Rough Road Ahead for Diamond Mining

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Researched by Industrial Info Resources (Sugar Land, Texas)--For centuries, diamonds have remained one of the most exquisite gems, finding applications in jewelry, biomedical research, audio equipment and industrial applications such as cutting and polishing. Diamonds are generally extracted and mined via four processes: open-pit mining, underground mining, marine diamond mining and alluvial mining.

The diamond industry made a radiant recovery post-COVID with revenues rising by 62% in diamond mining, 55% for cutting and polishing and 29% for retail diamond jewelry in 2021--all above pre-pandemic levels by 13%, 16% and 11%, respectively (as reported by Bain & Company), although the industry is currently facing headwinds globally. Diamond prices have declined 25% from their all-time high in 2022 and are anticipated to fall further due to a downturn in demand. Furthermore, low resale value of pre-owned diamonds has also left consumers hesitant to purchase new diamonds.

Softened demand has led to excess inventory in the global market, with countries like India, which is a major hub for diamond polishing and cutting, asking miners to reduce supply. Geopolitical tensions, such as the European Union sanctioning Russia's largest diamond producer, Alrosa, and economic slowdown in China (the second largest market for diamonds), have also contributed significantly to the declining demand. Social and environmental implications also remain a key concern in diamond mining around the world. Mining activities causing local ecosystem destruction along with forced child labor and poor working conditions are said to affect mine workers adversely.

As a result, consumers have started to focus on ethical procurement of diamonds and are thus moving towards lab-grown diamonds. These are not only environmentally viable, but also cheaper and indistinguishable (one carat of lab-grown diamond costs approximately $600-$1000 depending on quality, while a similar natural diamond costs about $4,200) and poses significant competition to naturally mined diamonds.

Industrial Info tracking 76 active capital-spending projects, worth more than US$7 billion, which are geared toward diamond mining. Subscribers to Industrial Info's Global Market Intelligence (GMI) Metals & Minerals Project Database can click here for a full list.

Africa is the biggest driver of investment, owning about 63% of the market with a massive investment value of around US$5 billion across 45 projects. It is followed by North America, with an investment of about US$2 billion and Asia with about US$249 billion.

By country, Botswana leads the way with a total spend pipeline of more than US$3 billion across 12 projects. It is followed by Canada with around US$2 billion and South Africa with US$559 million. Other countries with substantial investments include India, Australia, Sierra Leone and Lesotho.

With a combined project spending of around US$4 billion, De Beers Consolidated Mines (Pty) Limited (Kimberley, South Africa), Burgundy Diamond Mines Limited (Perth, Australia) and Lucara Diamond Corporation (Vancouver, Canada) are the top spenders and cumulatively own about half of the global market.

With 61% of the investment in the initial planning stages and 30% under construction, most of these projects are facing a kickoff slippage of more than two years. This not only adversely affects project costs and timelines, but also undermines stakeholder confidence.

Going further, the diamond industry is anticipated to be shaped by changing consumer preferences for artificial diamonds and sustainable and ethical mining practices. As the industry navigates through challenges, the future trajectory of these projects remains to be seen.

Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).