Kimberlites are usually found in clusters of between three and one hundred pipes or dykes. There is a tendency for the largest Kimberlite intrusive in a cluster (usually representing the most significant volcanic event) to be the richest pipe. Kimberlites are known for their extreme weathering characteristics. A few Kimberlites can be exceptionally valuable because of a) the immense size of their ore reserves and, b) the enormous value of a small percentage of the diamonds they contain. Diamond bearing Kimberlites are known to have been intruded throughout geological history.

Kimberlites have been intruded into a widely differing variety of geological environments. However, only those found near the centre of large, ancient and stable continental masses, or cratons, will contain diamonds. The diamonds have to be created at shallow enough depths to allow rare events, such as Kimberlite eruptions, the opportunity to transport them close to the Earth's surface. Approximately 5,000 Kimberlites (60% of them in South Africa) are known in the world today, yet these have only produced 20 major diamond mines to date.

Major Kimberlite pipes, as yet un‑mined, are known to exist in Angola, Canada, and Russia. Nevertheless, on today's information, it would appear as though only one in every 200-250 Kimberlites discovered, is destined to become a major diamond producing mine. Kimberlite, the world's principal source of diamonds, is highly susceptible to weathering effects of wind and rain, but the diamonds this igneous rock may or may not contain are not. In the central and Western part of the Southern African sub-continent, approximately 3,000 Kimberlite pipes and dykes (mostly 90 to 120 million years old,) are believed to have released up to 10 billion carats of diamonds. This has resulted in the formation of the world's richest diamond field the marine beach terraces along 1,000 kilometres of the Atlantic coast of Namibia and South Africa.

In Southern Africa, two thirds of all diamonds liberated by erosion are believed to have been destroyed on the journey to the sea. Thus where the original Kimberlite might have contained 30% gem quality diamonds the marine deposits now boast 90% + gemstone content. This process of upgrading diamond quality by the process of transportation and erosion is known everywhere alluvial diamonds are mined. From Namibia to Zaire and Australia to Sierra Leone, the same holds true. Significant alluvial diamond production takes place in the following countries: Angola, Australia, Brazil, the Central African Republic, Ghana, Guinea, Guyana, Namibia, Sierra Leone and, South Africa, Venezuela, and Zaire.

In Southern Africa, two thirds of all diamonds liberated by erosion are believed to have been destroyed on the journey to the sea. Thus where the original Kimberlite might have contained 30% gem quality diamonds the marine deposits now boast 90% + gemstone content. This proces of upgrading diamond quality by the process of transportation and erosion is known everywhere alluvial diamonds are mined. From Namibia to Zaire and Australia to Sierra Leone, the same holds true. Significant alluvial diamond production takes place in the following countries: Angola, Australia, Brazil, the Central African Republic, Ghana, Guinea, Guyana, Namibia, Sierra Leone and, South Africa, Venezuela, and Zaire.

Diamond & Gold Production | The Geological Origins of Diamonds |
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The World Diamond Market Today
 

It is a modern misconception that the world's diamonds come primarily from South Africa: diamonds are a world wide resource. The common characteristic of primary diamond deposits is the ancient terrain that hosts the Kimberlite and lamproite pipes that bring diamonds to the Earth's surface.

The map shows both the major deposits and the ancient bedrock, both the 2,500 millionyear old archons and less productive 1,600 to 2,500 million year old protons, that contain the diamond pipes. The diamonds in secondary deposits have been moved by erosion away from the pipes.

Over the past 100 million years up to 1,400 meters have been eroded from the land's surface, releasing billions of carats of diamonds on a trip to the sea. An estimate of diamonds eroded from the Kimberley mine the "Big Hole" alone is 500,000 carats. The rivers carried most of the eroded diamonds to the Atlantic Ocean, although about 10% of them were store in the alluvial deposits of the drainage systems. The rest are in the past and present beach deposits of the Atlantic coast, from Port Nolloth in Namaqualand to Luderitz in Namibia.

Because powerful ocean waves break the poorer quality diamonds, 90 - 95 percent of marine diamonds are of gem quality. The littoral zone, the area of wave action on the Atlantic coast where diamonds accumulate, has moved in and out with changes in sea level, but shore lines have been constant over long periods, resulting in wave cut terraces with hollows and crevices in which diamonds concentrated. These terraces are preserved hundreds of meters both above and below sea level and are the focus of mining activity.


The monumental increase in diamond production in the 20th century is shown on this graph. India's maximum production, perhaps 50,000 to 100,000 carats annually in the 16th century, is very small by modern standards. Brazil and Venezuela are barely discernible compared to South African production following discoveries in 1867. For the most part, except for major wars and economic recessions, diamond production has been steadily increasing since then, with non-African sources growing in relative proportion. Major production is now dominated by Australia, Botswana, Russia, and Congo Republic (Zaire), but South Africa is still a major producer, in both volume and value.

Most of the diamond deposits first discovered were alluvial concentrations in streambed or riverbed sand and gravel. They are still actively exploited in many ways, from the most primitive to the highly sophisticated. The goal is relatively simple: to find a location where moving water has deposited diamonds in the bottom of a channel, possibly in a pocket or cleft. Because rivers meander and drainage can change, fossilizing a once active river, the search for alluvial diamonds requires some geological knowledge and a lot of luck. The process involves removing the overlying barren ground, digging up the bearing ground, extracting the diamonds, and, nowadays, restoring the landscape when finished. 

In the most basic, individual operations, such as in Sierra Leone or Angola, the technology involves shovel and with some hand sloshing to gravitate diamond to the bottom of the pan; the eye is the ultimate sorting device. Mom and pop operations in South Africa involve a small claim and utilize limited technology shovels, buckets, jury-rigged cranes powered by small vehicles, and the like to load a small washing pan. The concentrate is then sieved into several size ranges, and each fraction is dumped onto a picking table, where someone checks by eye for diamonds. In the bigger operations, as shown in the model, large earth-moving equipment transports the alluvium, and the processing approaches that of the primary mines coarse sieving, then rotary sieving in a trommel, before loading into a large washing pan. Final processing includes concentrate sieving, a picking table, and usually a grease table. Of course, no crushing is required, as nature has already released the diamonds from the pipe rock.

There are two aspects of moving diamonds from mine to dealer. The first is the fairly straightforward but important task of separating diamonds into gem‑quality, near gem-quality, and industrialgrade diamonds. The second is the more intriguing aspect: the primary diamond marketing, which has been and still is largely controlled by De Beers Consolidated Mines, Ltd. through its majority control of the Central Selling Organization (CSO). The CSO sells a large percentage of mine production to diamond dealers; independent mines sell by closed bids and through private transactions.

Sorting occurs at every level of the market, from the mine to the jeweller. At the mine the sorting depends on the sophistication of the operation and the size of production, but it is always based on grouping stones of like type. Diamonds are grouped into "sizes" more than one carat; "smalls" between 1 carat and 1/10th carat; and "sand," less than 1/10th carat, with some leeway for market pressures. Diamonds larger than about 15 carats are handled individually. Shape groups comprise "stones," "shapes," "cleavages," "macles," and "flats," describing characteristics familiar to the market. The ultimate purpose of sorting is to estimate an asking price for the rough diamonds. 

After great swings in diamond prices, the Diamond Trading Corporation (DTC) was set up by De Beers in 1934 to handle the actual sales of diamonds. The DTC and the Diamond Producers' Association (the mine operators) form the nucleus of the Central Selling Organization. The CSO stabilizes prices in hard times and raises them in accord with inflation and demand during good times. It needs considerable wealth and stockpiles of diamonds to maintain this position, but this "single channel marketing" system has been an effective cartel. In the United States cartels are illegal, so De Beers cannot operate here. However, the company's interests are represented by a public relations office, the Diamond Information Centre, and indirectly by the diamond dealers and jewellers who sell the gems.

Diamond & Gold Production | The Geological Origins of Diamonds |
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The World Diamond Market Today

A History of Diamonds

Around the early 1700's, alluvial diamonds were first found in Brazil in the Tejuca region of Minas Gerais , 300 miles north of Rio de Janeiro. Brazil maintained its pre-eminent position as the world's principal diamond producer for over 150 years, until the time of the huge African discoveries in the latter half of the 19th century. The 21 carat "Eureka" gemstone was the first diamond to be found in South Africa in 1886 followed three years later by the far more famous 83.5 carat "Star of South Africa". The following year, a 50 carat gemstone located in "yellow ground". This proved to be the first Kimberlite pipe ever discovered on the present day site of the famous Jagersfonteine Mine in the Orange Free State. Several more Kimberlite discoveries soon followed (Bultfonteine, Dutoitspan, De Beers, Koffiefontein and Kimberley or "Big Hole").

By a series of astute business manoeuvres throughout the 1880's the claims of Charles Rudd, Cecil Rhodes, and Barney Barnato were brought together under the effective control of one company. On March 12th, 1888, De Beer's Consolidated mines and was incorporated with Cecil John Rhodes and Barney Barnato as principal shareholders. In 1890, Rhodes formed the London Diamond Syndicate, a forerunner of the present day Central Selling Organisation (C S O). Major or new discoveries, (Namibia) in 1908 in North‑East Angola in in 1912, and Sierra Leone in 1930, put increasing strain on the syndicate. However it was the Great Depression of the 1930s which almost spelled disaster for De Beers, when the demand for diamonds slumped to a tiny fraction of the decade before. By 1934, all hard‑rock mining activities at the Kimberley mines had ceased

The crisis of oversupply, with individual producers savagely undercutting each other in an attempt to grain greater market share in the diamond industry, continued throughout the 1920s culminating in crisis at the end of the decade. This precipitated Sir Ernest Oppenheimer, the chairman of De Beer's, in a series of complex business transactions, to form the CSO. As a result all major producers of diamonds, not under the direct control of De Beers, agreed to market their gemstones with the CSO. The intention was to create price stability, and thereby public confidence as well, in a luxury item which was previously renowned for its wild price fluctuations. Nevertheless, the 1930s were a grim period for De Beers and the CSO. Real recovery only came with a renewed spectre of a European war, with industries demanding diamonds for high precision cutting tools for a newgeneration of weaponry.

Since the end of World Wax II, major diamond discoveries have been made in Australia (1979), Botswana Tanzania (1942), and Russia (1955). During this period the CSO has never reduce the price of diamonds and has been extraordinarily successful in matching the enormous increase in supply with demand.

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The World Diamond Market Today

The World Diamond Market Today

In the early 1990s, approximately 50 million pieces of diamond jewellery were sold annually at an average retail price of around $800 per item. This 42 billion dollar industry, which has doubled in value since 1980, is heavily dependent on the maintenance of an orderly market, where adequate supplies of diamonds are assured at acceptable prices.

The retail market for diamond jewellery is weighted towards consumption in Japan and United States, as can be seen by the nex figures.

RETAIL SALES OF DIAMONDS IN JUWELRY ($42 BILLION)
USA   30 %
Japan 30%
Europe 17%
SE Asia 11%
Other 12%  

Gluts of uncut gemstones are just as disrupting to the market as chronic shortages. When the former occurs, such as with the flood of illicit diamonds from Angola in the first nine months of 1992. C S O agents are active in the market buying up these stones, ensuring that the stability of the market is not disturbed by any distress selling. The CSO is believed to have bought about $600 million, some two‑thirds of the diamonds smuggled out Angola in 1992, before the rainy season and the resumption of the 15 year old civil war brought the flow to an abrupt halt.

Ashton Mining's estimates of the value of 1992 world diamond sales indicated a highly volatile market, heavily influenced by political and economic developments in Central Africa and Russia are. In 1992 diamond sales from the (8) major selling countries, only Botswana, Russia and Zaire posted a decline from a year before. In 1993, only South Africa showed a significant increase in diamond sales, as a result of the 4 million carat/year Ventia Mine coming fully on stream. CSO sales restrictions (currently 20%) will account for cutbacks from Australia, Botswana and Namibia. There seems little chance of resolving the political/economic chaos in Angola and Zaire in the short term. Whereas in Sierra Leone, the political and economic climate to develop is currently one of several attractive areas.

De Beer's CSO is not loved for its role as market regulator, seeking to match supply and demand closely as possible. In essence, it moves to dampen all speculation, seeking to ensure that diamonds are "consumed" and opposing the concept that they should be bought solely for investment purposes. The investment categories of diamonds, such as celebrated one carat D flawless and very rare representing 2% of CSO sales by weight and 15% by value. The world's mines produce approximately 15 million carats of gem diamonds annually. Around 80% of the world's rough, or uncut, gem quality diamond output is purchased annually by the CSO. To aid the retail diamond market, De Beer's undertakes a massive and sophisticated global market programme, which spawned the enduring slogan in 1948 of A Diamond is Forever. When the market is weak, advertising expenditures increase and in recent times have approached 5% of total CSO sales. A total of around $164 million was spent by De Beers on advertising 1992.

The rough (uncut) diamond market consists of three very different segments ‑ 'gem', 'near‑gem' and 'industrial'. Gem and near‑gem diamonds are used in jewellery and can vary in colour from pure blue‑white, through pale yellow and brown, to the rarest pink or blue diamonds. Industrial diamonds, because of their inferior quality or undesirable colour, are used in industry for cutting, grinding, polishing, drilling and other technical and scientific applications. Gem diamonds make up only 18 per cent of world production by weight, but account for 66 per cent by value. Alluvial diamond deposits typically have a high gem content, of 80 per cent or above.

Approximately 75 per cent of the world's annual production of rough diamonds is marketed through the De Beers‑controlled Diamond Trading Company (DTC) which markets all De Beers production as well as production bought from other mines both on long term contracts and on the open market. The DTC aims to preserve an orderly market for diamonds and in the past has managed diamond prices by controlling supply in times of over production or economic recession. As a result, the diamond market has been less prone to the cyclical price fluctuations typical of many commodities. Rough diamond prices increased at an average annual rate of approximately 5 per cent between 1985 and 2000, and substantially outperformed oil, gold and the Economist commodity price index over that period.

De Beers has recently indicated that it will shift its focus from its traditional approach of supply management, where the DTC would limit supply to the market to maintain a balance between overall supply and demand, to demand creation. The primary objective of this initiative is to increase demand for diamonds by raising the advertising to sales ratio for diamond jewellery from its present level of 0.5%, closer to the average of  about 10% in the luxury products sector. In January 2001, De Beers an nounced a joint venture with LVMH, the French luxury goods group, with a view to leading the industry in developing and promoting new brands in the diamond jewellery market. These changes are expected to increase overall demand for diamonds, which will benefit all producers.

Diamond & Gold Production | The Geological Origins of Diamonds |
A Brief History of Diamond Industry | A HIstory of Diamonds | 
The World Diamond Market Today