The future of diamond production is in jeopardy. Diamond dealers could face significant obstacles shortly as supplies shrink as well as profit margins. The annual estimated global rough production according to DeBeers projections, will drop to 115,000,000 carats by 2030, down from nearly the 160,000,000 carats expected for 2014. Davies explains that the expected decline in rough supply based on the fact that "finding."
The vast cost of exploration, coupled with the harsh realities of finding new diamond-rich areas, brutal climates, extremely remote in inhospitable locations and challenging natural obstacles from which the diamond must be under raised the possibility, Davies said, mining diamonds and removing them from deep within the earth is a complicated, painstaking process and one that requires an enormous amount of human ingenuity and engineering expertise.
Davies added, and that those costs are rising. Despite these obstacles, DeBeers company continues its search for new mines. The company has spent 50 million in the past two years hunting for new areas to mine. But are the mitigating factors of the costs and complexities of exploration worth the risk of those dividends not paying off? "It's more than expectations," Davies said, referring to the chances of uncovering a yet untapped treasure trove of gems. "And we've literally gone to the end of the earth looking."
The longevity of diamond production is tied directly to the hyper-inflated cost of exploration is furthermore responsible for the steadily rising price of rough which many dealers in the US wholesale market claim has been a drag on their business due to the declining profit margins between the prices of rough and polished. The recent price increases in rough are dictated, Davies said by market factors the DeBeers cannot control.
There are those in the industry to say however that consumers are not willing to continue to pay more for polished goods. President of Mr. Baguette, Greg Telonis a manufacturer of small loose diamonds and jewelry in New York City, is one of them. Today's consumers are becoming increasingly savvy at using the Internet to get information on prices in order to use it as leverage against retailers to get them to lower prices on goods said Telonis.
Consumers use of the Internet to comparison shop as with other goods and services is one of the main factors shrinking profit margins for diamond dealers, according to Ronnie VanderLinden, president of Diamex, a New York city wholesaler, and president of the Diamond Manufacturers and Importers Association (DMIA). "As with everything, consumers can go online and check prices, "Vanderlinden said. "And you can only sell a piece of jewelry for what the customer will pay for."
If price hikes continue, Telonis cautioned, business will suffer. "The flow buying and selling diamonds been interrupted by the very high prices of polished because most wholesalers cannot make higher prices and out willing to buy new inventory at these prices," Telonis explained. Some in the industry have criticized DeBeers for artificially inflating prices I stockpiling its diamond and buying up the inventory of emerging competitors, thus controlling the flow of diamonds into the market.
But he did note that DeBeers is able to control which items it increases or decreases in price, a reality, in Telonis' estimation, that could come back to haunt them. "If DeBeers is not careful, it will eventually price itself out of the market with its cheaper goods. Consumers just might eventually move toward synthetic diamonds rather than pay high prices for eye imperfect diamonds." Davies, however, enthusiastically rejected the idea that DeBeers is stocking a massive inventory in order to control the market and referred to such a notion as "one of the myths" about the secretive company.
"The DeBeers stock at the time of Asian currency crisis of 1997/1998 had a value of several billion dollars. Our senior management questioned whether holding such a large stock was a sustainable and efficient use of capital," Davies said, "and this triggered a strategic review that resulted in a decision to liquidate the stockpile over a number of years." Responding to that claim, Vanderlinden said, "we can only take them at their word. Nobody really knows. The truth is probably somewhere in the middle."
There are those in the industry to say however those consumers are not willing to continue to pay more for polished goods. President of Mr. Baguette, Greg Telonis a manufacturer of small loose diamonds and jewelry in New York City, is one of them. Today's consumers are becoming increasingly savvy at using the Internet.
Consumers use of the Internet to comparison shop as with other goods and services is one of the main factors shrinking profit margins for diamond dealers, according to Ronnie VanderLinden, president of Diamex, a New York city wholesaler, and president of the Diamond Manufacturers and Importers Association (DMIA). "As with everything, consumers can go online and check prices, "Vanderlinden said. "And you can only sell a piece of jewelry for what the customer will pay for." If the price hikes continue, Telonis cautioned, business will suffer.
Some in the industry have criticized DeBeers for artificially inflating prices. And stockpiling its diamond and buying up the inventory of emerging competitors, thus controlling the flow of diamonds into the market.
But he did note that DeBeers is able to control which items it increases or decreases in price. A reality, in Telonis' estimation, that could come back to haunt them. "If DeBeers is not careful, it will eventually price itself out of the market with its cheaper goods. Consumers just might eventually move toward synthetic diamonds rather than pay high prices for eye imperfect diamonds."
Davies, however, enthusiastically rejected the idea that DeBeers is stocking a massive inventory in order to control the market and referred to such a notion as "one of the myths" about the secretive company. "The DeBeers stock at the time of Asian currency crisis of 1997/1998 had a value of several billion dollars. Our senior management questioned whether holding such a large stock was a sustainable and efficient use of capital."
Furthermore, Davies said this triggered a strategic review. Which resulted in a decision to liquidate the stockpile over a number of years. Responding to that claim, Vanderlinden said, "we can only take them at their word. Nobody really knows. The truth is probably somewhere in the middle."
In light of rising exploration cost, the shrinking supply and the difficulties in identifying territories to mine. What is the future of diamond production? Expansion of existing mine the only solution, Davies said. Adding that DeBeers was,"investing major capital and expanding current projects."
These include underground exploration at theVenetia mine in South Africa and the Jwaneng Cut 8 project in Botswana.
Along with exploiting current sites, Davies said the industry must also exploiting growing diamond demand. Particularly in the emerging markets of China and India. The far east, especially China, is where demand is growing exponentially. It presents the most powerful market for potential profits. DeBeers estimates that by 2020, affluent and middle-class Chinese will account for the majority of the country's population. "Potentially the Chinese market could be bigger than the US market," Davies said.
http://www.mining.com/rio-tinto-paints-rosy-future-for-diamonds-77970/
Diamond Production of diamond from rough to polished.