Introducing the Argyle Mine
Over 90% of the world’s annual natural pink diamond supply is mined from one single source: Rio Tinto’s Argyle Mine in Western Australia. The mine has been in operation since the early 1980’s, and is scheduled to completely cease all mining operations by 2021 due to exhausted supply.
In anticipation of this closure date, investors buying pink diamonds are seeing an average appreciation of between 15-20% on their diamond portfolios each year.
The Argyle Mine: Why is it closing?
In the world of diamonds and precious gemstones, the Argyle mine has assumed a brand of its own. In addition to being the fourth largest diamond mine in the world by volume, the mine has been the largest and most significant source of rare pink diamonds, producing 90% of the world’s supply. While occasional pink diamonds can be found in other mines, (in Brazil, Russia and India for example), the Argyle mine is unmatched in the sheer quantity and quality of the pink diamonds it has produced over the years.
Within the Argyle mine itself, pink diamonds are incredibly rare, representing less than 1% of the total diamonds mined, as the table below highlights.
|Est. Production %||72%||27%||< 1%|
|Est. Production Volume (carats)||9.70 million||3.64 million||< 0.13 million|
As with all diamond mines, the Argyle diamond mine has a limited lifespan, after which it will no longer be economically viable to continue mining. The majority of industry experts suggest it will largely be depleted within 5 years. Rio Tinto has confirmed these findings, announcing in 2013 that it was only able to extend the life of the Argyle mine to 2021 by transitioning to underground operations. When taking into consideration the full life of the mine, this transition is fairly minor and the reality remains that closure by 2021 is a very real expectation.
The closure will be a major milestone and its significance has not been lost on the diamond community or savvy investors with a preference for hard assets. There have been no recent discoveries of viable mining opportunities to replace this unique mine, and curtailed exploration since the 2008 financial crises.
If a new mine was discovered in the near future, it would still take a minimum 10-15 years to reach the actual stage of producing diamonds to sell to consumers.
Like all assets, the diamond market follows the laws of supply and demand. As such, when Argyle does close, the supply of pink diamonds will be even more limited. This closure positions the pink diamond as an investment opportunity offering significant capital gains in the medium to long term.