Australia / Press Releases
The Argyle Mine’s Closure To Disrupt The Global Diamond Market
by Jason Aravanis
Jul 16 2019

Summary:

  • Rio Tinto has announced the beginning of the 35th Argyle Diamond tender, which may present one of the last opportunities to buy newly mined Australian diamonds.
  • Based in Western Australia, the Argyle mine accounts for over 90% of the global supply of coloured diamonds and almost the entire Diamond and Gemstone Mining industry in Australia.
  • The mine is expected to close in 2020, although diamonds are still present in the mine. Extraction costs have risen as the mine has become deeper, ultimately rendering the site unviable.
  • The closure is anticipated to disrupt the global diamond market, and the value of coloured diamonds will likely skyrocket as supply falls. The Argyle mine has left a lasting impact on the global diamond market by reshaping consumer impressions of coloured diamonds.

The Argyle tender and mine

Rio Tinto has announced the beginning of the 35th Argyle Diamond tender, which may present one of the last opportunities to buy newly mined Australian diamonds. The 2019 Argyle Diamond tender includes 64 diamonds, totalling 56.28 carats. Due to the extreme rarity of pink, red and purple diamonds, these varieties command much higher prices than equivalent white diamonds. IBISWorld expects each carat to be auctioned for several million dollars. In 2018, the tender included the Argyle Muse, the most valuable Argyle diamond ever, with an estimated value of $21 million.

“Investor interest will likely be higher this year, given the Argyle mine’s imminent closure. After the mine closes, the value of these diamonds is forecast to rise above their historical yield of more than 10 per cent per annum,” said IBISWorld Senior Industry Analyst, Jason Aravanis.

The Argyle mine is anticipated to close by the end of 2020, although diamonds are still present in the mine. Extraction costs have risen as the mine has become deeper, ultimately rendering the site unviable. Rio Tinto has pursued innovative strategies to extend the mine’s life since its construction in 1985, including a transition from open pit to underground mining in 2013.

Argyle’s underground operation pioneered the use of block-cave mining, a relatively new and increasingly important mining technique, in Western Australia. Block caving involves tunnelling deep beneath an orebody and establishing a series of chambers, into which the orebody gradually collapses in on itself.

The democratisation of diamonds

Although Argyle is primarily known for its treasurable pink diamonds, the mine’s less valuable brown diamonds have also had a major influence on the global diamond market. These diamonds have played a significant role in making diamonds more affordable for consumers.

“For most of the 20th century, the global diamond market was primarily controlled by one company: De Beers. Through a near monopoly on supply, De Beers was capable of determining diamond prices. De Beers also successfully used advertising to persuade consumers that white diamonds were the ideal, as opposed to coloured diamonds, and were therefore worth a price premium,” said Mr Aravanis.

In light of De Beers’ influence on consumer tastes, Rio Tinto made an ambitious decision to withdraw from its supply arrangement to De Beers in 1997. Instead of selling its brown diamonds at a low pricepoint to industrial manufacturers, Rio Tinto attempted to sell them to consumers by reshaping demand for coloured diamonds.

The company rebranded Argyle’s brown stones as “champagne” diamonds, offered them at a lower pricepoint than white diamonds and targeted their marketing at older consumers. Output from the Argyle mine flooded the global market with cheaper coloured stones, which became a runaway success as demand surged.

The future of Australian diamond mining

According to IBISWorld, the Argyle mine’s closure will represent the end of diamond mining in Australia, at least until new discoveries are made.

“The possibility of a new Argyle-like diamond discovery is unlikely, and Rio Tinto is not currently pursuing exploration opportunities in Australia. If any discovery is made, it will be several years before the discovery is developed into an operating mine. Most of the Argyle mine workforce is expected to be absorbed into Rio Tinto’s iron ore operations, or transferred to block cave mines overseas,” said Mr Aravanis.

-ENDS-

IBISWorld reports used to develop this release:

Diamond and Gemstone Mining

 

For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:

Kim Do
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3641
Mobile: 0422 773 995
Email: kim.do@ibisworld.com