Diamonds have a long and fascinating history. They have been sought after for centuries because of their beauty, brilliance, and hardness. Diamonds, of course, have been around for millions of years, but mining diamonds becomes increasingly difficult and can take a social and environmental toll. No wonder many people are showing interest in lab-grown diamonds and are questioning the future of the diamond mining industry.

GAHCHO KUÉ is too far north for trees. In the few snowless months, its surroundings in Canada’s Northwest Territories resemble a sprawling archipelago, as much lake as land, dark ponds stretching flat to the horizon. Wolverines roam, as well as bears, foxes, hares and caribou, though the herds have dwindled. There are no roads, no pipes, no electricity cables. So it seems strange when, flying over the tundra, a giant truck appears, then another, then a steel factory, rows of trailers and a big grey pit, deepening by the day.

De Beers, the world’s biggest diamond company, marked the opening of its Gahcho Kué mine in September. Local indigenous leaders prayed for the mine, beating drums. Bruce Cleaver, the firm’s chief executive, and Mark Cutifani, the boss of its parent company, Anglo American, stood by a ceremonial fire, flames tilting in the wind.

Now the hard work is under way. The area is so sodden that staff bring in heavy supplies just once a year, in the depths of winter, when they can build a thick road of ice. A caravan bearing fuel and equipment is slowly crossing the tundra. At the mine, their colleagues are working day and night to ramp up to full production, with the aim of extracting more than 12,000 carats (2.4kg) of diamonds each day. Gahcho Kué is an astonishing endeavour, the biggest new mine in the world in over a decade. De Beers has no plans for another.

Natural diamonds—as opposed to the synthetic ones mostly used in industry—were formed more than 1bn years ago deep below cratons, the oldest part of continents. There, between Earth’s core and its crust, the pressure was high enough and the temperature low enough for carbon to crystallise into its hardest form. There diamonds would have remained were it not for molten rock rushing through the mantle and drawing diamonds, garnets and other minerals with it, like a furious river pulling dirt from its banks, before erupting through Earth’s surface faster than the speed of sound.

Some of the gems settled in river beds, as in Brazil, or were swept to the coast, as in Namibia. Others remained encased in extinct volcanoes, or pipes, and ended up buried under soil or lakes. De Beers’s richest diamond mine was found beneath sand in Botswana in 1972, within the Kaapvaal craton that spans southern Africa.

A long-term risk looms over the industry: one day young couples may no longer want diamonds at all. They are a “Veblen good”, as items that gain their value solely from their ability to signal status are named, after Thorstein Veblen, an economist who wrote about the spending of the rich. For Veblen goods, the normal law of supply and demand does not hold: higher prices support demand, rather than suppressing it. If a big gap opens up between the number of diamonds offered for sale and the number of people willing to buy them at high prices, diamonds could suffer a big, sustained fall in value and the entire business could cease to make sense.

Today’s 20- and 30-somethings grew up as De Beers lost its monopoly and, wary of helping competitors, cut spending on the advertising that had done so much to create demand for diamonds in the first place. In recent years the company’s marketing budget accounted for roughly 1% of sales, down from about 5% in the 1990s, according to Morgan Stanley. At the same time the notion of “conflict diamonds” percolated through the popular consciousness—a movie called “Blood Diamond”, starring Leonardo DiCaprio with a Zimbabwean accent, was released in 2006. Young couples, who earn less than their parents did at their age, may prefer to spend their money elsewhere.

Complicating matters, those who do want a diamond now have an alternative. Synthetic diamonds have been available for decades, but only recently has the process become cheaper and the result more refined. In 2015 a company called New Diamond Technology made a ten-carat polished diamond of excellent quality, an unprecedented feat. Sales of synthetic diamonds are thought to amount to just 1% of the rough-diamond market. But synthetic-diamond sellers are appealing to young shoppers’ concerns for social and environmental causes—Diamond Foundry, backed by Mr DiCaprio, boasts that its products are “as rock-solid as your values”.

As the company works to shore up demand, there is a source of solace. For over a century it has fretted that big new finds would lead to plunging prices. “Our only risk,” Rhodes declared, “is the sudden discovery of new mines, which human nature will work recklessly to the detriment of us all.” But it seems that threat is waning.

Other companies have a few mines planned. De Beers is now focused on expanding existing mines, not building new ones. New technologies may help liberate more diamonds from kimberlite more efficiently. Even so, Bain estimates, production will peak in 2019. Supplies of new diamonds will then start to fall, sinking by 1-2% each year until 2030.

The cafeteria sometimes shudders with the reverberations of a blast from the pit. Outside, work goes on day and night. Staff pile kimberlite onto huge trucks, then haul the rocks to the processing plant. There, the ore passes through breakers, crushers and scrubbers until pebbles are sent through a series of X-rays and lasers, jets of air separating diamonds from worthless stones.

No workers at Gahcho Kué touch the diamonds with bare hands. Only a few see the gems before they are sent off by plane to be valued. In September Mr Coolen stood atop a steel grate in the processing plant, the platform shaking as giant scrubbers churned beneath. “Occasionally you see one,” he shouted above the din, “and it’s just gorgeous.” The mine is expected to reach full production in March. By 2030, its diamonds extracted, it will close.

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Article Source: The Economist