The future supply of the diamond market, already stretched to its limit by increased demand in the U.S., India and China, are getting ready to be dealt an even worse blow as we approach 2006. This is due for the most part, to the recent announcement that the Argyle Mines in Australia are going to either shut down completely, or cut production in half next year. Most experts believe at this time that the mines will close.
The Argyle Mines, located in the Kimberley Mountains of Australia, produce the highest volume of diamonds in the world. Most of the smaller goods, those marketed to the every day consumer, originate there, and the impact on that particular segment of the market (under 2 carats) will most likely be felt the most. Some of the African nations have said they are going to try and ramp up production to fill in some of the void left by the Aussies, but most feel that no African nation is big enough to make up much of the shortage that lies ahead.
Marketing 101 tells us that when demand is higher than supply, prices are sure to rise, and the diamond market, already hit with a number of price increases this past year, will be passing along substantial increased costs to the consumers in the near future. Just last week, DeBeers announced another price increase, this time 3%, on their diamonds.
Don't blame DeBeers for all of this, however. Now, I'm not giving them a free pass on this one, but the African miners have had their share of rewards with all of this going on all around the world. They have held DeBeers hostage in the market, holding out their precious diamond rough to get what they want in return, be it higher costs, or something else -- like pressuring DeBeers to bring some of its' factories to Africa, something that is actually being done as I write this article tonight.
If you are planning a wedding in 2006, buy the rings now. Trust me, in the long run, you'll be glad you did.
Argyle Mine To Remain Open
(12-12-05)
The Argyle mine, the world's largest producing diamond mine, received a $760 million shot in the arm from Rio Tinto this week . The company plans to develop an underground project at Argyle.
An additional $150 million will be spent on a related open pit cutback, which will enable production to continue from the end of open pit mining in 2008 to the ramp up of the underground mine. Development work will continue and construction of the underground mine will begin once government approvals have been finalized.
Although the average annual production over the life of the underground mine from 2007 to 2018 is expected to reach approximately just 60 percent of Argyle�s historical annual average of 34 million carats and of similar quality, the fact that the mine will not shut down as previously announced is a tremendous boost in the arm, primarily for the industrial as well as for the colored diamond business.
"This investment springs from Rio Tinto�s proven capacity to develop large scale underground mines and to compete successfully in the global diamond business,� said Rio Tinto Chief Executive Leigh Clifford. �It will allow the Argyle mine - the world�s largest diamond mine- to operate beyond 2008."
Clifford added, �The Argyle brand and its signature stone - the pink diamond- will continue to play an important role in the global diamond market,� said Ketih Johnson, chief executive of Rio Tinto Diamonds. �This is a particularly good decision for the East Kimberley area, the Indian cutting and polishing industry and the affordable fashion jewelry industry, each with a degree of dependence on the Argyle business."
