Is The Diamond Market About To Collapse Over Huge Russian Find?Forbes

Tim Worstall, Contributor

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9/18/2012 @ 10:18AM |6 222 views

Is The Diamond Market About To Collapse Over Huge Russian Find?

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I have some knowledge of how these sorts of announcements from Russia go. There’s often a slight disconnect between the profit that can be made from some mineral resource and the value assigned to that mineral resource. I have a feeling that this might apply to this announcement of a huge diamond field in Russia:

Russia is about to start tapping into a huge source of diamonds that could supply the world market for the next 3,000 years.
Scientists estimate there are ‘trillions of carats’ lying beneath a 35million-year-old asteroid crater in Siberia – more than ten times the global stockpile.
The Kremlin has known about the reserves under the 62-mile-wide impact zone since the 1970s.
But it has kept it a secret until now because it was already reaping big profits in what back then was a heavily controlled market.

I wouldn’t doubt at all that there are the reported trillions of carats of diamonds in that asteroid impact crater. Such impacts are a known cause of diamonds forming after all. However, I am a great deal less convinced that the find will be of any value: or that it will ever be mined.

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For the value of any mineral deposit is not the value of the minerals in it. It’s the value of those minerals minus the cost of extracting them. With gemstone diamonds this doesn’t usually matter: the value is so high that almost any mining technique is profitable. But these aren’t gemstone diamonds:

Russian scientists are claiming that a gigantic deposit of industrial diamonds found in a huge Siberian meteorite crater during Soviet times could revolutionise industry.

The Siberian branch of Russian Academy of Sciences said that the Popigai crater in eastern Siberia contains “many trillions of carats” of so-called “impact diamonds” good for technological purposes, not for jewellery, and far exceeding the currently known global deposits of conventional diamonds.

We have an entirely acceptable substitute for natural industrial diamonds: lab grown industrial diamonds. And we almost always find that the lab grown ones, the artificial ones, are cheaper than the mined ones.
Indeed, as a rough sketch, not a wholly accurate one but one that’s good enough, no one actually does go mining for industrial diamonds. You go mining for gemstone ones and those that you find which are not up to grade are sold as industrial ones. At prices that don’t cover their mining costs: the whole exercise is only made profitable by the much higher prices received for gemstone quality.
So I don’t doubt that there is a huge deposit of industrial diamonds there. What I do doubt is whether anyone will ever bother to go and dig them up. When we can make diamond powders in labs simply enough, why bother trying to build a vast mine in Northern Siberia, one of the most inhospitable places on the planet?

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Is The Diamond Market About To Collapse Over Huge Russian Find?