From rough diamond to beautiful jewel? Discover the diamond pipeline

The diamond pipeline covers the entire process a diamond goes through from rough diamond to a beautifully cut diamond set in jewellery. In this economic process the US dollar is the primary currency all the way through to retailers, after which the local currency is employed.

The diamond’s unique and beautiful structure is created deep in the earth by extreme heat and pressure, as far back as 3.3 billion years ago. The carbon atoms in the diamond stick together in a pyramidal structure to become the hardest mineral on earth. While diamonds can be synthetically manufactured, the majority of diamonds used for jewellery are completely natural. Given that it takes so long for a diamond to form, the following steps are crucial for the global supply chain.

The direct production costs for the entire annual raw production incurred by diamond mines is five billion dollars. These production costs comprise direct wage costs, machinery and energy.

The diamond mines in Angola, Namibia, Botswana, South Africa, Australia, Canada, Russia and elsewhere sell the diamonds on the market for some 13 billion dollars a year. That already equates to a difference of eight billion dollars, but it is naturally not pure profit for the mine operators, as that must also cover things like exploration costs, investments and sales. Locating a diamond deposit and subsequently mining it is no simple task. In order to extract one carat – 0.02 grams – of diamond some 250 tons of earth must be moved. The chief diamond producers today in volume terms are Botswana, Russia, Canada, South Africa, Angola, Namibia, the Democratic Republic of the Congo, Australia and Sierra Leone. De Beers is the current world leader in the mining, recovery and marketing of rough diamonds, with 19 mining operations and providing an estimated half of the world’s diamonds. The company runs mines in South Africa, Botswana, Namibia and Tanzania, and 35 percent of world diamond output is traded or distributed through De Beers. Once the rough diamonds are extracted they are sorted into one of 5,000 possible combinations according to size, shape, colour and clarity. The rough diamond is then shipped to be sold for cutting and polishing.

The rough diamonds are sold for some 14 billion dollars annually to diamond workers and cutters. The majority of the world’s diamonds are cut in India in high-tech cutting factories where highly-trained and experienced professionals control the machinery. Once cut, the diamond output is put back on the market for around 19 billion dollars. In the final – retail – phase the value of the diamonds jumps to 60 billion dollars. BAUNAT, Tiffany&Co, Cartier and Van Cleef & Arpels, are examples of a retail company that operates globally and is located at the very end of the diamond pipeline.

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