March 8, 2021

The largest diamond mine in the world will close in 2020 | Economy

The world's largest diamond mine, famous for producing pink and red gems, will be closed by the Rio Tinto Group after almost four decades. The Argyle mine is located about 2,600 kilometers northeast of the city of Perth, in Western Australia, and plans to close in 2020 after having exhausted its supply of economically viable stones. Runners, Banks and competitors predict that the closure could boost prices of these precious stones, which has been decreasing since 2011, according to data.

"There will be a good amount of supply that will come out of the market," he explained. Arnaud Soirat, copper and diamond director of the Rio Tinto group, in an interview this Friday. "By the end of 2020, we will stop operations and begin the rehabilitation of the site," he added.

Argyle is best known as the source of approximately 90% of the world's pink diamonds: pink to magenta stones that dominate among the industry's highest prices. Sotheby's auctioned in April 2017 the "Star Rosa" of 59.6 carats -Extracted by the rival company De Beers- for 63 million euros, a record auction price for any gem.

Although the pink stones attract the most attention, they represent less than 0.01% of the total production of Argyle. More than three quarters of the mine's output is made up of brown diamonds of lower value, and the mine's total output sells for an average of between 13 and 22 euros per carat, according to the 2017 estimates of Canaccord Genuity Group Inc A figure that is much lower at 151 euros per carat than received De Beers last year.

The mine is also the largest producer of diamonds by volume and that is what puts the operation at the center of all eyes of the sector. There is now an excess of small, cheap diamonds on the market, which has eroded the profits of almost all miners and has made it increasingly difficult for industry cutters, polishers and traders to make a profit. In December, some of Rio's customers refused to buy cheaper stones, while De Beers was forced to reduce some prices and offer concessions to buyers.

However, with consumers' appetite for stable diamonds, and major mines, including Argyle, scheduled for closure, "rational compensation between supply and demand should lead to price growth," he said in March. CEO of Stornoway Diamond Corp., Pat Godin.

Some 21 million carats of world diamond production – including some 14 million Argyle – are scheduled to exit the market in 2023, a volume that will only be partially offset by the addition of new mines, according to Alrosa PJSC, the largest producer of diamonds. of the world. The deficit between demand and annual supply could be between 11 million and 35 million carats by 2023, the company said in a presentation last month.

"In terms of pink diamonds, the impact will be even more dramatic," said Soirat. "You can imagine that the laws of supply and demand will apply, and you can imagine the impact it will have on those very rare pink, red, blue and purple diamonds."

Pink diamond prices have already quadrupled in the last 10 years, and buyers "are now realizing the potential impact of Argyle's closing" to further increase values, says Frauke Bolten-Boshammer, owner of Kimberley Fine Diamonds, a retailer based in the city of Kununurra, about 200 kilometers north of the mine. She has marketed the gems since the 1990s.

The closure of Argyle will eliminate approximately 75% of the Rio Tinto Group's diamond production, but the impact on its profits will be negligible. Diamonds contribute only about 2% of their profits, while iron ore (the company's main raw material) accounts for almost 60%.

In 2016 the mining company closed the Bunder development project in India and in 2015 it left the Murowa mine in Zimbabwe. The only other diamond producer that Rio Tinto has is the Diavik mine in Canada, but it is also scheduled to close in 2025, Soirat does not rule out extending the exploitation time of the site.

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