SHORT SUPPLY Although the diamond projects and expansions will create additional rough diamond supply in the short term, this supply may not meet eventual demand
The impending shortage of natural diamonds, with demand forecast to exceed supply within the next decade, is encouraging the establishment of new mines and the development of additional diamond projects, suggests World Federation of Diamond Bourses (WFDB) president and diamond polisher Ernest Blom Diamonds owner Ernie Blom.
“ . . . [C]urrent diamond projects and expansions in South Africa and Southern Africa, as well as diamond major De Beers Canada’s Gahcho Kué project, in Canada – the world’s largest diamond mine currently under construction – will boost the diamond market,” he says, noting that the Gahcho Kué mine development is more than 50% complete.
Meanwhile, South Africa is the fourth-largest diamond producer in the world and includes the current diamond mine and plant expansion projects of Petra Diamonds’ Cullinan C-Cut expansion and processing plant expansion programmes, in Gauteng, and De Beers’ Venetia mine underground project, in Limpopo, which entails an openpit-to-underground mine conversion.
Blom emphasises the potential opportunities in Southern African countries, which underlines his positive sentiment regarding the future outlook for diamond production.
He highlights Angola’s “vast potential” to increase its productivity in diamond mining, diamond miner Lucara Diamonds’ finalising its Karowe mine plant optimisation project, in Botswana, in addition to the country’s standing as a major diamond producer that is continuously exploring new pipes, and the Democratic Republic of Congo’s encouraging resources.
Supply Deficit
Blom also warns, however, that, while the diamond projects and expansions will create additional rough diamond supply in the short term, this supply will not meet the eventual demand that will see a shortage of $7-billion to $10-billion in rough diamonds in the longer term.
Meanwhile, De Beers, in September, notes in its ‘Diamond Insight Report 2014’ that, while demand for diamonds is expected to continue in the long term, global rough diamond production has declined, with the 145-million carats produced in 2013 being below the peak of 175-million carats produced in 2005. Diamond supply is expected to plateau in the second half of this decade before it is expected to decline from 2020.
Blom notes that the concerns of falling profitability, declining bank credit and rough diamond prices are exacerbated by the gradual losses of polishers in the industry, as a result of noncompetitiveness in the production per carat by large centres such as China and India. These are some of the key issues that he highlighted at the WFDB’s and the International Diamond Manufacturers Association’s 2015 Presidents Meeting held in Tel Aviv, Israel, last month.
Blom therefore strongly backs the suggestion that diamond sellers and cutters need to work closely with producers, as well as governmental institutions, to ensure profitability in all sectors of the supply chain.
Other suggestions at the meeting included diamond industry members rethinking their business strategies and considering whether they should be paying such high prices for rough goods, Mining Weekly reported last month.
Blom concludes by noting that while the diamond industry needs more credit globally, which could be provided by the banking community and diamond producers, the high prices could be reduced if buyers show restraint and buy only profitable parcels.