How the Closure of the Argyle Mine Could Affect Your Portfolio of Diamond Investments

Are you aware that the Argyle Mine of Australia, which supplies 90% of pink diamonds in the world, plans to stop operations next year? Discovered in 1979 and operated as a diamond mine since 1985, it started facing depletion in 2010.  

In 2013, Rio Tinto, the natural resources corporation that owns the Argyle mine, announced the opening of a different underground section within the site to prolong the life of the influential mine. Situated in the East Kimberley region of Western Australia, this mine is the fourth biggest diamond mine on the planet in terms of volume. 

Also, it supplies ultra-rare pink stones, only one in every million diamonds found worldwide is pink.  

Moreover, even though pink diamonds are found in other countries, such as India, Brazil, and Russia, the Argyle Mine is known for the quality and quantity of the natural coloured diamonds it has produced through the years.  

And this is particularly true for the exceptional ‘bubble gum’ shade of the pink diamonds from Argyle mine, which is unmatched worldwide as far as depth, saturation, and vibrancy is concerned.  At this point, you may be wondering why Rio Tinto opted not to further extend the life of the mine through making another underground extension.

Why Rio Tinto is not planning for another underground expansion

The answer is quite simple: it is expensive! Take note that the creation of all diamonds requires enormous pressure. They are formed only at depths ranging from 120 to 250 kilometres under the surface of the earth. This makes diamond extracting a high-cost business.  

There comes a time, with all diamond mines, when the expenses and effort of recovering the gems outweighs the profits. It is forecast that by the last part of next year the economically viable diamonds of the Argyle mine will be exhausted, and the mine will close. Obviously, great speculation has been rising since the closure announcement on how the end of the Argyle mine will impact the diamond industry.  

Impact of Argyle Mine Closure to the Diamond Industry 

So far, there is no evidence of another mine that can cover the gap that the Argyle mine will leave.  This is understandable since exploration for diamonds is a very lengthy and often expensive process. And, even if another mine is discovered, the kimberlite samples have to satisfy the formula below, courtesy of ehudlaniado.com, for proper operations to arise:

Income = (Grade x Average Value/Carat x Total Volume of Ore) – (Capital, Financing, and Operating Costs)

Also, it should be noted that just a small section is examined, thus, there is no guarantee that the final result will meet the initial expectations. Still, because of the extensive period required to set up mining operations issues like global financial strength and market variations heavily influence extracting companies, and therefore, add another tier of uncertainty.

This explains why major extracting companies have significantly reduced exploration. And, if you are thinking of existing global mines that produce coloured diamonds, such as India, Russia, and Brazil, take note that not one of them can compete with the splendour of the Australian certified stones, particularly the unique tones of its famed pink diamonds.

It is impossible to tell for certain the way the future will play out, however, several signs may offer some clues. To start with, the 2020 closing is not happening on the first day of the year. In fact, the closure schedule of the mine stands at the closing stages of the year. So, 11 more months or so away.   

Effect of the Argyle Mine Closure on the Pink Diamond Market

No one can deny the record sales of pink diamonds in each public sale session. Altogether, market performance statistics show a solid rise in the price of these diamonds across the past years with a 500% upturn since 2000.  

As proof, the yearly Australian Certified Pink Diamond Tender of Rio Tinto always outperforms its previous year with 2018 holding the record in the history of the company. And this is probably because the public knew of the planned closure of the Argyle mine. After all, investors possessing pink diamonds will benefit from the continued increase in the value of these diamonds over time. 

It also follows that new pink diamond buyers will acquire these investments, through private or public auctions, at a very high price. Needless to say, the time to capitalise on pink stones is now as the price can only go up, never down. The closure of the Argyle Mine will only increase the rarity of pink diamonds in the world due to the shortage of supply.  

As published on the website of the Argyle Group, a Bain & Co. partner in Moscow, Olya Linder, said that the price of pink diamonds can be anywhere from a million dollars to three million dollars per carat1.  Meanwhile, jewellers value the Australian certified stones more highly than other gems of similar quality from Russian or South African mines because each Australian diamond is accompanied by an authenticity certificate2.

How the Closure of the Argyle Mine Could Affect Your Portfolio of Diamond Investments - Argyle Diamond Mine

Impact of the Argyle Mine Closure to your Diamond Investment Portfolio

Obviously, investors prefer to invest in the natural coloured diamonds of the Argyle brand. To further strengthen their portfolios, they are expected to be looking to get hold of the exceptionally scarce varieties, such as pink, red, and blue diamonds.  

While these diamonds will produce a return in the relative brief term of five to 10 years, the true value of these stones and the profit for the investors will be realised in the longer term. The blue and red diamonds, also coming from the Argyle mine, are even rarer and more expensive than the pink diamonds. 

Bear in mind that diamonds exist as the most portable wealth in the world.  So, although the closing of the Argyle mine may be viewed as a tragedy by coloured diamond fans, it offers investors the unique opportunity of locking in large profits by acquiring the rarest diamond varieties before the planned closure.

That means that investors have a maximum of two more auctions to strengthen their diamond investment portfolio by purchasing the blue, pink, and red diamonds of Argyle brand. It is expected, however, that the market will not feel the scarcity of the Australian pink diamonds until after 20213.  So, for now, the investment horizon is fairly stable.  

By 2022, when no new Australian diamonds will be in the market, the market is sure to heat up. Well, that is, if no other mine can replace the iconic Argyle mine! Following the law of supply and demand, when the demand outpaces the available supply, the price will naturally increase.

1. https://www.theargylegroup.co.uk/category/the-argyle-group/
2. https://business.financialpost.com/commodities/mining/jewelers-are-already-nostalgic-for-the-end-of-pink-diamonds
3. https://www.theceomagazine.com/business/finance/hot-commodities-4-unusual-investments-worth-your-money/

Argyle Diamond Investments Pty Ltd are Australia’s largest supplier of Australian certified pink diamonds and have exclusive use of the Australian Pink Diamond Analytics program. This program is a data driven decision maker that tracks and statistically analyses the rarity, financial growth and value of all investment grade pink and blue diamonds. With this valuable information, Argyle Diamond Investments Pty Ltd can offer all clients an investment grade pink from $5,000AUD up. But, the highest growth diamonds, are the larger, stronger colour pinks starting from around $20,000AUD plus.

Book-Cover-2020

FREE eBook Download

The Essential Guide To Buying A Pink Diamond

  • This field is for validation purposes and should be left unchanged.