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11 posts from August 2006

Studying Diamonds Movements Under Earth's Surface

Diamonds form 75-120 miles below the earth’s surface where the high temperature and high pressure melt rock and forces the carbon atoms to form into new rock crystals.  Conditions necessary to form diamonds are tenuous because if the temperature rises or the pressure drops then the diamond crystals may melt or even dissolve. 

Kimberleypipedrawing Even when diamonds crystals form, they are still located far below the earth’s surfaces.  It takes a violent volcanic eruption, called kimberlites that propel the diamonds up through the earth’s crust before they have a chance to be crushed and pulverized on any other path to the surface.  Diamonds are extremely hard which means they are highly resistant to scratching but they can break when hit at the right angles with force as rocks shift in movements over time in the earth’s crust.

Geologists estimate that diamonds arrived at the surface via kimberlites from 45 million to 2.5 billion years ago.  Many of the diamonds are still locked up in the softer kimberlite (sometimes called blue ground) and lamproite rock in the carrot-shaped pipes.  Because these types of rock are softer than the surrounding rocks, the forces of nature over millions of years eroded away some of the material leaving the harder diamond crystals to settle in river beds and eventually wash out to sea.  Diamonds moved and deposited due to erosion are called Alluvial Deposits.

A young researcher is exploring the process involving diamonds deep underground.  The results of his research are being presented as part of the Fresh Science national competition.  The diamond industry, in particular the Australian diamond industry, hopes that a better understanding of the force that move diamonds to the surface will point to other areas with diamond deposits.

The Australian diamond industry is in decline because the known deposits and existing mine production are both decreasing.  Australia has vast expanses of land where diamonds might be found if better tools can be developed to identify potential sites.


Colored Diamonds Book from GIA

Coloreddiamondbook_1 Gems & Gemology in Review: Colored Diamonds is a newly released book from the Gemological Institute of America (GIA) that explores the allure of colored diamond.  Edited by John M. King, the illustrated book takes more than 70 years of articles and notes and provides a 340-page publication that taps into the recent passion for natural-colored diamonds.

King is the technical director of the GIA Laboratory in New York and is an authority on fancy-colored diamonds with more than 25 years of laboratory experience.

The book details various aspects of colored diamonds including:

  • Historic and Notable Colored Diamonds
  • Characterization of Colored Diamonds
  • Color Grading of Colored Diamonds
  • Colored Diamonds with Unusual Characteristics

The book delves into the reasons that colored diamonds have gains so much fame and attention even though they represent such a small percentage of the world’s diamonds.  Diamond cutting innovations, the discovery of the Argyle mine in Western Australia, the impact of the media, and GIA changes in color diamond grading are all topics addressed in this authoritative document.

For the diamond lover, this book is a “must have” and is available for purchase from the GIA for $59.95 plus shipping.


Warning for the Diamond Industry

Maurice Tempelsman, Chairman of DTC Sightholder Lazare Kaplan, spoke to investors recently and forecasted tough times for the diamond industry in the near future.  He based is gloomy projection on the problems confronting the jewelry industry including the following:

  • Diamond industry is transitioning from its historical supply-driven structure to demand-driven economics.
  • Prices of rough diamonds escalated to unsustainable levels in recent years creating intense pressure on margins, a situation that is just now beginning to stabilize.
  • Rising interest rates have pushed debt levels so high that they are now threatening the financial integrity of companies throughout the diamond industry pipeline.
  • The slowing economy and high interest rates have reduced the inventory levels of retail jewelers in many country, but in particular the United States.

The impact of rising interest rates on the economy and the cost of debt are creating “an extremely challenging environment for the foreseeable future,” according to Tempelsman.  This dire prediction from one of the recognized strategic thinkers in the diamond industry, suggests a tough business environment for the diamond industry.

While the average price for rough diamonds appears to have declined 4 to 5 percent in recent months, most of that decline has been in smaller, lower quality stones while the larger, high-quality diamond prices have continued to rise.  The manufacturers have absorbed any price relief as they struggle with increased financing costs.  The retailer and the consumer only see increasing prices, while faced with higher business expenses and cost of living.


Jericho Diamond Mine Officially Opens

The $120-million Jericho diamond mine has been operating since January of this year, began commercial production in July and celebrated its official opening this month. 

Nunavutmap The open-pit mine, located about 400 kilometers north of Yellowknife.  This is the first diamond mine in Nunavut, the largest and newest of the territories of Canada.  Nunavut was separated officially from the vast Northwest Territories on April 1, 1999.

The Jericho diamond mine is owned by Tahera Diamond Corp and was partially financed by New York based Tiffany & Co. which markets the diamonds produced at the mine.  The mine’s processing facility crushes and sift about 2,000 tons of kimberlite per day to produce about 2,000 carats of diamonds daily.  In June the mine produced a 59-carat diamond worth about $400,000 which raised the hopes for more larger diamond discoveries in the future.

The Jericho mine is Canada’s third producing diamond mine.  The Ekati and Diavik diamond mines are located in the Northwest Territories, near the Nunavut border.  These two mines produced more than $1.7 billion worth of diamonds in 2005, making Canada the world’s third-largest producer of diamonds by value.

The Jericho operation is expected to grow to produce 500,000 carats of diamonds a year with a projected life of eight years.  The open pit is about 300 meters long and 75 meters wide.  While the Jericho mine is about one-eighth the size of the other Canadian diamond mining operations, it proved that smaller operations are economically feasible and quicker to place in production.  There is vast diamond potential in this desolate Arctic region and the Jericho mine demonstrates that smaller projects have a bright future.

In 2007, De Beers Canada Corp. is expected to open its Snap Lake diamond mine located 220 kilometers northeast of Yellowknife.  The projected production at Snap Lake mine is 1.5 million carats per year.


Missing Bag of Diamonds

It seems like no matter how tight security is around diamonds, there is always the opportunity for something to go wrong.  Police are now investigating the apparent theft of a bag of diamond worth more than $1.1 million (US$) at a Sydney, Australia jewelry trade show. 

More than 500 diamonds were in a sealed security bag that was suppose to be transported by armored car and then stored in a vault off-site in advance of the trade show.  Police speculate the bag was either taken on the way to the show, or after it arrived.

Security logs and security camera records are being reviewed in hopes of finding clues as to when and where the bag of diamonds when missing.


AGS Laboratories Introduces Emerald Cut Grade

Agslogo The American Gem Society (AGS) Laboratories has instituted a new Performance-Based Cut Grade system for the emerald cut.  In 2005, the AGS introduced a cut grade system for the round brilliant and the princess shaped diamond.  The new cut grades include the three basic emerald cut shapes: square emerald cut, rectangular emerald cut, and the octagon step cut.

The Performance Based Cut Grade system was a move away from the proportion-based grade system previous used which relied on measurements of the diamond fitting within prescribed ranges.  With the new cut grade system, ray-tracing software monitors light’s path traveling through a diamond.  The software quantifies the amount and quality of light returned to the viewer in terms of brightness, dispersion, leakage, contrast, and weight to size ratio.  In addition to the light performance, the traditional proportions, polish and symmetry of the diamond are considered in determining a final cut grade.

The AGS has become the industry leader in fancy shaped diamond cut grades, as they are the only major grading laboratory to establish cut grades for princes and now emerald diamond shapes.  Because it is relatively easy to apply their new Performance Based Cut Grade system to different shapes, they plan to introduce cut grades for other fancy shapes in upcoming months.


Mining Diamonds in Ontario

Mapcanada Exploration for diamonds in Northern Ontario continues to accelerate as more diamond-bearing kimberlites are discovered.  Northern Ontario has huge potential as a major diamond-producing region but like most diamond sources in Canada, accessibility is very difficult.  Many areas have yet to be explored because they are so isolated in terms of the terrain and weather.

The world’s diamond exploration efforts are focused on Canada.  Diamond mines in South Africa, Botswana and Australia are coming to the end of their productive life and there are no major new discoveries in those areas to replace the supply.  Canada is currently the third largest rough diamond supplier in the world and diamond exploration experts believe there is abundant resources to fuel even more growth.

Like most natural resource efforts in Canada, diamond mining faces challenges to major mining efforts while maintaining environmental protection.  Ontario is home to 400,000 square kilometers of northern boreal wilderness, one of the largest remaining intact wilderness areas on the planet.  These fragile ecosystems took millennia to evolve and creatures like the woodland caribou will be driven to extinction if large-scale development efforts do not plan for conservation.

The Victor Diamond Mine is Ontario’s first diamond mine.  It is owned and operated by DeBeers Canada. The project will create 600 construction and 375 new, full-time jobs in Attawapiskat and nearby communities. Over the long term, the project could generate up to 3,200 jobs across the province.  The mine is expected to begin production in 2008 and turn out about 6 million carats of diamonds. In total, DeBeers Canada will invest over $980 million in the project, which could pump more than $6 billion into Ontario's economy.

Learn more about DeBeers Canada at http://www.debeerscanada.com/


Challenging Global Rough Diamond Market

Loosediamondsrough While the retail market for diamond jewelry remains active, the outlook for global rough diamonds is expected to be difficult in the second half of 2006.  Rising fuel prices, higher interest rates, conflict in the Middle East, and global stock market volatility create pressure on consumer budgets and thus diamond purchases.

Diamond production worldwide has kept DeBeers earnings at record levels but the increased production coupled with slowing growth in retail sales is exerting downward pressure on rough diamond prices.

The increase in interest rates is especially critical for the diamond cutting centers in Belgium, China, India and Israel.  The flow of diamond material through the cutting centers requires large debt and corresponding interest expenses.  The same economics apply to the jewelry manufacturing where record gold and platinum prices have put strains on the financial viability of operations.

While rough diamond suppliers like DeBeers and ALROSA are showing record earnings and retail sales are growing, the diamonds distribution system is feeling the pressure of reduced margins and growing debt expenses.  Cutters and wholesalers face critical cash flow challenges and revising their policies with retailers.  The retail diamond industry historically used the wholesalers for financing by getting diamonds on memo and delaying payment.  To survive the wholesalers and cutters now must be more selective of which retailers they do business with and the length of time they allow for payment.

For the consumer, this means less “memo” inventory in the jewelry stores.  These memo diamonds, an extension of the wholesaler’s inventory, are often the higher quality items in the store.  Diamond shoppers can also expect to see more emphasis on a quicker purchase decision.  Taking weeks or months to decide on an item ordered in on memo from a wholesaler create pressure on the wholesaler’s cash flow.


Dubai Diamonds

Dubai_diamond_exchange In May of 2006, Dubai Gems Club (DGC) began operations with sales of 30,000 carats of rough diamonds worth $2.3 million.  The diamonds were sold by ALROSA, Russia’s diamond exploration and mining company that is the world’s second largest rough diamond producers, next to DeBeers.

Dubai Multi-Commodities Centre (DMCC), established by the UAE to grow and control the Gulf region diamond market, is the parent of the Dubai Gems Club.

The Gulf region is now the fourth-largest diamond market in the world with 47 percent growth in sales over the past four years.  Annual diamond sales are close to $2 billion.


50th Diamond

CraterdiamondsCrater of Diamonds State Park was in the news again with the discovery of a 2.18 carat white diamond.  Mike Ellison moved to Arkansas last year and now devotes five days a week digging for diamonds at the state park near Murfreesboro, Arkansas, the world’s only diamond producing mine open to searching by the public.

The 2.18 carat diamond was the 50th diamond Mike has found and the stone is the 273rd diamond discovered at Crater of Diamonds State Park this year.