Diamonds aren’t forever

By THE DATA TEAM

THE Gahcho Kué diamond mine is an astonishing endeavour. Built by De Beers in the frozen tundra of Canada’s Northwest Territories, it is the biggest new mine in the world in over a decade. De Beers has no plans for another. The global supply of diamonds is expected to peak within a few years. This marks a turning-point for an industry built on manipulated supply and skilfully cultivated demand.

De Beers was founded in 1888 to mine diamonds in South Africa; by 1902 it accounted for 90% of the world market. The firm boosted demand through clever marketing, penning slogans—memorably, “a diamond is forever”—and inventing social rules, urging men to spend two months’ pay on a gift for their affianced. Tight control of supply continued until the 1990s. New discoveries in Canada, a civil war in Angola and the collapse of the Soviet Union all made supply harder to manage, meaning that more diamonds were sold outside the cartel. In 2000 De Beers said it would stop strictly controlling supply, selling instead to carefully vetted buyers.

Competitors such as ALROSA, Russia’s state-owned diamond company, produce more stones than De Beers, though they earn less. New firms have cropped up, too. De Beers is still the biggest producer by value, but it accounts for only a third of global sales, down from 45% in 2007. The diamond market looks increasingly volatile. The company’s sales fell by 34% in 2015, before bouncing back by 30% last year. Because it controls just one-third of the market, any production cuts have a limited effect on total supply.

That supply is dwindling. Most diamonds lie in riverbeds, on coasts or in extinct volcanoes, or pipes, buried under soil or lakes. The easy-to-reach diamonds have been extracted already. Of the 7,000 or so pipes sampled by explorers, just 15% have held diamonds and just 1% (about 60) have held enough of them to justify building a mine. Gahcho Kué cost $1bn. That was deemed worthwhile, compared with the costs of finding and opening a mine elsewhere. As a result, global diamond production is expected to peak in 2019, according to Bain, a consultancy. It projects that supplies of new diamonds will then fall by 1-2% each year until 2030. De Beers continues to explore in Canada, South Africa, Botswana and Namibia. Nonetheless, big discoveries by De Beers—or any other firm—are unlikely.

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