Here is a summertime conundrum to contemplate: Which forces drive business activity besides the obvious: buying, adding value and selling at a profit? There are other forces at work in the diamond industry, and they have a potentially devastating effect.
Excess capacity of manufacturing infrastructure, plus excess capacity of manufacturing, plus excess capacity of financing, minus production demand, equals price of production decline! This is the rule we need to remember, as it not only applies to today’s diamond market - it is also a rule to live by.
As stated here time and again, an excess of bank financing leads to both excess in rough diamond buying and excess in manufacturing capacity. The combination of these with apparently a lack of caution on the part of several manufacturers led us to where we are today.
Fancy color diamonds include yellow, blue, pink, green, red, and a few others. The color of most diamonds comes from trace particle impurities that are present in the carbon lattice structure of the stone as it grows below the Earth. The most common trace element in diamonds is nitrogen, which imparts a yellowish or brown tint to the diamonds, depending on its concentration. Diamonds with nitrogen impurities are called Type Ia diamonds, and represent about 98% of all gem-quality natural stones in the world. Even D-color diamonds can have trace amounts of nitrogen, but the concentration is so small that it cannot be detected without sophisticated lab equipment.
After considering the techniques that diamond exploration companies use to identify kimberlite pipes, we know that while technology and know-how have improved steadily, it is still true that only about 1% of kimberlite pipes will eventually yield an economically-viable diamond deposit. Finding a kimberlite field is by no means a guarantee of success, and a lengthy and expensive process of testing and drilling must be undertaken to test the viability of a pipe once it is discovered.
Last week I wrote about the places where diamonds are found around the world. The reality is that our planet might host enormous quantities of diamonds below its rocky surface.