Last week I reviewed some of the countries whose vast diamond production and sales policies currently shape the industry. I focused on the 6 largest producers, which account for over 90% of global production by value. However, there are also as many as 22 different countries that reportedly produced diamonds in 2014.
At present, none of these smaller diamond-producing nations has enough volume to fundamentally change the industry; however, times are changing and some of these countries have new mines on the horizon, while others are slipping backwards as mines close or reduce output. To complete the picture, I will focus on some of the smaller diamond producers, to address the impact that their policies have had in the past, or might have in the future.
The world’s 7th largest diamond-producing country is the small land-locked kingdom of Lesotho. According to data from Kimberley Process Statistics, Lesotho sold diamonds valued at $343 million in 2014, from only 346,000 carats. This amounts to an average value of nearly $1,000 per carat, by far the highest average price of any national diamond production in the world. This is principally owed to the Letšeng mine, which produces a large proportion of high-value diamonds that sold for an average value of $2,540 per carat in 2014.
Lesotho is surrounded entirely by South Africa, and is only slightly larger than Belgium – boasting a sparse population of 2 million people. Lesotho is well known for its mountainous terrain, and it was in its Maloti Mountains that diamonds were first discovered in 1957. For the decade following, diamonds were mined mostly by artisanal diggers under government supervision. In the late 1960s, the government requested the assistance of Rio Tinto in establishing a large-scale mine in the area, and later solicited the input of De Beers in the 1970s.
The Letšeng mine, and the diamond mining industry in Lesotho, gained a large boost in 2006 when London-based Gem Diamonds purchased a controlling interest in the property; it has been mining diamonds there since. Letšeng has produced some of the largest and most important diamonds in history over the past decade.
The future for Lesotho might very well be brighter than its past. There are now several mining operations in the country, more have plans underway to begin soon. The nearly 20-hectacre Kao mine is now the largest producer of diamonds by volume in the country, and mining in the Liqhobong mine is scheduled to commence at the end of 2016. At full production, Liqhobong is expected to produce as many as 1 million carats per annum. The Mothae mine is also currently in the feasibility study stage, and could add to the country’s output in years to come.
Contrary to Lesotho, Australia produces a large number of carats at one of the lowest average values in the world. The country currently has only two diamond-producing mines, Argyle and Merlin, since the Ellendale mine was closed in 2015. Also contrary to Lesotho, Australia’s annual diamond production is expected to steadily decline over the next few years.
The Argyle mine has been in operation since the early 1980s and is the only economically sound diamond-bearing lamproite pipe in the world. The mine’s open pit, which at some points reaches as deep as 600 meters, has been exhausted, and mining has moved underground. This is the reason for the nation’s gradual decline in production.
However, Australia has long been among the world’s elite suppliers of fancy color diamonds, including yellows, pinks, and reds. It could be argued that the Argyle mine helped put pink diamonds on the map, and the Argyle annual pink diamond tender is consistently a well-attended industry event. Similarly, before its closure, Ellendale was known as a principal source of fancy canary yellow diamonds.
Argyle and Australia are often credited as the reason for India's flourishing diamond manufacturing market. The Rio Tinto mine operator faced the challenge of creating a market for diamonds that were previously deemed virtually valueless, owing to their small size and poor quality. In a sort of business-government partnership with India, Argyle provided a large and consistent supply of diamonds, and the Indian cutting industry was reborn.
Zimbabwe is an example of a country with dwindling diamond production. The Marange diamond fields are believed to possess vast quantities of diamonds; some estimates suggest that up to 25% of the world’s diamond reserves by volume are located there. However, the low value of the diamonds often makes it unprofitable to mine anything aside from the easily accessible alluvial gravels that rest primarily at the surface.
Diamond production in Zimbabwe has existed for a long time, and has had a troubled past. The discovery of the Marange fields in 2006 opened the country to large-scale mining. However, Zimbabwe was banned from exporting diamonds under the Kimberley Process Certification Scheme until 2010. Zimbabwe’s official production in 2010 was over 8 million carats; this number peaked in 2012 at over 12 million carats – nearly 10% of the world’s production by volume. However, recent production has been on a steady decline, and it is believed that much of the more easily accessible surface gravels have been mined out. The remaining reserves are deeper underground and require more sophisticated equipment; Zimbabwe is unlikely to invest in this equipment, given the low inherent value of the diamonds there.
Zimbabwe recently chose not to renew the mining licenses of several active companies mining in the area, a move that nationalizes the country’s diamond assets. President Robert Mugabe is on record saying that the country may elect to partner with an established diamond company. At present, several mines have been temporarily closed, and it remains to be seen if Zimbabwe’s production in the upcoming years will reach anywhere near the last few years.
Sierra Leone is rich with diamonds, covering approximately 7,700 square miles of land, mostly in alluvial deposits in the Central/East Kono, Kenema, and Bo districts. Sierra Leone’s reported diamond exports have been increasing steadily, from $78 million in 2009 to over $220 million in 2014, according to Kimberley Process Statistics; diamond exports are among the most important foreign currency exports in the country.
Sierra Leone was mired by a decade-long civil conflict in the late 1990’s, in which diamonds were used as monetary exchange for weapons and war. However, since holding democratic elections in 2007, the country has been at peace, with diamond production increasing steadily to the benefit of the public. Time will tell if this trend continues, but Sierra Leone has shown signs of being an increasingly important player in the rough diamond industry.
DRC (Democratic Republic of Congo)
Similar to Sierra Leone, The DRC has had a troubled past in diamond production, and mining data might not be entirely accurate. The country is a significant producer of rough diamonds, representing more than 12% by carat volume, however value data is uncertain.
Much of DRC’s diamond production comes from an estimated 700,000 artisanal diggers alongside a small presence of diamond mining companies, including De Beers. Despite allegations of human rights abuses and difficult conditions for the country’s local diggers, the DRC has the potential to develop into a more important player in the global industry.
Interestingly, India, which was the world’s only diamond producer for nearly 2,000 years, may become a diamond-producing country again. In 2003, Rio Tinto discovered the Bunder mine (meaning "monkey" in Hindi) in the central Indian state of Madhya-Pradesh. Although still in the development stage, in 2014 it produced 37,000 carats valued at $6.7 million. In 2015, the company announced that it would spend $500 million to bring the mine into production. Commercial mining at Bunder is expected to produce 2-3.5 million carats per year, and once again establish India as a diamond-mining locale.
Brazil was a key player in maintaining the significance of diamonds among the European elite after many Indian mines were depleted by the mid-1700’s, and before South Africa’s rich finds a century later. Brazil continues to produce small quantities of diamonds, officially pegged at 57,000 carats valued at $2.7 million in 2014.
While these smaller mining jurisdictions play a relatively insignificant role in the total global diamond supply, each producing country could be just one big find away from changing rough diamond distribution.
The views expressed here are solely those of the author in his private capacity. No one should act upon any opinion or information in this website without consulting a professional qualified adviser.
Diamond industrialist Ehud Arye Laniado is a man passionate about diamonds. From his early 20s in Africa and later in Belgium honing his expertise in forecasting the value of polished diamonds by examining rough diamonds by hand, till today four decades later, as chairman of his international diamond businesses spanning mining, exploration, rough and polished diamond valuation, trading, manufacturing, retail and consultancy services, Laniado has mastered both the miniscule details of evaluating and pricing individual rough diamonds and the entire structure of the diamond industry. Today, his global operations are at the forefront of the industry, recognised in diamond capitals from Mumbai to Tel Aviv and Hong Kong to New York.