongly signal why diamonds will run out sooner than one can fathom the gravity of the situation. Such a scenario not only adversely impacts the diamond miners but also other industry players across the pipeline.

 

 

Major analysis forecasts falling Roughs supply

  • Rough diamond production is forecasted to fall by more than 50% by 2030, from their current levels.
  • The scenario will further aggravate by 2050, when only 14 million carats of global rough diamond production is predicted, by Frost & Sullivan.
  • Bain report has predicted that diamond production will decline by 2% annually from 2019.
  • McKinsey and De Beers have also made similar forecast.

 

Exhausting diamond mines

  • Mines like Argyle (Australia) and Ekati (Canada) now have reserves for only 7 years.
  • Argyle, the third largest diamond mine by volume, will reach its End of Life by 2020.
  • Major mines in South Africa (Venetia, Kimberly, Voorspoed) and in Botswana have less than 10 years of reserves.
  • Voorspoed mine has life only till 2021.
  • Venetia mine has already exhausted its open pit resources.
  • De Beers is ending its Kimberly operations, is currently retreating its tailing dump and the mine would come to end of life in 2018.

 

No New Mines

  • No new economically viable mine has been discovered since last 2 decades.
  • Success rate for finding new economic diamondiferous mine is very meager, at less than 1%, according to De Beers’ estimates.
  • Charles SkinnerDe Beers’ head of exploration had mentioned during last year’s Kimberley Diamond Symposium that out of the 8,000 kimberlites found till date, only 67 have diamonds that make the mine economically viable.
  • Many of the earlier finds have not been able to successfully commercialize. Finds like Bunder mine in India is yet to see the light of the day.
  • It takes decades to start full-fledged operations for any new find. Liqhobong diamond mine has been around for 60 years but its production has just begun.

 

Exploration budgets of major miners have reduced, who are undergoing asset sale

  • Overall diamond exploration budgets of miners have reduced by around 50% from their 2007-08 levels.
  • Major miners including Rio Tinto are reducing their CAPEX and exploring asset sale.
  • De Beers sold its Kimberly Underground to Petra Diamonds due to economic unviability.
  • Stephen Lussier, executive director of De Beers had mentioned that “It looks like the world is getting to the end of that period of diamond production expansion”.

 

Mines going underground

  • Many of the open pit mines are now converting into a more expensive and sometimes unfeasible underground operations in order to find the last left diamonds.
  • But underground resources yield fewer diamonds and have high operating costs associated.

 

Declining diamond production

  • Alrosa, world’s biggest diamond miner by volume, witnessed a decline in its production capacity in first half of 2014
  • Newly operational Ghagoo mine is forecasted to produce only 200,000 carats, far less than Kimberly’s 2012 capacity of 755,000 carats

 

Widening Demand-Supply Gap

  • The demand-supply gap is increasing and is expected to widen in coming years, as predicted by Bain.
  • Demand for roughs is expected to rise gradually to 292 million carats by 2050, leaving a tremendous 278 million carats Demand-Supply gap. A 41 million carats gap is forecasted, by Frost & Sullivan by, 2022 itself.

 

Reducing Inventory

  • Inventory of roughs is also declining since its peak in 2005.

 

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