Billions of years ago, diamonds were formed at depths of between 90 to 120 miles beneath the Earth’s surface, by way of the explosive combination of tremendous pressure and temperatures of around 2,000 degrees Fahrenheit.
They were carried to the surface by violent, supersonic deep-origin eruptions. Known as ‘volcanic pipes,’ they are a deep, narrow carrot shaped cone of solidified magma. These pipes, which are relatively rare, are usually largely composed of one of two characteristic rock types - kimberlite or lamproite.
It is the kimberlite pipes that are well known as the primary source of diamonds, and are mined for this purpose. They can be found in shallow alluvial deposits, where the crystals settle after being transported away from the kimberlite pipes by geologic activity and rivers.
Diamonds are made of just a single element, almost 100% carbon. Under the immense heat and pressure far below the earth’s surface, the carbon atoms bond in a unique way that results in a diamond’s beautiful and crystalline structure.
The Greeks have a word for something that is invincible or indestructible – it is ‘adamas’, from which the word diamond is derived. They are the very hardest natural substance and the only thing that can scratch a diamond is another diamond. They also have the highest thermal conductivity of any natural material.
The earliest diamonds were found in India in the 4th century BC and until the 18th century India was thought to be the only source of diamonds. For thousands of years they have been valued, collected, traded and coveted. For centuries, diamonds have been worn by royalty and noblemen as status symbols.
Tears, Splinters or just Magical
Diamonds are the oldest thing that most of us will ever hold.
Ancient Hindus, believing that they could protect the wearer from danger, used diamonds in the eyes of devotional statues. The ancient Greeks and Romans thought that they were tears cried by the gods or splinters from falling stars.
Even Cupid’s arrows were said to have been tipped by the Romans with diamonds, as ways of showing romantic love.
Giving the wearer strength and courage encouraged many kings to wear them in their armour as they rode in to battle. Whilst in the Middle Ages diamonds were considered to have healing properties, able to cure fatigue and mental illness.
Trading in diamonds started in Venice in the 1400’s as they were brought through from India by way of the merchant caravans. Gradually such trading spread through Europe, initially in Amsterdam in the 1600’s, and thereafter in other centres across the Continent.
Gradually higher demand for India’s diamonds helped to significantly reduce its supplies. In 1725 new discoveries in Brazil saw that South American country become the principal supplier. It dominated the market for the next 150 years.
In 1866 a huge diamond reserve was discovered at Kimberley in South Africa. Some 22 years later businessman Cecil Rhodes established the De Beers Consolidated Mines company and by 1900 De Beers, through its many South African mines, ended up controlling circa 90% of the world’s production of rough diamonds.
Through its cartel De Beers effectively held a monopoly over the global diamond mines – stockpiling diamonds, then limiting supply and thereby driving up demand and the market prices.
Higher prices generated greater exploration, which added to better mining technology and thus the ability to identify more exploration areas. Over the year’s other countries, like Russia, Australia and Canada, identified significant new sources of supply.
Subsequently, the increase of multiple geographic sources weakened the control that De Beers had in the ‘custodian’ role that it had assumed in the single-channel path in diamond supply.
The Mining of Diamonds
Diamonds come from two types of deposit and each type requires special mining techniques. Importantly, no chemicals are used to remove diamonds from the Earth.
Primary deposits, in which diamonds are contained in kimberlite pipes, require open pit or underground mining operations.
Secondary deposits are defined as diamonds that have travelled from their original location due to erosion. These require alluvial mining, which uncovers diamonds in riverbed, coastal and marine/undersea locations.
Regardless of the way diamonds are mined, enormous investment and technical skills are necessary to construct, maintain and operate a mine. In open pit and underground mines, the ore is crushed to uncover the diamonds.
Coastal mining involves the excavation of sand to find diamonds.
Undersea mining entails drilling into the seabed to recover diamond-bearing gravels.
Riverbed mining is often on an informal, smaller scale - also known as artisanal digging - and involves the most basic of equipment, such as sieves and pans, to find diamonds.
Over the years, there have been many amazing diamond discoveries. But still holding the record today as the world’s largest gem-quality diamond, the Cullinan was found in South Africa in 1905 and weighed 3,106 carats uncut.
Annual Diamond Production
The annual production of rough diamond in the 1870’s was well under 1m carats, by the 1920’s that figure was up to 3m carats. Come 1970 that yearly figure had increased to 50m carats, surpassed two decades later when it hit the 100m carats level. It is currently running at around 150m carats.
It is said that diamonds are rare and getting rarer every day. Apparently, the number of recovered diamonds peaked in 2005 and will decrease significantly over the next decade.
Diamond-bearing kimberlites are very hard to find. In fact, most of the diamonds recovered today come from kimberlites discovered decades ago, which is why diamond production is gradually decreasing and diamonds are becoming rarer.
Even though world diamond production has tripled since 1980, diamonds remain a scarce resource. More than 12,000 kimberlite deposits have been found worldwide in the last 25 years, yet fewer than 1% have contained enough diamonds to make them economically viable.
Geologists utilise many methods in diamond exploration, including satellite surveys, reconnaissance sampling and drilling in the ground. The top diamond producing countries, in order of carat production, are: Russia, Botswana, Canada, Congo, Australia, South Africa, Angola, Zimbabwe, Namibia, and Lesotho.
The main criteria used to determine the quality of polished diamonds may be well-known to most. But what is less well-known is how rough diamonds are valued when they reach the surface of the earth.
When diamond miners produce ore from deep within the ground, the diamonds extracted from it include a whole spectrum of stones of different qualities which are unsorted and uncategorised.
Every single rough diamond with its own set of characteristics will yield a unique polished diamond which is measured by the criteria of the 4Cs combined with its irregularities. In the trade, this spectrum of rough diamonds is called ‘run-of-mine’, comprising millions of different combinations of diamond size, colour, shape, clarity and thousands of other characteristics.
To determine the accurate price of rough diamonds requires both an in-depth technical knowledge of rough and polished diamonds and a thorough mastery of the international diamond markets at any given moment. Before diamonds can be priced, they need to be sorted with precision. Like people, diamonds are unique and no two are the same.
Once mined, rough diamonds are delivered to sorting experts who categorise and assign a value to them. It is here that industrial quality diamonds – which are small, lower quality stones – are identified. Those industrial diamonds are then used in equipment such as drill bits and lathes.
Valuers determine the price of a rough diamond using a Reverse Engineering. They estimate the yield of the polished outcome of the rough diamond and the resulting value of the diamond when polished and then work back to determine the price of the rough diamond. An accurate valuation relies on the experience and market knowledge of the valuer.
Those diamonds that are of gem quality are classified into thousands of categories based on size, shape, quality and colour. The majority of diamonds fall within a range of standard colours from colourless to faint yellow or brown tints. Almost all rough diamonds have some distinguishing marks, known as inclusions, which make each one unique.
Synthetic and Imitation Diamonds
Imitation diamonds can also be made out of materials such as cubic zirconia and silicon carbide.
Natural, synthetic and imitation diamonds are most commonly distinguished using optical techniques or thermal conductivity measurements.
Conflict diamonds, also called blood, hot or war diamonds, captured the world’s attention during the extremely brutal conflict in Sierra Leone in the late 1990s. During that time, it is estimated that conflict diamonds represented approximately 4% of the world’s diamond production.
While illicit rough diamonds have been used by rebels to fund conflicts across many African countries, the problem is not the diamond itself, but the rebels who exploit diamonds to achieve their illicit goals.
Today the trade in conflict diamonds has been virtually eliminated through the efforts of Kimberly Process participants and from adherence to warranties and monitoring processes as part of the Kimberly Process Certification Scheme.
As a result, 99.8% of diamonds are Kimberley Process-compliant. Moreover, all major producers have safeguards in place to guarantee their diamonds are produced responsibly.
It is said that just one in every 10,000 natural diamonds can be classed as a fancy colour diamond.
Exceptional diamond colour can be traced to the lattice of carbon atoms that form a diamond’s microscopic structure. Over billions of years, coloured diamonds were formed through exposure to heat, natural radiation or the saturation of natural elements.
Because the arrangement of atoms in diamond is extremely rigid, few types of impurity can contaminate it, with two exceptions being boron and nitrogen. Small numbers of defects or impurities can colour diamond.
Blue diamonds are contaminated with boron, yellow with nitrogen, green diamonds are due to radiation exposure, whilst brown, purple, pink, orange or red are due from other defects.
Cut and Polished
After sorting, the diamonds are cut and polished. In ancient times, diamonds were left uncut and mounted into their settings, which gave each piece a dark, deep, mysterious look.
In the 1400’s diamonds started to be cut and polished, which gave them their tell-tale sparkle and brilliance.
Currently cutting and polishing take place in southern Africa, Belgium, China, India, Israel, Russia and the US, among other countries.
Cutting a rough diamond takes great skill. A well-cut diamond reflects light within itself, from one facet to another, as well as through the top of the diamond, bringing out its spectral brilliance. The most popular cut is the 57 facet round brilliant.
After a stone has been cut, it is then polished and classified again, this time by its cut, colour, clarity and carat weight, also known as the “Four Cs.”
After being cut, polished and categorised, diamonds are then sold via one of the 24 registered diamond exchanges (also known as ‘bourses’) located around the world or direct to wholesalers or diamond jewellery manufacturers.
How to Invest in Diamonds
As De Beers claimed in a marketing slogan way back in 1947 ‘Diamonds Are Forever’, then Ian Fleming repeated it as a title for one of his world-famous James Bond stories.
Diamonds are incredibly portable and their ownership is not registered anywhere, meaning that you could easily put hundreds of thousands of pounds worth in less than a thimble, ideal if you are wanting to transfer the proceeds of crime to anywhere in the world.
But if you are interested in investing in diamonds, then I can suggest that there are just five ways of doing so.
You could buy shares in any number of quoted companies across the globe that have diamonds as their emphasis, with several listed in Vancouver, but do your own research please.
Three companies that are quoted in the UK, worthy of attention, are: Anglo American (LON.AAL), which is the owner of De Beers; Gem Diamonds (LON.GEMD), with mines in Lesotho and Botswana; and Petra Diamonds (LON.PDL), with operations and producing mines in South Africa, Tanzania and Botswana, it also owns the famous Cullinan mine.
The other four ways need an expert for advice, which will invariably cost you. There are diamond dealers, diamond brokers or you can use the internet.
You could buy rough diamonds, through any of the brokers on the diamond bourses across the globe.
Fancy or coloured diamonds can be purchased through companies like Asteria Diamonds, James Allen or Leibish & Co.
Colourless stones will cost you a fortune but can be a truly excellent way of buying diamonds.
Finally, buying polished diamonds can be handled through several companies, such as Armann International and Lumera.
But I do repeat, that if you wish to participate in this lustrous world, it is essential that you take the advice of experts in the diamond business.
Sources: Mining Global; Mining.com; De Beers; Lumera Diamonds; Geology.com; and, Ehud Laniado.