This article was updated on 3/12/2019
Despite occupying such an influential position within the diamond industry and the investment market, all mines eventually “burn out”, and unfortunately the Argyle mine is no exception. Its resources are expected to be largely depleted in the very near future, an estimation that can be further supported by Rio Tinto’s 2013 announcement of ceasing operations in 2020.
In this article we will be exploring:
- The Importance of the Argyle Mine
- How the Argyle Mine will impact the colored diamond industry
- If there are potential mines that can take the Argyle's place
- If there will ever be another auction that can replace the prestige and importance of the Argyle Tender
- Thoughts on what will happen once the Argyle Mine closes
The Importance of the Argyle Mine
Established in the Kimberly region of West Australia, the Argyle mine commenced open pit mining operations in December of 1985. While the diamonds initially unearthed were of a lesser value when compared to the global average; the mine had immense volume and the precious stones had a grade whose richness would eventually rewrite geological textbooks. As operations progressed, Argyle ultimately became the fourth largest diamond producer by volume worldwide, and contributes to roughly 90% of naturally colored diamonds even today.
Filling the “Gap” Created by the Closure
Great speculation has risen during the past years regarding how the official closure of the mine will ultimately impact the industry as a whole.
Up to this day there has been no evidence of a new mine being found that could potentially fill the gap Argyle will leave, and with good reason; exploration for diamond mines is both a very long and often extremely expensive process. Even if a new mine is found kimberlite samples will have to fulfill the following formula in order for operations to ensue.
Profit = (Grade * Average Value per Carat * Total Volume of Ore) – (Capital Costs + Financing Costs + Operating Costs) (source: ehudlaniado.com)
It should also be mentioned that only a small sample is examined, therefore there is no guarantee that the end result will meet initial expectations. Further, due to the extensive time period required to set up operations, factors such as global financial stability and market fluctuations heavily influence mining economics, thus adding another layer of uncertainty to the matter.
The abovementioned can explain why major mining companies have severely reduced exploration but what about existing mines? There are in fact numerous mines throughout the globe that produce colored diamonds (prime examples are in India, Brazil, and Russia), however, none of these can rival the magnificence of Argyle’s stones, especially the unique “bubble gum” hue of its famous pink diamonds.
Can Anything Replace the Annual Argyle Tender?
Regarding tenders, another important question arises. With the closure of the mine, the prestigious annual Argyle Tender will also cease to exist, a fact that will most likely, greatly impact the investment market.
These tenders are truly a staple in the diamond investment market, bringing some of the most beautiful and valuable precious stones the industry has to offer. Each year’s magnificent and unique collection outperforms that of previous tenders, and 2018 was no exception. Rio Tinto happily announced that last year’s tender was the most successful in the company's history, showing a 400% appreciation for diamond prices. It was so successful in fact, that it surpassed 2017's "The Custodians of Rare Beauty" and 2016's “Chroma Collection” which featured the the extremely rare 2.83-carat “Argyle Violet”. This is definitely a sign that demand (and competition) for such exclusive colored diamonds is increasing rapidly.
Positioning Ahead of the Closure
With closure being imminent, perhaps this is the ideal time to consider investing in Argyle diamonds. There are roughly about 400 days until this mine stops producing which means that the already rare Argyle stones will become even rarer, with pink diamonds from the mine being potentially finite. It is therefore important to understand the impact rarity has on the value of these stones.
With supply greatly decreasing and demand for these precious stones increasing exponentially in the last decade, intense escalation of value could be expected. This statement can be further supported by the fact that tender prices in the last few years have experienced a 400% increase. It could therefore be an opportune moment to begin considering investing in such stones.
It is evident that the matter of the 2020 Argyle mine closure is dominated by great uncertainty. It is hard to predict the exact impact this will have on the diamond industry and investment markets, however, only one thing is for sure, the Argyle mine will go down in history and its departure will certainly mark the end of an era.
If you are unsure about how to position your investments in fancy colored diamonds, Arpège Diamonds stands ready to help. With over 50 years of combined industry experience, we'll help you gather the most effective information and insights so that you can make educated decisions on your fancy colored diamond investing. You can contact us at 866-821-5508 for a personalized review.
For more reading on colored diamonds, see the links below:
- Sparkling Alternative Investments for 2017
- Pink Diamonds Show Largest Growth of Colored Diamonds
- 3 Key Insights Driving Fancy Colored Diamonds Investments
- Colored Diamonds Growing as an Alternative Investment
- Investing in Natural Pink Diamonds: What You Need to Know
- Alternative Investments: A Comparison of Commodity Investing