World diamond production registered a slight increase to 107.9 million carats in 1995, according to a survey by Metals and Minerals Annual Review. This represents less than a 1% increase over 1994 production.

Changes are in the wind, however. Production of very small diamonds is on the decline and will continue that way because De Beers, Argyle and other mining companies no longer find it profitable to recover stones smaller than 1.5mm. This has cut 3 million carats from production at Argyle in Australia and more than 500,000 carats from De Beers’ Finsch Mine in South Africa.

The reason for the cutbacks: demand for such small diamonds has been running far behind available supplies. As a result, prices have fallen so far that it costs more to recover them than the $1.50-per-carat average they bring in today’s market.

Another major change this year: two new producing countries have been added to the world diamond map. The Kelsey Lake mine in Colorado has already gone on line (see related story pp. 102-103). And if BHP’s mine development goes according to plan, we will see the first commercially produced diamonds from Canada next year.

The Canadian and U.S. mines probably won’t add greatly to the world’s total production. The BHP project could boost production 2%. Another Canadian mine under exploration by Kennecott/Aber Resources could add 2 million to 4 million carats. The U.S. project won’t even register on the statistics: 100,000 to 150,000 carats. Still, these are important because they’re the first North American diamond mining operations in history.

The “Big Six” list of world diamond producers remains the same: Australia, Zaire, Botswana, Russia, South Africa and Namibia. By most accounts, Angola should be on this list, but so little of its production is mined legally that any production figures are a guess. Many Angolan diamonds are mined “informally” by individual diggers or small groups working claims or “poaching” alluvial grounds held by mining companies.

Here’s a closer look at world diamond production by region.

AUSTRALIA

The Argyle mine produced 39.8 million carats of diamonds and sold US$362.4 million worth in 1995. The majority were small, lower quality stones, many of which wound their way to diamond manufacturers in India through De Beers’ Central Selling Organisation. Though production fell 3 million following a decision to stop recovering small goods, revenue increased $15 million.

The other significant diamond producer in Australia is the Normandy Bow River project, operated by Normandy Poseidon, a division of Poseidon Resources. This mine produced an estimated 950,000 to 1 million carats, similar to 1994 levels. Bow River diamonds are somewhat higher quality than those from Argyle, which has the lowest average value of all major producers.

Elsewhere in Australia, the Merlin project in the Northern Territories is a promising find and reportedly could yield several hundred thousand carats yearly if it proves to be economically viable.

CRA and other mining companies are looking off the north shore of Western Australia near pearling farms. One theory is that the site originally contained 13 kimberlite pipes similar in size to Argyle’s prolific AK1 pipe. If that’s the case, geologists believe untold millions of carats may lie beneath the seabed — if they haven’t been dispersed far and wide by the dangerous currents of the Timor Strait.

On the minus side, Argyle’s economic life after 2003 remains uncertain. The company must spend $100 million to $150 million to develop an underground shaft to continue mining the pipe (see JCK, May 1996, pp. 98-105).

SOUTHERN AFRICA

The big story in South Africa is, of course, the same as it has been for the past century. De Beers controls all but 10% or so of the estimated 10.1 million carats of diamonds mined in the country each year. The estimated value of this production is $1.2 billion. The six mines that De Beers owns or controls yielded 9.05 million carats in 1995. production in South Africa runs the full quality range, with the highest percentage of quality goods coming from Namaqualand (623,985 carats) and Koffiefontein (123,213 carats).

The mainstays of South African production are the new Venetia Mine, which yielded 4,353,419 carats last year, a slight decline from 1994; Finsch, where production fell a half million to 1,722,597 carats; and the venerable Premier Mine, where production was virtually unchanged at 1,633,297 carats.

De Beers’ technical staff in Johannesburg says Finsch is the only mine in which the recovery size has been increased to leave the tiny millimeter diamonds in the ground. They say the decision was based on economic criteria specific to that mine.

Several smaller mines operated by Rex, Redaurum and a few other companies — most of them lower-yield/higher-quality ventures — rounded out the nation’s production.

De Beers says it’s continuing to prospect in the north and off the Namaqualand coast, but nothing promising turned up in 1995. Look for South Africa to continue opening up more areas to smaller companies as the government pushes for more black-owned businesses.

Elsewhere in Southern Africa, Botswana, the world’s leading diamond producer by value, registered an estimated 16.8 million carats valued at $1.5 billion in 1995 production. Virtually all of Botswana’s production — except for the occasional alluvial find, exploration sample or purloined gem — comes from three mines: Jwaneng, Orapa and Letlhakane. These are owned by Debswana, a 50-50 venture of De Beers and Botswana’s government. Jwaneng’s production grew by 1.4 million carats to 10.5 million in 1995 as its fourth processing plant expansion was completed. This increased production some 15%.

Several companies, including De Beers, are exploring concessions in Botswana, but no promising finds were reported in 1995.

In Namibia, production was a relatively small 1.3 million carats. But the country boasts the highest average value of any major producer: just under $300 per carat. The estimated value of Namibia’s production last year was $380 million. De Beers’ offshore operations recovered 457,397 carats, up 12% from 1994. The beach operation brought in 748,468 carats, down slightly from the year before. Most of Namibia’s production is managed by Namdeb, a corporation owned 50-50 by De Beers Centenary and the Namibian government.

Meanwhile, the stormy cold seas off the Namibian coast are the most hotly contested and debated diamond areas in the world. Some geologists believe untold millions of carats lie off the coast, and numerous companies have mapped out concessions. De Beers commissioned eight mining vessels and a costly exploration campaign over thousands of square miles. So far, De Beers says the quantities aren’t nearly as large as some predict and that the diamonds would be expensive to recover because they’re scattered over a large area.

A number of marine mining operations under way in other concession areas have yielded some small but productive pockets of diamonds, but no mother lodes.

In Zimbabwe, the River Ranch Mine is a new venture operated by Auridiam Consolidated, a division of Redaurum Ltd. Auridiam expects to produce about 500,000 carats of medium qualities (65% gem) this year. About 10%-15% of the production is 1 carat or larger. All of the diamonds are sold by tender offer in Antwerp. Auridiam may follow the lead of larger mining companies and increase the screen size in the recovery plant from 0.5mm to 1.5mm or 2mm because of a glut of very small goods on the market today. Such goods account for about 15% of River Ranch production.

In Angola, Endiama, the state-owned mining and marketing company, recently signed a prospecting agreement with De Beers’s CSO to search for diamond deposits in the key areas of Lunda Norte and Lunda Sul. De Beers fully understands Angola’s potential as a diamond producer because it bought more than $600 million worth of rough exported illegally from the country last year. Official production figures may add $50 million to $100 million to that total.

Best estimates peg Angola’s diamond production at 1 million to 1.3 million carats annually, the vast majority of them gem-quality material mined from shallow alluvial deposits. Virtually none of this is mined officially. Following the latest cease fire in the county’s decades-long civil war, the richest diamond areas were seized by armed gangs of former soldiers or the rebel group UNITA, which is negotiating with the ruling party for a place in the government. There’s little chance order will be restored anytime soon; the prevailing view is that poachers may render much of the country’s rich alluvial deposits uneconomic.

Angola’s future as a diamond producer will likely depend upon De Beers’ success in finding the kimberlite sources. Several diamond bearing pipes have been discovered already, but conditions remain too risky to develop them. In addition, the quality of diamonds coming from Angola will likely decline over the long-term because alluvial fields traditionally yield much better stones than kimberlites.

RUSSIA

Russia’s diamond sales outside the CSO in the past two years were an industry obsession until March, when both sides signed a memorandum of agreement. This immediately slowed the flow of rough sold outside the CSO.

Until recently, Russia was the world’s leading diamond producer by value. However, its four mines are in dire need of repair and only one, Udachnaya, remains fully operational. Udachnaya accounted for the vast majority of Russia’s production of 12.5 million carats valued at $1 billion to $1.6 billion in 1995. The disrepair of Russia’s mines, including water and mud seepage into the large Mir mine, caused overall production to fall by an estimated 4 million to 5 million carats over the past six years.

The agency responsible for mining and exporting rough, Almazy-Rossii-Sakha, has just received a $500 million loan from NatWest Markets, an international financing arm of NatWest Bank, and a $60 million loan from the U.S. Export-Import Bank to renovate existing mines and develop new ones. One beneficiary will likely be the country’s Yubileynaya mine, which has the potential to produce several million carats yearly once it is developed completely.

These mines and three other finds — the Arkangel’sk area and two large kimberlites in Sahka — also give Russia the potential to remain a major diamond producer for many years to come.

WESTERN AFRICA

Ghana produced an estimated 800,000 carats last year, down 5%-10% from 1994. Most significant is the fact that De Beers pulled out of the Akwatia and Birim River projects late last year after several years of study determined the economic potential was far lower than expected. Most of the production was lower qualities averaging less than $25 per carat, lowest of all producers but Australia. Operated by Ghana Consolidated Diamonds, these projects represent half of the country’s production. Akwatia had produced more than 2 million carats yearly in the 1950s and 1960s. Lazare Kaplan International owned a share of that production and remains part owner today. The remaining production comes from licensed diggers.

Sierra Leone was the source of about 300,000 carats last year, most of which were better quality alluvials with the occasional very large diamond. Estimates value the country’s production at more than $150 million. The vast majority of the country’s diamonds are extracted by freelance diggers and sold to dealers who smuggle them out of the country to avoid export duties. De Beers is prospecting offshore, though no results have been realized yet.

In Guinea, licensed diggers around the Aredor Mine and other areas unearthed about 500,000 carats last year. What makes that county’s diamonds so intriguing is the large percentage of big diamonds: Guinea yields one or more 50-ct.-to-100-ct. stones each year. The Aredor Mine has operated sporadically since opening in 1984. In 1991, a makeshift army of diggers attacked the facility and destroyed much of the infrastructure. The government got Aredor running again, but operations remain sporadic. Production figures have not been announced.

CENTRAL AFRICA

Zaire, the world’s second largest diamond producer by volume, yields predominately lower-quality goods. Last year, production totaled 20 million carats. MIBA, the officially sanctioned mining company, contributed 4.6 carats, but its output has fallen steadily from 9 million carats as the political and social fiber of the country has deteriorated in the past few years. In addition, thousands of freelance diggers work the diamond fields and sell their finds to local dealers or a licensed diamond exporter.

Best estimates place the value of Zaire’s production at $500 million to $550 million, but the numbers are difficult to pin down because many of the best diamonds are purloined by government officials or smuggled to Brazzaville, Liberia, Belgium or South Africa by exporters avoiding export duty. There’s little prospect for improvement in the outlook because the standoff between longtime dictator Mobutu Seke Seko and rival factions continues.

The Central African Republic made news in the diamond world more than a decade ago when then-Emperor Bokassa sent top officials of the French government large diamonds shortly after embarking on a reign of terror in his country. Today, United Reef Ltd. is testing a diamond deposit in cooperation with Trans Hex, an independent South African mining group that has provided some of the financing. The company produced 3,267 carats from exploration sites near the Bamingui and Bangoran rivers in 1995 and realized an average value of $181 per carat. Ultimately, the company hopes to produce 12,000 to 35,000 carats yearly with values ranging from $80 to $95 per carat.

In addition, licensed diggers and local miners produce 500,000 to 600,000 carats each year. They are sold to dealers in Antwerp and elsewhere through licensed exporters.

In Tanzania, the once formidable Williamson Mine (1 million carats yearly in the 1950s and 1960s) has been closed for remodeling since late 1994. The retooling will convert the mine into a smaller, lower-cost operation. The work is being done by a De Beers subsidiary, Willcroft, which has upped its share in the mine from 50% to 75%. The state holds the remainder.

SOUTH AMERICA

Two centuries ago, Brazil was the source of most of the world’s diamonds, and their trade was well-organized. Today, more than 1 million carats of low to medium qualities still come from the Minas area yearly, but the trade has fallen to the garimpeiros — freelance diggers who blunt commercial mining by “picking the eyes” out of the alluvial deposits and making the remainder uneconomic to mine. Several small mining companies work deposits in the area, but no economically feasible kimberlites have been found.

The story is much the same in Venezuela, where alluvial fields are concentrated in the remote regions in the south, near the border with Brazil. Several mining companies are exploring the area, but the garimpeiros guard — sometimes violently — against incursions into their territory. Production is estimated at 800,000 carats yearly.

Guyana produces 50,000 to 200,000 carats yearly, depending on which survey you study. BHP and several other mining companies are exploring sites in Guyana. But virtually all production is by freelance diggers.

OTHERS

Prospecting and small mining ventures in a number of countries — including Indonesia, Borneo, China, India, Liberia, Ivory Coast and Canada — total about 500,000 carats.

India’s famed Golcanda Mine, for example, was the world’s first consistent source of diamonds until the discoveries in Brazil in the 1740s. Golcanda closed about a century ago, though diggers have sifted though the area on occasion since then. Two years ago, India relaxed restrictions on foreign investment and ownership of mining concessions. This brought a flood of applications from major and aspiring diamond mining companies. A number of kimberlites have been found, though no test results have been announced.

Several Australian companies have been prospecting in Indonesia and Borneo. They’ve found several small alluvial deposits, but nothing major is reported in the offing.