Multifaceted Exploration
As demand rises, mining companies are looking beyond southern Africa and going to Russia, India and other countries to seek diamond deposits.
SOUTH AFRICA
DIAMONDS
DE BEERS CONSOLIDATED MINES LTD SOUTH AFRICA DIAMO
MINING
GLOBAL REPORT
DE BEERS CONSOLIDATED MINES LTD
By Rebecca Bream and Nicol Degli Innocenti, Financial Times
JOHANNESBURG, South Africa — For years, De Beers of South Africa dominated the world diamond market and production was concentrated in southern Africa. But now a number of companies — some big and established, others small upstarts — are seeking to produce the sparklers from other parts of the globe.
De Beers says it now controls less than half of rough diamond production, down from a market share of more than 70% 10 years ago. Although about 40% of diamonds still come from Botswana or South Africa, rising prices have stimulated gem exploration and mining in a wider range of countries from Brazil to India.
Diversified mining groups Rio Tinto and BHP Billiton broke into the market in the late 1990s with big projects in Canada, and state-owned production has been increasing in Russia and Angola.
Demand for diamond jewelry is strong in the United States, the main market, but is growing even faster among newly wealthy consumers in China and India.
But existing mine production has peaked, and producers have sold their stockpiles of gems. It has been 10 years since the last significant diamond discoveries — BHP Billiton and Rio Tinto's mines in Canada — and questions over future supply have pushed up prices.
These conditions have enticed more mining companies into the diamond market. Many are pursuing exploration projects discarded by other prospectors when the market was less attractive.
Diamond mining is relatively simple, but it is hard to find a suitable deposit. Kimberlites, deposits of volcanic rock associated with diamonds, occur all over the world, but only 1% contain diamonds and only 1% of those yield enough to be worth mining.
"There are fewer than 20 kimberlites in the world that matter," said Keith Johnson, chief executive of Rio Tinto's diamond division.
Diamond mines are expensive and time-consuming to develop, making it hard for smaller mining companies to succeed without help from a major firm, he said.
Central and West Africa hold great promise for diamond discoveries, analysts say, but past efforts to look for kimberlites have been interrupted by war and civil unrest.
Mano River has formed a joint venture with BHP Billiton to look for diamonds in Sierra Leone, whose civil war was declared over in 2002, and the group also is exploring in neighboring Liberia.
BHP Billiton, with De Beers, is also in talks with the state-owned diamond company in Congo about acquiring projects in that country.
Tony Williams, executive chairman of European Diamonds, said, "New sources of diamonds are very valuable, that is why people are prepared to take political risk in Sierra Leone" or Congo.
His company is hoping to develop a diamond mine in eastern Finland, in an area that shares the same geology as northwestern Russia, home to two large gem deposits.
"Russia is the wild card in the diamond business," said James Picton, a diamond mining analyst at brokerage firm W.H. Ireland Group, who thinks the country could have more diamond-producing potential than Canada.
Many Russian diamond deposits, such as the Grib kimberlite near Arkhangelsk in northwest Russia, have not been fully developed because of legal or financial problems.
Canada, Russia and West and Central Africa are regarded by analysts as the areas where big new diamond discoveries are most likely to be made, but geologists are also active in India and Brazil, encouraged by the two countries' past production of diamonds.
"Historically, India has been the home of some of the largest diamonds ever found," said Melissa Sturgess, chief executive of Dwyka Diamonds, which is exploring in Andra Pradesh with BHP Billiton.
India was the main source of diamonds in the world until 1725, when gems were discovered in Brazil. The South American country then became the leading diamond producer in the 19th century, but supply dwindled in the 20th century and southern Africa came to prominence.
River Diamonds and Brazilian Diamonds are two companies that hope they can revive the industry by using modern exploration technology to locate new deposits.
Despite all the exploration activity taking place elsewhere, Gary Ralfe, De Beers' chief executive, thinks that Botswana and South Africa will remain the main producers.
"The mines in Canada are rich but small and do not have a long life," he said. "Russia has the mine resources to continue to produce its current share of 20% of world production but not to increase it significantly. Looking ahead, there is nothing to disturb southern Africa's position as the greatest source of production."
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