The Argyle mine may close by 2008, and some think the small-diamond industry will suffer as a result.

Argyle is the main supplier to—and arguably the creator of—the Indian diamond industry. But without the mine’s steady supply of small diamonds, the price of lower-end diamond jewelry could increase significantly.

“If they close the mine, it will have a significant impact all the way down the supply chain,” says Beryl Raff, senior vice president and general merchandise manager of fine jewelry for J.C. Penney. “I would assume prices will be impacted. “Executives at Rio Tinto, the mine’s owner, say no decision has been made as to the mine’s fate. But with its main pit depleted, the only option is to take it underground—and the company isn’t sure that’s economical.

“We are hopeful we will have a good case, but we don’t have all the information yet,” said Keith Johnson, chief executive for diamonds for Rio Tinto Mining.

Even if the mine does stay open, it will produce a lot less than it once did. At its height, it produced 40 million carats a year but now produces 30 million. If it goes underground, it will likely produce about 15 to 20 million carats a year until the year 2020.

“Whatever happens, the mine’s production will fall in 2008,” Johnson said. “It will fall to about half or it will fall to zero.”