Diamond Booklet

8/2/2019 Diamond Booklet

1/241DiamonDs


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Diamonds hae the highest meting oint

o any natura substance

Diamonds are amost re roo. In orderor a diamond to burn it needs to beheated to 1292 degrees Fahrenheit

It is beieed that the engagement diamondring is worn on the third nger o the ethand because the ancient Egytians beieed

the ein directy connected to the heart

The rst diamond engagement ring wasgited by Archduke Maximiian o Austria

to Mary o Burgundy in the year 1477


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Gelgy Dd PpeDiamonds are transarent crystas o carbon that are ormedunder extreme ressure at reatiey ow temeratures, atdeths between 100 and 400 km beow the Earths surace.Studies suggest that the majority o diamonds ormed eryeary in the Earths history and thereore reresent hysicarocesses haening dee within the Earth, in a region known

as the uer mante, shorty ater the ormation o the anet.Many rocesses o the actie Earth since that time and con-tinuing to the resent hae been destructie to these origi-nay ormed crystas, conerting them into grahite or othermineras containing carbon. Unique and ong asting hysicaconditions o ressure and temerature hae been required toroide reuge or these rimea diamonds, conditions that

occur ony in the odest and most stabe arts o each conti-nent. For this reason, the words great diamond mines a occurwithin regions reerred to by geoogists as stabe ArcheanCratons, the nucei o continents as we know them today.The Kaaaa/Zimbabwe craton o southern Arica, the Saecraton o northern Canada, the Siberian craton and others ao these reresent ortions o the Earths crust that stabiizedat a ery eary geoogic time, hae suried dramatic geoogiceoution since then and, in doing so, roided reuge or thecrystaine treasure beow.

Getting these diamonds to the surace is a secia geoogicoeration. Norma tectonic rocesses o subduction and crustauit are too sow and hot, destroying the diamonds. Tyi-ca ocanic eents such as the Hawaiian isands, or Mt Etna

deeo in regions where the diamonds hae aready beendestroyed and the magma chambers eeding these ocanoes

DiamonDs from KimBErLiTE


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are too shaow anyway. It takes a secia magma, and a seciatye o ocano the Kimberite.

The ormation o kimberite magma is a rocess that is notwe understood. What is known is that these magmas orm

ery dee and that they hae a reatiey high comonent ogases, such that when they do erut into a ocano, they do itquicky and ioenty. Kimberite magma moes uward romthe mante into the ower crust, oowing existing racturesand weaknesses in the surrounding rock. It icks u ragmentso surrounding rock as it moes uward and assimiates thismateria into itse. As the magma rises higher in the crust, sur-

rounding ressure becomes ess; the contained gases exandmore, racturing more rock, moing uward aster and asteras surrounding ressure becomes ess and ess, and in a eryshort time eruts to the surace. On erution, contained gassesescae immediatey, which eectiey reezes the remainingmagma in the chamber it has hammered out or itse on itsuward journey.

This eaes a body okimberite in the shae oa cassic chamagne fute,known as a kimberiteie. The uer ortiono the ie is the crater,and contains ne grained

kimberite magma thatwas hured uward as theerution occurred andthen e back into thehoe created. Time wiaso aow surroundingmateria to erode into the

crater, which resuts in amix o ne grained kim-

Crater

Diatreme

Xenoiths

Root


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berite and sediments o surrounding rocks. Beow the crater, isthe diatreme, a jumbe o kimberite ragments together withmateria that the magma brought u with it on its ong journeyrom the uer mante, a o which was rozen in mid-action

when the mobiizing gases escaed on erution. Going deeerinto the root zone o the ie are dykes and sis o kimberite,reresenting kimberite magma sti under some ressure onerution o the ie and thereore aowed to coo more sowyinto a hard igneous rock. These dykes and sis aso testiy to thecracks and weaknesses that the rising magma exored in itseort to reach the surace.

Kimberites and reated tyes o ocanoes occur a oer theword and a o them roide insights as to the nature o deecrusta and uer mante materia. It is ony where kimberitemagmas hae ormed underneath stabe Archean cratons thatthere is a chance that the magma wi ass through a zoneo diamond enrichment on its uward journey, assimiatingdiamond into itse and eeate these to the surace. It does not

Uer manteUer mante

Diamondbearing ie

Non diamondbearing ie

Diamonds

KIMBERlITE pIpES


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take much assimiating o diamond rich mante materia to makea great mine. Consider that many economic kimberite minesoerate on grades o 1 carat er tonne or ess, sometimes muchess. The weight o one carat is 0.2 grams. This equates to a dia-

mond concentration in the kimberite o 200 arts er biion.A o this is to say that the ormation o a diamondierous kim-berite deosit is a ery secia set o we-timed geoogic eents.primea diamond crystas must be shetered rom destructiegeoogic eents or miions o years. Kimberite magmas mustorm and ascend to the surace in an area that causes the mag-ma to rise through and assimiate diamond rich mante mate-

ria. The ascent o the magma must be quick so that assimiateddiamonds are not dissoed and resorbed by corrosie gaseswithin the magma. The resutant diamondierous ie must beresered rom subsequent erosion or miions o years, waitingor the ucky rosector who can recognize its otentia, andunderstands how to deeo the deosit into a mine.

KIMBERlITE

SANDSTONE

REDBEDS

SEDIMENDS

SHAlES

QUARTZITE

ARCHAEAN GRANITESCHIST

TUFF CONE

lAKE

500 m

lAvAS

KIMBERlITE pIpES


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Evlut Kbelte PpeEauating a kimberite ie or diamond content and its

economic otentia requires answering three questions insequence:

1 Does the kimberite hae any diamonds in it?

2 I the kimberite does in act hae diamonds, how abundantare they, what is the grade?

3 What are the diamonds worth?

A imited assessment o the economic otentia o a newydiscoered kimberite can be made rom core and ercussiondri sames. Anaysis o Kimberite Indicator Mineras,yroe garnet, chromite, and imenite, together with anaysiso kimberite or microdiamond content (diamonds ess than0.5 mm) can be used to make a quaitatie assessment o thediamond carrying caacity o an untested kimberite. These

anayses roide inormation that is essentia to makinga decision as to roceed with more costy buk samingrograms to recoer a arce o arger diamonds.

Buk saming to determine diamond grade and quaity iswarranted on kimberite bodies which hae been sucientydeineated to indicate otentia o mineabe tonnage, andor which microdiamond and kimberite indicator minera

anayses roide ositie conrmation o diamond content.Buk saming oerations generay require signicant caitainestment, but can be carried out in stages to rogressieyreduce the risk o inesting heaiy in a kimberite discoerywhich may roe to be uneconomic.

Saming rograms designed to coected 100 500 caratso diamond can be used to make an initia assessment o

macrodiamond grade and size distribution, and roide some


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inormation o diamond quaity. Coecting a sucient numbero diamonds to condenty assess diamond quaity and carryon with mining easibiity study is ery much deendent onthe nature o the diamond ouation. As a minimum, sames

o 1,000 to 3,000 carats o diamond is required to roduce astatistica diamond aue estimate. I a kimberite contains aunique diamond ouation, in articuar, i a sma ortiono the diamond ouation has a strong infuence on aueestimates, sames o 5,000 to 10,000 carats may be required.

Concurrent with buk saming or diamonds, other arameterscritica to an economic assessment o a kimberite are

eauated. Accessibiity and ease o mining, aroriate miingtechnoogy or the ore, sca considerations or the jurisdictionin which the ie is ocated, aaiabiity o quaied abor,water, ower, enironmenta and socioeconomic assessmenta hae signicant infuences on the economic iabiity o aotentia roject.

vauation o buk same diamond arces is generay

conducted by one or more exerienced diamantaires who areactie and current in the rough diamond trade. vaue estimateso the actua arce o diamonds recoered in buk samingeorts are then statisticay modeed to create an estimateo diamond aue to be exected on u scae mining. Thesemodeing eorts consist o anayzing the size distributiono diamonds recoered in the buk same rogram and the

reatie aues o each size category. The statistica mode isthen used to roject the requency o arious diamond sizeractions in a u ouation o diamonds rom the kimberiteto arrie at an estimate o run o mine diamond aues.

Because o their rarity, diamonds hae historicay been gradedinto hundreds o aue categories base on the Four Cs: coor,carat weight, cut, carity. These can a be groued into the

oowing genera categories:


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Source: www.kitco.com, London Metal Exchange, Diacro Diamonds

1 Inestment diamonds the inrequent among the rare.These are ery arge (10 carat and aboe), high quaity stones(great carity, intense coor, no faws). This is not the stone youbuy or an engagement ring. These stones are so rare that

they command ery high rices rom those who are making aninestment urchase.

2 Jeweery diamonds rough diamonds cut or use as gem-stones in jeweery, and,

3 Industria diamonds natura and synthetic diamonds used ina wide range o manuacturing rocesses.

Athough aroximatey 80% o rough diamonds roduceda into the third category, the reerse is true or aue morethan 80% o the aue o rough diamonds roduced in theword is contained in jeweery and inestment stones.

Rough Diamond Price vs. Commodity Trend

AAu Di ZnCu Ni pb

200720062005

0.50

1.00

1.50

2.00

2.50

0

2008 2010 20112009

Normaized to Jan 2011


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mg d PcegDdeu KbelteMining o kimberite iesis tyicay initiated as anoen it mining oeration.Modern truck and shoemining is a cost eectiemeans o extracting hightonnages o kimberite oreto great deths. I the kim-berite ore is o sucientaue, oen it miningoeration may eoe intounderground mines once the economicay ractica deth oan oen it oeration has been reached.

processing o kimberite to searate diamond rom its host rockis comaratiey unique in the mining word or two reasons:

1 The hysica roerties o diamond, its hardness, density,hydrohobic nature, and that it can be made to fuoresceunder x-ray radiation end themsees to unique and ecientrecoery rocesses, and

2 Kimberite rarey contains enironmentay harmu byrod-ucts which aows good enironmenta management racticesto gie u eect to minimizing the imact or mining androcessing.

Kimberite ore is broken down in a series o crushing andgrinding stes to iberate contained diamonds. More diamondsare recoered the ner the kimberite is broken down; how-eer, higher costs are incurred in ner grinding, and the extradiamonds recoered are o a smaer size and ower aue. The


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oerator determines the extent o size reduction based on theanaysis o the economics. Most diamond mining oerationssette somewhere between 1 and 2 miimeters as a bottomcuto size.

liberated diamonds aresearated rom most o therest o the kimberite ore bydensity searation. Crushedroduct is mixed with adense soution and assedthrough a DMS cycone. The

cycone searates heaymineras, incuding diamondsrom the ow density gaugemateria. The high densitymateria and diamonds aredirected to the diamond

recoery circuit whie the ow density raction goes to taiings.

This concentrate o heay mineras is then tyicay assedthrough a x-ray recoery unit, as the stream o heay minerasasses through the x-ray, diamonds fuoresce, which fuo-rescence is icked u by a hotomutiier, and this triggersthe recoery machine to eject the diamond rom the articestream.

Taiings rom the x-ray recoery system may be assed oer a

grease tabe or urther recoery or as an audit o the x-raymachines eciency. Because o diamonds hydrohobic nature,it wi stick to grease whereas other mineras wi wash o.


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Whe d Hw dd mdeDd mg stt?Modern diamond mining started during the 1870s in SouthArica, oowing the discoery o the Star o South Arica dia-mond (83.5 carats in size) on the banks o the Orange Rier (atthe border o Namibia and South Arica) in 1869. A diamondrush oowed and by 1888 the rst working mines in the areawere estabished. As rosecting increased, more diamonds

were discoered in other southern Arican ocations. The dia-mond industry has since exanded across southern Arica, mak-ing this the rimary goba ocation or diamond sources today.

The Kbeley Pce

Ater being mined, the rough diamonds are examined, regis-tered, certied and seaed by a recognized authority as er theKimberey process Certication Scheme (KpCS). The Kimbereyprocess (Kp) is a joint goernment, industry and cii societyinitiatie estabished to minimize the fow o iicit diamondsand to roide urchasers with condence that they are buy-ing diamonds rom a egitimate source.

The KpCS imoses extensie requirements on its membersto enabe them to certiy shiments o rough diamonds asconfict-ree. As o December 2009, the Kp has 49 members,reresenting 75 countries, with the Euroean Community andits Member States counting as an indiidua articiant.


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Ge dd pduct (vlue)

Ge dd pduct (vlue)

Total: 133,120,898

Total US$11,998,001,932Source: Kimberley process Certifcation Scheme (July 28, 2011)

Other 23%

Other 16%

Canada 9%

Canada 19%

South Africa 10%

South Africa 15%

Angola 15%

DRC 15%

Botswana 17%

Botswana 22%

Russia 26%

Russia 20%


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Source: BMO Capital Markets Ltd

Rough Diamond Supply and Demand Analysis

sellg rugh DdOnce rocessed at the mine, rough diamonds are deiered to

sorting aciities mainy in london, Antwer, Surat, Gaborone,Kimberey and Moscow, where the rough diamonds are cas-sied. There are thousands o dierent categories into whichdiamonds can be sorted, deendent on size, shae, quaityand coour. The majority o diamonds a within a range ostandard coours rom coouress to aint yeow or browntints. Some ery rare diamonds, known as ancies, are brightcoours, such are ink, bue or green. A erecty transarentdiamond with no coour or hue is considered to be the urest,but the majority o rough diamonds hae some distinguishingmarks, known as incusions. The best quaity diamonds in termso coour and carity are distributed to the gem market.

Historicay, the market or rough diamonds was managed byDe Beers, which controed the ast majority o rough diamond

roduction and was abe to contro the market structure or

22,000

18,000

14,000

10,000

8,000

2006 2008 2010E 2012E 2014E 2016E 2018E 2020E

Suy Demand peak Demand

(US$M)


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rough diamond saes.

Beginning in the 1990s, a number o roducers came on ineand oerated outside the De Beers system. These new roduc-ers did not disrut the existing ricing structure but sod their

roduct either through excusie saes contracts, oen tendersor auctions. Tenders and auctions are articuary eectie inestabishing a ricing structure or a mines roduct in that buy-ers comete directy with each other or the tye o diamondsthat they want. Through these seing atorms the roducercan be condent that he is receiing a true and current marketaue or the u range o his roduct, and the cients are abe

to ocus their urchasing eorts on the tye o roduct thatthey want.


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Dw the PpeleAter the roducer has sod his diamonds into the rough market,

the stones moe down the diamond ieine. Rough diamondbuyers distribute their urchases to their own cutting and o-ishing actories or re-sort and re-se to third arty cutters andoishers.

Cuttg & PlhgGem quaity diamonds are usuay distributed to one o the

main diamond cutting and trading centres in Antwer, Mumbai,Te Ai, New York, Surat, China, Thaiand or Johannesburg.Once they arrie at the diamond centres, exerts known as dia-mantaires cut and oish the rough diamonds into shaes, suchas the round briiant, the oa, the ear, the heart and the em-erad. poishing oows cutting, beore the diamonds are againcassied by their cut, coour, carity and carat weight; the Four

Cs. These diamonds are tyicay sod to diamond whoesaersor diamond jeweery manuacturers in one o the 24 registereddiamond exchanges ocated across the word.

Jewelley muctugWhoesaers or manuacturers buy reatiey sma amounts

o unset, oished diamonds. Whoesaers se these to jewe-ery designers, manuacturers or retaiers. Manuacturers wiroduce diamond jeweery designed and commissioned by aretaier or other jeweery designer. They may aso create jewe-ery, designed by in-house teams, and sod direct to retaiers.The System o Warranties is used as a decaration on the inoiceor each transaction o oished diamonds to assure industry

urchasers and consumers that their diamonds are rom confictree sources.


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retlgThe na stage o the diamond ieine is when diamond jew-eery is sod by retaiers to the consumer. The aue o diamond

jeweery sod each year is aroximatey US$72 biion, whichincudes the cost o the diamonds, recious metas and othergems. The USA reresents the argest market (50%), oowedby Jaan (15%), Itay (5%), India (3%), China (2%), The Gu(2%) and other countries (23%). According to indeendentresearch, diamond jeweery is the most highy sought-atercategory o uxury goods, both by women or themsees andby men or gits. The jewery industry is quite ragmented

and ocay cometitie so margins tend to be tight, but arge,high-end jeweers ike Tiany do achiee higher margins. A keyto maintaining these brands is security o suy; in this casearge, high quaity diamonds. large, high quaity stones arerare so the ikes o Harry Winston, Tiany and Gra wi go togreat engths to secure suy through o-take arrangements,acquiring diamond mines and setting u their own rough

marketing channes.

idutl DdIndustria quaity diamonds are ow quaity or bady incudedstones and are suitabe ony or industria use; or exame,they are used in dentists dris and earthmoing equiment.

Industry ProfleFor most o the 20th century oer 80% o the words roughdiamonds assed through De Beers, but in the eriod 20012009 the gure has decreased to around 45%. De Beers sod

o the ast majority o its diamond stockie in the ate 1990s


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Glbl Dd Jewelley sleAt mid 2010, Chinas diamond imorts or genera tradeincreased by 92 ercent year on year to a record high o $577miion. Diamond consumtion in China has surassed Jaanand is now second ony to the U.S. The Shanghai DiamondExchange (SDE) is the ony diamond exchange in China, whichenjoys aourabe taxation oicy and is oerated in accordancewith internationa ractice o diamond industry. It roidesdiamond deaers a air and sae transaction enue with cosedmanagement.

Ecc ipct DdAs one o Aricas major natura resources, diamonds are he-ing transorm southern Arica and the ies o its eoe. Inarticuar, Aricans are using the reenue rom diamonds tocreate weath or themsees. The diamond trade contributesaroximatey US$8.5 biion a year to Arica and is heing the

continent in our key ways:

Financial: Diamonds provide a signicant economic contribu-tion to the countries in which they are ound or examediamonds reresent 33% o the GDp o Botswana (aroxi-matey US$3.3 biion)

Health: Diamonds play a signicant role in helping tackle

the HIv andemic in southern Arica through the unding ocounseing, testing, education, treatment rogrammes, cin-ics and hosices

Education: Southern African countries are using the revenue

rom diamonds to he more chidren go to schoo or onger

Employment: More than 38,000 people in southern Africa areemoyed by the diamond industry

Botswana is the jurisdiction that has deried the greatest


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Ch d id pe t be the ext ege gwth the duty

Rest of World, 19%

Rest of World, 15%

Italy, 4%

Italy, 3.5%

Hong Kong, 2%

Hong Kong, 2%

Taiwan, 2%

Taiwan, 3%

India, 7%

India, 11%

Japan, 11%

Japan, 9%

China, 5%

China, 9%

Gulf, 8%

Gulf, 9%

USA, 41%

USA, 37%

Source: De Beers EstimatesNote: Excludes currency eects

2008

2016E


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economic imact rom diamonds. Oer 30% o its GDp, andaroximatey 50% o goernment reenues are deried romdiamonds. Diamond reenues or the Goernment o Botswanacome in a ariety o orms: royaties, taxes and diidends.

Oer 3,000 jobs wi be created in the diamond cutting andoishing sector, an increase o 30% in diamond emoyment inBotswana.

repble Tdg PctceTo romote the trading o diamonds rom egitimate sources

and to ensure that consumers can be condent in their dia-mond jeweery urchases, goernments, NGOs and the inter-nationa diamond industry hae worked together to ime-ment a certicate o origin system, the Kimberey processdescribed aboe.

The Kimberey process is a certication system designed toreent iicit diamonds rom entering the egitimate diamond

suy chain. The Kimberey process ensures that ony roughdiamonds accomanied by a goernment-issued certicate canbe imorted and exorted, roiding an assurance that the dia-monds are rom confict ree sources. Under this United Nationsmandated system, ony countries that are art o the Kimbereyprocess can imort or exort rough diamonds. Today, 75 coun-tries are members o the Kimberey process, ensuring that more

than 99% o diamonds are rom confict ree sources.


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