If diamonds are available in every jewellery shop, how can they be rare? We are often asked this question and it is not the most straightforward to answer. In part this is because whether something is rare or not depends on your definition of rare, and it is a concept that has many definitions!
There are many gemstones that are far rarer than diamond; an oft-cited example is Tanzanite, which is regularly marketed as ’1000 times rarer than diamond’. It is found in only one location on earth whereas diamond is mined in many countries around the world. Diamond is not absolutely rare in the way that Tanzanite is; its rarity is more complex…
Diamond is formed entirely of carbon (apart from tiny traces of other elements that aren’t essential to its composition) which is quite a common element. However, the conditions required for carbon atoms to form as diamond only exist naturally at the great pressures and temperatures found deep within the earth’s mantle. At the surface carbon exists as graphite – familiar as the ‘lead’ in pencils.
Research suggests there may be vast quantities of diamond deep within the mantle and scientists also think there may be enormous diamond crystals in space, many trillions of carats in weight; the remnants of ancient stars that came to explosive ends. Some argue that this makes diamond ‘common’, but I would disagree since they aren’t accessible: we can only mine diamonds that have been brought to the earth’s surface by volcanic activity and survived the brutal journey. The areas of the mantle where diamonds are most likely to form are also areas that see little volcanic activity, so many never reach the surface and remain out of our reach.
The areas where we can mine for diamonds are in some of earth’s most challenging terrains, as varied as the perma-frost of northern Canada and the desert beaches of Namibia. Mining in these environments is expensive, requiring intensive investment in infrastructure and equipment. A huge amount of rock must be excavated, crushed and processed to recover the diamonds. For instance, the Jwaneng diamond mine in Botswana is the world’s richest and in 2015 it excavated 115,841,000 tons of rock, producing 10,408,000 carats of diamond. Since a carat weighs 0.2g this equates to 2,080,000 tons. That is an extraordinary amount of rock that must be moved and processed to find a relatively small amount of diamond!
Around two-thirds of diamonds mined are only of industrial quality, unsuitable for use in jewellery (diamond has a range of industrial applications due its extreme hardness). The remainder will still vary greatly in size and quality; large stones with good colour and clarity make up only a tiny fraction of what is produced. This is where a more nuanced idea of rarity comes in; the balance between supply and demand of fine diamonds means that such stones are rare.
It is a widely held belief that diamond mining companies hold huge stockpiles of stones and ‘drip-feed’ them into the market to keep prices high. While it is true that most do have some stock in reserve, it is less than you might think, and the reasoning is less straightforward. The production from mines tends to dwindle as they become older and can in any case vary over time. Most of the diamonds mined are almost immediately sold into the market at regular sales, keeping cashflow strong and enabling mining to continue. If production dips the reserve can allow the gap to be filled so there is no sudden drop in availability, securing cashflow for the mining company and preventing prices from shooting up for buyers. Recent reports suggest that production is falling at many of the largest mines and companies are increasingly having to dip into their reserves to ensure enough diamonds enter the market. There is also concern that new mines are not being found to replace those that are coming towards the final stages of production. Keeping prices reasonably steady is a good thing for everyone; if price and availability fluctuated as much as production the market would become incredibly confusing!
Over the last 30 years or so the diamond industry has undergone huge changes and many people’s understanding of it is now out of date. In the late 1980s De Beers controlled around 80% of the diamond market, but this has now dropped to around 37%. There are many more companies operating mines and selling diamonds themselves through methods such as auctions instead of the traditional fixed-price sales to designated clients.
The environment in which retailers are selling their goods has also changed. Widespread certification of diamonds has made comparisons easier and increased the quality level that consumers typically prefer. The rise of internet shopping has made the market more competitive, especially since online-only retailers have much lower costs than traditional jewellers. This combination of factors has put pressure on retailers to ensure their prices are competitive. This type of competitive market creates the opportunity for consumers to get a good deal!
Our showroom is staffed with qualified gemmologists and diamond graders, with a combined experience of 150 years. We are happy to answer any questions you may have about diamonds and talk you through the factors that affect diamonds pricing. Just call in to our showroom for a chat!