What Lies Ahead: World Rough Diamond Production

For the remainder of this decade, we expect the world’s leading diamond mines in Botswana, Russia and Canada to continue to deliver in the face of increased demand for diamonds. Emerging markets of Asia will provide most of the growth in demand. Some diamond observers believe that demand will eventually permanently outstrip supply and this could happen at the end of this decade at the earliest. The world’s biggest diamond companies have sufficient proven reserves enabling them to maintain the current level of diamond production for at least two-decades, without any deterioration in quality of products. However, as the years progress, concerns about the limited supply of new projects and depletion of existing mines will crystallize.

While we agree that going forward there will be a limited supply of new projects, we also believe that a repeat of what happened in Canada is likely. In little over a decade, Canada has gone from being an insignificant producer to being one of the top three producers by value. This has gone a long way in compensating for the depletion of resources in other producing countries such as Australia and South Africa.

We believe that Zimbabwe is the best-placed producer country to repeat what has happened in the Canadian diamond industry. Excluding the simple but important discoveries in Marange, no significant diamond explorations have been undertaken in Zimbabwe in more than a decade. This has largely been the result of a decade long political crisis and deleterious economic policies that deter investment. Zimbabwe has only recently begun taking tentative steps towards reform and we expect the country will receive renewed significant interest if it can demonstrate long-term stability and positive economic policies. As mentioned earlier, more than two-thirds of Zimbabwe’s total surface area lies on a craton which is very stable and conducive for the deposit of kimberlites. Additionally, the Orapa Kimberlite Track – where the world’s largest diamond mine is located - extends from Botswana into Zimbabwe. The Zimbabwe area covers more than 14 000 square kilometres.

It is important to point out that any potential new diamond projects in Zimbabwe, excluding at Marange, will only begin to have impact in the decade after 2020. In the short-term we expect rough diamond prices to gradually track upwards as supply constraints become more apparent. Retail demand for diamonds is expected to grow 40% by 2020. Overall, supply trends point to a decline in long-term production and Zimbabwe alone will not be able to compensate for depleted reserves. If and when new projects are developed in Zimbabwe, the result would be to check a steep rise in diamond prices in the long-term.

This article is an excerpt from the Diamond Industry Report 2011 by Equity Communications. To find more or to purchase the report please visit the link. The Diamond Industry Report 2011 provides detailed analysis on the world diamond industry, providing an overview of the diamond value-chain, represented both textually and in graph and tabular formats. The changing dynamics of the diamond value-chain are analyzed, including the potential impact of Zimbabwe production which is increasingly becoming significant.