Commodities & Metals

The Richest Diamond Mines in the World

The global diamond mining industry may be one of the world’s best-kept secrets. Next to anything else having to do with diamonds, that is. The four largest diamond miners in the world are De Beers Group, Alrosa, Rio Tinto (NYSE: RIO) and BHP Billiton (NYSE: BHP). De Beers is privately held, having delisted from the Johannesburg stock exchange in 2001. Alrosa is owned by the Russian government.

Read The Ten Richest Diamond Mines In The World

Until about two decades ago, De Beers effectively controlled 70% to 80% of the rough diamonds market. Because of that control, the company could fix the price of diamonds. Not only that, but those prices were nonnegotiable and could differ from one customer to another. The whole business was shrouded in secrecy that still persists today. Alrosa, for example, reveals little about individual mines, choosing instead to refer to project groups.

To compile the list of the top diamond mines, 24/7 Wall St. reviewed public documents issued by the mining companies, professional journals and websites, as well as information provided by the Rapaport Diamond Report. We’ve indicated estimates where appropriate and dates when data for 2010 were not available.

In 2010, diamond miners produced more than 133 million carats of the precious stone, which were sold for a total of about $12 billion, according to a report from the Kimberley Process Certification Scheme. The top five producing countries — Russia, Botswana, Democratic Republic of Congo, South Africa, Canada — account for more than 75% of total production by weight. This state of affairs is not unlike the oil business, where about 100 massive fields supply about half the world’s oil.

As for scarcity, diamonds are far rarer than gold. Only about 175,000 tons of gold have been mined in all of human history. The estimate for total rough diamond production is around 500 tons, of which just 20% to 30% are gem-quality stones.

The value of scarcity is indicated in the difference between the price of gold, currently around $1,800/ounce, and as much as $1,800/carat for a diamond from Lethoso’s Letseng mine. There are 5 carats in a gram and about 30 grams in an ounce, for a diamond price of $270,000/ounce. Even at the 2010 average price of $90/carat, an ounce of diamonds costs nearly three times as much as an ounce of gold.

In the 1990s, the diamond trade suffered from a connection to civil unrest in west and central Africa. Stones came to be called “blood diamonds” in the press and, finally, “conflict diamonds” by the trade. In 2003, the industry adopted the Kimberley Process Certification Scheme under which diamonds were certified and labeled as originating legally from conflict-free mines. Sales of conflict diamonds have fallen below 1% of the worldwide total, although Zimbabwean diamonds’ acceptance is being questioned.

Following is our list of the top ten diamond mines in the world in 2010. The ranking is based on number of carats produced.

10. Kimberley
> Carats: 100,000 (2010)
> Location: South Africa

South Africa’s Kimberley mine first went into production in 1871. The original mine closed in 1914 and the underground mine closed in 1995. De Beers, the original owner, sold underground mining rights to Petra in 2007, and Petra produced about 100,000 carats from the mine in 2010. De Beers is re-treating the dumps on the surface and recovered 823,000 carats in 2010 from nearly 5.5 million tons of rock.

9. Letlhakane
> Carats: 1.2 million (2010)
> Location: Botswana

The Letlhakane mine is a Debswana property, a 50-50 joint venture between De Beers and the government of Botswana. It went into production in 1975. The open-pit mine processed 3.3 million metric tons of rock in 2010 and produced 1.2 million carats. This is the deepest of the Debswana-owned mines and is located near the Orapa mine.

8. Finsch
> Carats: 1.3 million (2010)
> Location: South Africa

The Finsch open-pit mine in South Africa was once owned by De Beers, but is now owned by independent and privately held Petra Diamonds. The mine began operations in 1978, is South Africa’s second-largest by production and is estimated to have produced 1.3 million carats in 2010. Petra estimates 26.6 million carats remain to be produced.

7. Ekati
> Carats: 3 million (2010)
> Location: Canada

The Ekati mine in Canada’s Northwest Territories is 80%-owned by BHP Billiton. The open-pit mine began operations in  1998 and processed 4.93 million metric tons of rock in 2010, yielding less than 1 carat/metric ton of diamonds. The Ekati mine produces about 3% of the world’s annual volume of diamonds by weight and 9% of value. BHP estimates that Ekati contains about 0.3 carats/metric ton of rock. In 2010, Ekati produced 3 million carats.

6. Venetia
> Carats: 4.3 million (2010)
> Location: South Africa

South Africa’s Venetia mine is owned and operated by De Beers. The open-pit mine began production in 1992 and now produces about 40% of South African total diamond production. The mine processed more than 4 million metric tons of rock in 2010, giving a yield of about 1.1 carats/metric ton. The Venetia mine produced about 4.3 million carats in 2010.

5. Diavik
> Carats: 6.5 million (2010)
> Location: Canada

The Diavik mine is located in Canada’s Northwest Territories. Rio Tinto owns 60% interest in Diavik and is the mine’s operator.The mine went into production in 2003 as an open-pit operation that will be transitioned to a fully underground mine by next year. The kimberlite deposits are small, but produce high-grade gem quality stones. The Diavik mine produced 6.5 million carats in 2010.

4. Catoca
> Carats: 7.5 million (2009)
> Location: Angola

The Catoca mine is located in Angola and is owned by a consortium that includes Russia’s Alrosa, Brazil’s Odebrecht, Israel’s Daumonty and Angola’s state-owned mining company. The mine went into production in 1997 and claims to be the world’s fourth-largest kimberlite pipe, the geological formation from which most of the world’s diamonds are mined. The mine is expected to produce 60 million carats over its lifetime, about 35% of which are gem quality. Production in 2009 totaled 7.5 million carats.

3. Orapa
> Carats: 9.53 million (2010)
> Location: Botswana

Orapa is another Debswana-owned mine. The mine was opened in 1971 and is an open-pit mine from which nearly 13 million metric tons of rock was processed in 2010, or about 1 metric ton for every 1.3 carats. The Orapa mine produced 9.53 million carats in 2010.

2. Argyle
> Carats: 9.8 million (2010)
> Location: Australia

The Argyle mine is located in northwest Australia and is owned and operated by Rio Tinto. The mine began production in 1985 and has produced more than 750 million carats through 2010. The mine is the world’s largest producer of pink diamonds, even though the Argyle Pinks, as they are known, account for just 0.01% of production. The Argyle mine produced 9.8 million carats in 2010.

1. Jwaneng
> Carats: 11.5 million (2009)
> Location: Botswana

Jwaneng is owned by Debswana, and the mine was opened in 1982. It now produces 60% to 70% of Debswana’s total earnings. De Beers claims Jwaneng is the richest mine in the world. In 2009, the mine treated 8.2 million metric tons of rock to produce 11.5 million carats. That’s less than 1.5 carats per metric ton of rock.

Missing from this list is any mine owned by Russia’s state-owned diamond-mining company Alrosa. Russia produced 34.86 million carats in 2010, of which 34.3 million carats are attributed to Alrosa. It is reasonable to assume that at least one of the company’s mines would appear on this list, but Alrosa does not report production from individual mines (at least as far as we could discover). The company owns and operates ten open-pit mines and nine alluvial deposits, including the Mirny pit, the second-largest man-made hole in the world.

Alrosa has announced plans for a $3 billion IPO in mid-2012. The offering would make about 20% to 25% of the company available to investors. Because there is really no other way for investors to make a big play in the diamond market, Alrosa’s IPO could be hugely successful.

Finally, a word about the U.S. There is one active diamond mine in the U.S., at Crater of Diamonds State Park in Arkansas. Visitors can dig for diamonds at the park and, best of all, if you find one it is yours. The largest diamond ever found in the U.S. — the Uncle Sam Diamond at 40.23 carats — was discovered there in 1924, well before it became a state park in 1972.

Paul Ausick

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