Diamonds have not only been sought as symbols of wealth and power, but also the common symbol of love and devotion, and even for industrial and technological uses.   In five thousand years of recorded history, a great many diamonds have come out of the earth. However there may be no greater period for diamond mining than the last 200 years. In just the last 60 years, some of the largest mines have been discovered.

Arglye Mine - Image Courtesy of Reise-Line Wikipedia Commons

Sifting for Treasure

While diamonds are forever, diamond mines are finite resources. As existing mines age and deplete their surface operations, the next step is to move to underground mining to extend the life of a mine. However, this process is lengthy and adds significant expense to the cost of production. A good example of this is the conversion of the Venetia mine in South Africa which is estimated to take about a decade. Even then it is only expected to extend the life of the mine another 25 years, while extracting fewer stones at higher cost. The Venetia was originally opened in 1992, giving this mine a possible lifespan of less than 50 years.

Exploration and development cost billions of dollars, and the finds resulting may not be commercially viable at current levels of mining technology. Diamond exploration expenditures reached a high point in 2008, with over $1 billion being spent worldwide to find new resources, but then fell off a cliff the next year during the start of the Recession with only $370 million being spent. Total expenditures for diamond exploration are estimated to be in excess of $7 billion from 2000 to 2013.

Currently Russia and state-owned diamond mining company ALROSA account for over 50 percent of all exploration spending – largely in Russia, but with some partnerships in mines outside of the country. Further, in the years between 1993 and the present, more diamonds were mined than in all of the thousands of years previously. Australia is estimated to have the largest untapped diamond reserves, but the costs of exploring, developing, and producing diamonds may not make those ventures commercially viable.

Is the Effort Worth the Cost?

Rare colored diamonds in colors such as yellow, pink, red, blue, and even green are reaching tremendous heights in the marketplace with investors making them as an asset class all their own. Yet even in the face of soaring prices for colored diamonds, Rio Tinto’s Argyle mine in Australia, which is the source of more than 90% of the world’s pink diamonds is projecting 2020 as the point in which that mine ceases production. This announcement came after the mine was converted to underground mining. Metaphorically speaking, if this were a soccer match, the mine would be playing in “extra time” right now. It is estimated that there are only about 500 tender quality pink diamonds to be extracted in this mine.

DeBeers states in a recent report that while mining companies are expected to continue exploration, the probability of striking a major find is low. Just one in seven from 7,000 Kimberlite pipes in the last 140 years have been diamondiferous, and of the 1,000 only 60 have been deemed economically viable to proceed into development. DeBeers even recently commissioned a 113 meter first of its kind diamond exploration ship to search for diamonds in the waters off Namibia.

What’s Next?

The ability to find and develop new resources for colored diamonds is especially under pressure, with only a few sources of these rarest of the rare operating at all. Between the costs of working aging mines, exploration of new sites, development and production, diamond mining companies are being squeezed hard between the pressure to find new sources and at the same time to cut capital costs. If pressure alone could create a diamond, the mining companies would not be facing such shortages of their rarest and most lucrative product.