The world’s supply of diamonds has been eroding over the last two decades.
Coupled with a sharp rise in demand from China’s burgeoning middle class, analysts believe the price of diamonds is set to go up.
Only around 30 significant diamond mines are in production today, according to Petra Diamonds, and a tier-one mine hasn’t been found since the 1990s, despite billions spent on exploration.
Mining companies are bracing themselves for an inevitable decline in production from 2019. As demand begins to outstrip supply in the coming five years, prices inevitably will rise. Already diamond auctions are attracting greater interest.
Some estimates say that the price of diamonds has already gone up by 7% this year and could continue to rise by some 7% a year in future.
As existing mines age, their production falls. Finding new mines has been challenging. De Beers estimates that the success rate for finding an economic mine yielding diamonds is around 1%.
Mining companies are increasingly turning from open-pit mines to underground ones. These, however, cough up fewer diamonds and are more expensive to operate.
De Beers is converting its Venetia open pit mine in South Africa into an underground mine, a process that will take almost a decade. The mine makes up 40% of South Africa’s diamond production, and the conversion is expected to extend the mine’s lifespan by 25 years to 2046.
People in China are becoming increasingly partial to diamonds. While 8% of global demand came from all of Asia in 2002, by 2012 the figure had climbed to 13% just from China.
China’s affluent middle class is expected to reach a total of more than 500 million, a spurt of 60%, in just six year’s time.
