Diamonds, those exquisite gems that captivate our imagination, are composed of billions of carbon atoms. These precious stones, which predate the existence of humanity, came into being approximately one to three billion years ago. Their formation occurred in the depths of the Earth, where extreme temperatures and immense pressure converged to shape their remarkable structure. Like delicate snowflakes, each diamond boasts a distinctive pattern, telling a one-of-a-kind story. Each gem stands alone in its uniqueness, defying any chance of discovering a matching twin.
As we marvel at the timeless beauty and incredible journey of diamonds, it becomes imperative to delve deeper into their origins and the industry that surrounds them. Beyond their captivating allure, natural diamonds hold a complex tapestry of ethical considerations, rarity, sustainability efforts, socioeconomic impact, and even the working conditions within the industry. In this article, we embark on an exploration, seeking to unravel the multifaceted aspects of the natural diamond industry. Let us embark on this journey to gain a comprehensive understanding of the world behind these awe-inspiring gems.
Are natural diamonds rare?
Natural diamonds are considered rare due to their formation process, which takes place over millions or billions of years in limited zones of the Earth's mantle under extreme temperatures and pressures. The recovery of natural diamonds has been declining, with global production peaking in 2005. Currently, there are only 30 significant natural diamond mines in production, and the success rate of diamond exploration is estimated to be less than 1%. The supply of natural diamonds is finite and their supply is decreasing. This means that there is a limit to how many natural diamonds can be mined, and that they will become more valuable in the future.
The closure of mines that have reached the end of their economic lives, such as Argyle in Australia and Victor Mine in Canada, further contributes to the changing landscape of natural diamond mining. Exploration for new diamond sources requires significant financial investment, and determining the economic viability of projects is a complex process. The gradual decline in rough diamonds recovered and traded under the Kimberley Process Certification Scheme also reflects the diminishing supply of rough diamonds. Overall, the rarity of natural diamonds is attributed to their geological formation and the challenges in discovering and extracting them.
How are natural diamonds ethically sourced?
The natural diamond industry is committed to ensuring ethical sourcing practices. The industry is highly regulated through initiatives like the Kimberley Process, mandated by the United Nations and the World Trade Organization, to ensure that rough diamonds are conflict-free. The process involves audits of major industry players and has strict checks and balances to enforce ethical standards.
Ethical sourcing in the natural diamond industry means obtaining products and services in an ethical manner, including upholding labor rights, providing decent working conditions, and avoiding child labor. It also emphasizes strong business ethics and respect for local communities. The industry has been working to address legacy issues related to mining practices and conflict diamonds and is held to high trading standards, as the majority of diamonds are extracted and marketed by large mining companies that are accountable to shareholders and stakeholders.
Transparency and traceability of diamonds in the supply chain have become important factors, driven by pressure for mine-to-market accountability. The Kimberley Process Certification Scheme (KPCS) is a foundational block in achieving ethical sourcing, requiring transparency, exchange of statistical data, and export and import controls. Over 80 countries participate in the process, and conflict diamonds now account for less than 1% of recorded rough diamond trade, a significant improvement from the past.
The industry has established its own standards, codes of conduct, and guidelines to ensure ethical practices. One example is the World Diamond Council System of Warranties, which requires professional buyers and sellers to include a warranty statement on invoices and memos, confirming the diamond's conflict-free origin and adherence to responsible business practices. The System of Warranties covers human and labor rights, anti-money laundering, and anti-corruption measures. Retailers also abide by the System of Warranties, and major jewelers like De Beers, Chow Tai Fook, and Tiffany & Co. reference it in their supplier codes of conduct.
What is the natural diamond industry doing to reduce its carbon footprint and protect biodiversity?
The natural diamond industry is taking steps to reduce its carbon footprint and protect biodiversity. Companies like De Beers Group and Rio Tinto have set goals to become carbon neutral or achieve net-zero emissions by specific target years. They are investing in renewable energy projects, engaging in carbon offsetting initiatives, and implementing programs to sequester carbon. The industry also follows global environmental standards and national laws, obtaining necessary permissions and implementing ongoing monitoring and reporting.
To protect biodiversity, the natural diamond industry conserves an area almost four times the land they use. 99% of waste produced by diamond recovery is rock, which is reclaimed and recycled, and water usage is actively managed and recycled. The industry also works on mine closure plans and rehabilitation to ensure a positive mining legacy. Various initiatives and partnerships are undertaken to support biodiversity conservation and wildlife protection. Regulations and guidelines are in place to ensure compliance with environmental standards and promote responsible mine closure.
Companies also engage in conservation efforts, rewilding projects, and wildlife protection programs. They comply with international environmental legislation, utilize biodiversity management plans, and actively monitor and report on their environmental impact.
Mining companies have closure plans in place to ensure responsible mine restoration once operations cease. They work with governments and local communities to meet regulatory requirements and implement measures for land rehabilitation. The industry follows various guidelines and frameworks for mine closure and restoration, emphasizing sustainable development and long-term liabilities.
Do natural diamonds benefit their countries of origin?
The natural diamond industry has made significant contributions to the countries where diamonds are sourced. Companies operating in the industry are committed to reinvesting in and creating positive effects in the communities they work with. These contributions align with the UN Sustainable Development Goals and focus on areas such as poverty alleviation, decent work, health and wellbeing, fair wages, and reduced inequalities.
Up to 80% of the value of rough diamonds can remain within local communities through local purchasing, employment benefits, social programs, infrastructure investment, and the taxes, royalties, and dividends paid to governments. The industry supports the livelihoods of approximately 10 million people involved in the diamond supply chain worldwide.
Contrary to outdated perceptions of economic inequalities and exploitation, the natural diamond industry has helped developing nations, such as Botswana and Namibia, experience significant economic growth. In Botswana, diamonds account for a large portion of total exports and contribute significantly to fiscal revenue and GDP. The industry has also supported education, healthcare, and social programs, contributing to rising prosperity and per capita income in Botswana.
The natural diamond industry has been actively involved in supporting communities during challenging times, such as the COVID-19 pandemic. Companies like De Beers Group have provided medical support, personal protective equipment, food aid, and other assistance to communities in need.
Is the industry stockpiling diamonds to drive-up prices?
The idea that the diamond industry is stockpiling diamonds to drive up prices is not supported by the available data. Inventories of natural diamond producers fluctuate over time due to various factors such as the size, color, and quality of the stones recovered each month, seasonal demand fluctuations, and external events like the global coronavirus pandemic.
Comparisons of production and sales data for diamond companies show that there is no evidence of deliberate stockpiling to systematically increase prices. In fact, upstream inventories at diamond mine sites and sorting offices fell by 40% in 2021, bringing them close to minimal levels. The diamond industry has been transparent in disclosing production and inventory management information, and the international rough diamond trade is regulated and recorded through the Kimberley Process Certification Scheme.
What are the working conditions like in the diamond industry?
The working conditions in the natural diamond industry are subject to high global standards set by the members of the Natural Diamond Council (NDC). These standards ensure fair pay, health and safety, employee benefits, and protection of human rights within mining operations. NDC members prioritize local employment, with 99.7% of their employees being hired locally and paid an average of 64% more than the national average salary.
NDC members aim to establish long-term partnerships with their employees, offering safe and high-quality jobs with fair working conditions. These conditions include competitive wages, reasonable working hours, non-discrimination, protection from harassment, the right to collective bargaining, and access to grievance procedures. The industry is also committed to promoting gender diversity, with one-third of the natural diamond mining industry's workforce being women, and 30% of board members in NDC companies being women.
The natural diamond industry is highly regulated under trading and legal frameworks by international organizations such as the United Nations and World Trade Organization. Multiple initiatives, processes, and policies ensure compliance and address social issues throughout the supply chain. The industry adheres to various standards and policies, including those of the Responsible Jewellery Council, De Beers Group, Petra, and Rio Tinto, which emphasize responsible practices and respect for human rights.
Health and safety are paramount in the industry, with a strong focus on maintaining a safety culture and following strict rules and processes. NDC members continuously invest in new technologies and provide training to ensure the well-being of their workers. Safety performance is closely monitored, and leaders' performance evaluations consider their safety records.
The natural diamond industry actively promotes gender diversity at all levels, including executive positions and throughout the workforce. The industry's efforts exceed the average representation of women in similar-sized companies, and NDC companies have a significant percentage of women on their boards.
What are the key stages in the journey of a natural diamond from the mine to the market?
The journey of a natural diamond from the mine to the market involves several stages:
Exploration and Mining: Diamond deposits are first discovered through exploration techniques such as aerial surveys, geophysical studies, and drilling. Once a viable deposit is found, the mining process begins, which can involve open-pit or underground mining methods.
Sorting and Rough Diamond Assessment: After extraction, the rough diamonds are sorted based on their size, shape, and quality. They are then assessed to determine their potential value and possible treatments required.
Diamond Cutting and Polishing: Skilled diamond cutters analyze the rough diamond to decide the optimal way to cut it to maximize its beauty and value. Precision cutting and polishing are carried out to transform the rough diamond into a faceted gemstone.
Certification and Grading: The polished diamonds are sent to independent gemological laboratories for grading and certification. These laboratories evaluate the diamond based on the "Four Cs": carat weight, color, clarity, and cut. The grading report provides an objective assessment of the diamond's quality.
Jewelry Manufacturing: Once the diamonds are graded and certified, they are often sold to jewelry manufacturers who incorporate them into various designs. Diamonds can be set in rings, necklaces, bracelets, earrings, and other jewelry pieces.
Distribution and Retail: The finished diamond jewelry is distributed to retailers, either directly from manufacturers or through diamond wholesalers. Retailers then sell the diamonds and diamond jewelry to consumers through brick-and-mortar stores or online platforms.
What factors influence the value of a natural diamond?
Several factors influence the value of a natural diamond as it progresses from the mine to the market. These factors interact and vary depending on individual diamonds and market conditions, making the valuation process complex:
Carat Weight: The carat weight of a diamond directly affects its value. Larger diamonds are generally rarer and more valuable than smaller ones.
Color: The presence of color in a diamond can impact its value. Colorless diamonds, particularly those graded as "D", "E" or "F", are highly sought after and more valuable. On the other hand, diamonds with noticeable color, such as fancy yellow or blue diamonds, may have their own market demand and value.
Clarity: Clarity refers to the presence of internal or external flaws, known as inclusions and blemishes, in a diamond. Diamonds with fewer or no visible flaws are considered more valuable.
Cut: The cut of a diamond affects its brilliance and overall appearance. Well-cut diamonds reflect light in a way that enhances their beauty. Diamonds with excellent cut proportions command higher prices due to their superior sparkle.
Rarity: Rarity plays a significant role in determining the value of a diamond. Diamonds that are rare in nature, such as those with unique colors (e.g., pink, green) or exceptional clarity, can command higher prices.
Market Demand: Consumer demand and trends can influence the value of diamonds. Market factors such as supply and demand dynamics, economic conditions, and shifts in consumer preferences can impact diamond prices.
While natural diamonds are rare due to their geological formation, the industry is committed to ethical sourcing practices, ensuring conflict-free diamonds and upholding labor rights. Efforts to reduce the industry's carbon footprint and protect biodiversity are underway, demonstrating a commitment to environmental stewardship. Moreover, the natural diamond industry has contributed significantly to the countries of origin, supporting local communities and driving economic growth. The industry's commitment to transparency and responsible practices challenges outdated perceptions and emphasizes its positive impact. From mine to market, the journey of a natural diamond involves various stages, each adding value and transforming it into a cherished gem. By understanding the multifaceted aspects of the natural diamond industry, we can truly appreciate the timeless beauty and significance of these remarkable gems.