The Diamond Mining Industry

The diamond industry is different than most other types of industries in the world. To understand why diamonds are so valuable and it seems in such short supply, you must first understand how the diamond industry works. There are two main types of diamonds, a gem grade diamond and diamonds that are used for industrial products. Both types of diamonds are marketed and sold quite differently from one another.

A gem grade diamond is mined, and traded to only a few key entities before it is available to the consumer; this makes it easier for the companies involved to keep strict controls of the prices of the gem grade diamonds. A gem grade diamond is not a commodity. For instance, gold, silver and other precious metals are sold on an open market, the diamond trade it is a cartel or a group of suppliers that control the output and thus are in collusion. They set prices for the diamonds that are much higher than their true value.

De Beers is a company that controls a large portion of the diamond mines, trading and wholesale outlets associated with gem grade diamonds. It is said that one company alone – De Beers is responsible for up to half of all gem grade diamonds that arrive on the market. At one time, estimates stated that almost 80% of all diamonds were controlled by De Beers.

Today there are only a few companies that handle the trade of diamonds. The DTC (Diamond Trading Company) which is a subsidiary of De Beers is the company that conducts the trade of diamonds throughout the world. There are only a few key places where the diamond trade exists. They are Antwerp, New York, Tel Aviv, London, Amsterdam and Surat. The vast majority of diamonds that are mined are sent to one of these locations to be polished, cut and traded. At this point, Sightholders sell finished gem grade diamonds to retail outlets. There are very few Sightholders which sell diamonds to the wholesale and retail outlets.

These outlets or markets where gem grade diamonds are sold to wholesale or retail outlets are called bourses. There are only 24 bourses, making the wholesale and retail market extremely limited. At this point gem grade diamonds are sold directly to either wholesale or retail entities. They are only available in small lots to keep demand high.

It is estimated that in 2002, gem grade rough diamonds directly from the mine were considered to have a market value of 9 billion dollars, after these diamonds were cut and polished, their price increased to 14 billion. When the diamonds were sold to the wholesale market, their value increased to 28 billion dollars and finally the retail value of the diamonds sold reached a value of 57 billion dollars.