“You need deep pockets to find kimberlites,” one expert notes. Meanwhile money, efforts have dried up.
(BLOOMBERG) – Diamonds are so hard to find that explorers have pretty much given up trying.
More than $7 billion has been plowed into the hunt for the gem since 2000, according to top supplier De Beers, and the results have been meager, with no major finds. That’s led producers including BHP Billiton Ltd. to pack up their maps and drills and head for home. The amount spent looking for diamond- rich kimberlite formations underground has dropped by half since 2007, when exploration investment topped $1 billion.
The dearth of new projects is putting pressure on an industry where supplies of accessible diamonds near the surface are depleted and the cost of going deeper is rising. De Beers opened the Orapa mine in Botswana in 1971 and its Jwaneng project, the world’s largest diamond mine by production value, in 1982. Botswana, the top producer, saw output drop to 22.7 million carats last year from 33.6 million carats in 2007.
“The odds of finding an economic kimberlite are extremely against you,” said Johan Dippenaar, chief executive officer of Petra Diamonds Ltd., which spent just $2.1 million looking for new mines last year and has abandoned prospective projects in Angola and Sierra Leone. “Exploration, for the foreseeable future, will remain something that we will be involved in, but it won’t command very much of our cash flows.”
Investment and mine activity are retreating as demand for the gem increases, with burgeoning middle classes in China and India seek to join the developed world’s love affair with the precious stones. The two countries accounted for about 20 percent of purchases in 2011, and that share will rise to 28 percent in 2016 as the market grows to $31 billion from $23 billion, according to De Beers owner Anglo American Plc.
Earth’s Mantle
Diamonds are formed hundreds of kilometers beneath the crust in the molten rock of the earth’s mantle. Violent explosions force the precious gems toward the surface, where they come to rest in carrot-shaped pipes known as kimberlites. Yet finding a kimberlite is no guarantee of finding diamonds. Of the more than 6,000 pipes that have been tested over the last 140 years, only 60 have been worthwhile mining, according to De Beers. A mere seven have been super deposits, capable of moving the supply needle.
To make matters harder for those still in the hunt, diamonds have been hidden in some of the world’s least- hospitable places. With South Africa and Botswana almost fully explored, the frontiers for exploration are the frozen Arctic of northern Russia and Canada or the war-torn jungles of the Democratic Republic of Congo and the Central African Republic.
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