Famous Argyle to close in 2020

By Staff Witer / August 11, 2019 / www.idexonline.com / Article Link

The closure of the world's biggest diamond mine " Argyle, in the Kimberly region of northern Australia - has drawn the attention of the international business press. In July, Bloomberg's diamond specialist Thomas Biesheuvel and his colleague David Stringer wrote an extensive piece about it. 

Argyle, "famed more for the fistful of coveted pink and red gems it yields each year than being a major producer of lower-quality stones " is being shuttered by Rio Tinto Group after almost four decades. Rivals from Russia to Canada hope that can help turn around the beleaguered industry."

Production at Argyle, about 2,600 km (1,600 miles) northeast of the state capital Perth, is scheduled to end before the end of next year after finally exhausting its supply of economically viable stones, Arnaud Soirat, Rio's head of copper and diamonds, told the Bloomberg reporters.

"There is going to be a fair bit of supply which is going to come out of the market," Soirat said. "In late 2020 we'll be stopping operations and will start the rehabilitation of the site."

Two questions are asked in the diamond industry at large:

What will Argyle's closure mean for the prices of melees and small rough diamonds? And: is there an alternative source for the very small annual production of top-quality pink diamonds produced by Argyle?

The short answer to the latter question is: No, there is not. Leibish Polnauer, the affable founder and owner of the eponymous Israel-based company, says there is no alternative to the "reddish, Roseberry color of Argyle pinks that is so different from any other sources."  "Of course," he added, "as you can see in the trade and business media, other producers are going out of their way to showcase any pink diamonds they mine, but none of these stones, no matter their weights, size up against those magnificent colors that those rare Argyle pinks supply us with."

Without Argyle as the source of about 90 percent of the world's exclusive pinks - the Bloomberg journalists called them "rose-to-magenta hued stones" - auction houses will probably begin scouting the market for Argyle pinks and future auction prices will most probably shoot up, including for those red and pink stones Argyle just put out for viewing toward its last tender.

As to smalls, Argyle's closure seems to come at a good time - especially for its competitors, both the large miners like De Beers and Alrosa, as well a number of junior miners, some of which are on the brink of oblivion due to the low prices paid for smaller rough diamonds.

"The [Argyle] mine is the biggest diamond producer by volume and that's what has put the operation at the center of global oversupply. More than three-quarters of Argyle's output is comprised of lower-value brown diamonds, and the mine's overall output sells for an average of between $15-25 a carat," the Bloomberg writers reported.

Pat Godin, CEO of junior diamond miner Stornoway Diamonds and Stuart Brown, CEO of Mountain Province diamond, another junior, who both have been quoted regularly on the topic on IDEX, expect that with Argyle's closure, with the absence of an average, annual supply of 14 million carats of cheap, small rough from Argyle, prices of smaller rough diamonds will have a chance to recover.

Note: The cover story of IDEX Magazine's September issue will be about the fancy color diamond market.