This article has been updated for 2021
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 were expected to be largely depleted in 2020, and on November 2, 2020 the Argyle Mine finally ceased operations.
But what happens now? How will this affect the industry, and what can enthusiasts and investors expect?
In this article we will be exploring:
- Why was the Argyle Mine important?
- How will the closure of the Argyle Mine impact the colored diamond industry?
- Are there other mines that can replace the Argyle Mine?
- Will there be an alternative channel that can replace the prestige and importance of the Argyle Tender?
- The Argyle Mine close, so what happens next?
Why Was The Argyle Mine Important?
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.
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How Will the Closure of the Argyle Mine Affect the Colored Diamond Industry?
There has been great speculation regarding how the official closure of the mine will ultimately impact the entire industry.
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 ultimately face its end, 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 ones, with 2020 being no exception. The 2019 Tender had truly astonishing results, presenting some of the greatest diamonds produced by the mine.
Each year has seemingly outperformed the previous year. The astonishing results for 2019, outpaced 2018's results... and 2018 was the year in which Rio Tinto announced its Tender was among the most successful in the company's history, showing a 400% appreciation for diamond prices over the previous year's. It was so successful in fact, that it surpassed 2017's "The Custodians of Rare Beauty" and 2016's “Chroma Collection” which featured the extremely rare 2.83-carat “Argyle Violet”.
While there is no direct alternative to the Tender in sight (in terms of prestige and unique supply), there is a strong demand for these exclusive colored diamonds. The channel to satiate this demand will most likely be the large, global auctions or comparatively large-sales on the secondary-market.
Final Thoughts About the Closure: What Happens Next?
With the mine now closed, the already rare colored diamonds from Argyle will become even rarer, especially with their signature pink diamonds now being finite in the market. It is therefore important to understand the impact rarity has on the value of these diamonds.
With supply having come to a halt 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 500% increase from 2000 to earlier this year. It could therefore be an opportune moment to begin considering investing in such stones.
The closure of the Argyle mine marks the end of an era. It's impacts will be felt for many years to come. How it impacts the diamond industry and its related investment markets will be predicated on how each reacts to this post-Argyle mine world. 2020 was a year with unprecedented uncertainty and it's ironic that the mine closure offered one certainty; a strong demand for these iconic stones.
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:
- 3 Booming Niches to Diversify Your Investment Portfolio
- 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