Mining Companies And The War Against Man-made Diamonds

2284 words - 10 pages

Table of contents 1. Summary 3 2. Background 4 3. Analysis A & Analysis B 5 4. Recommendation 10 5. Appendix 12 1. Summary Synthetic diamonds constitute 99% of the market. They are significantly cheaper than natural diamonds and are gaining popularity among 'Millenials'; who are more environmentally conscious and have less disposable income than previous generations.

Natural diamond miners (mainly De Beers) are concerned that synthetic (cultured) diamonds may be falsely traded as precious organic gems since they are difficult to differentiate with the naked eye, thus threatening the integrity of their operations.
Such activities undermine consumer confidence, which is important to diamond sales, and pose a reputational risk to diamond companies.

Melee diamonds (a small quarter carat diamond), are particularly susceptible since they are not sent to a certified lab for 'grading'.
The best preventative measure is screening. Devices such as ALROSA Diamond inspector, M-Screen, PhosView and the AMD can be used to differentiate between cultured and natural diamonds; however they can be very costly.
The fears of the mined diamond industry are warranted. Nonetheless, it is individual preferences that determine the demand for one diamond compared to another. The industry's main challenge lies in sustaining the long-term demand growth for diamond jewellery, especially among 'Millenials'.

2. Background
Diamonds were discovered nearly 1, 000 years ago in India and were originally used as payment for various items, such as loans. It was not until the 1800 that Cecil Rhodes, a South African politician, started the De Beers Company - one of the most renowned diamond companies in the world (Biesheuvel, 2012).

De Beers dominated the diamond industry, occupying 90% of the market until the 1900s when other diamond deposits were discovered across the globe (Goldschein, 2011). The industry significantly changed in 1955, when the first synthetic diamond was created using the high pressure high temperature (HPHT) method in the General Electric laboratories. Today, the company only controls about 35% of the market (Chang et. al. , 2002).

The production of synthetic and natural diamonds has been increasing every year since 1988 (see appendix A). In 2016 global production of natural diamonds totalled approximately 127, 605, 000 carats with an average price of USD $111 per carat. Production from Australia, Russia and Botswana accounted for 30% of the world's production of natural diamonds in 2016. China produced 91% of the world's 15. 1 billion carats of synthetic diamonds in 2016. Although synthetic diamonds are different from natural diamonds in the method that they were produced[footnoteRef:2], visually they are indistinguishable and cost about 15% less (Goff, 2007). [2: Natural diamonds were created over thousands of year under pressure and at high temperatures in the earth's crust, whereas synthetics are created in a lab over the span of ...

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