Diamonds aren't forever, the pipes are running dry
A CUT diamond is the ultimate in discretionary expenditure. So when the global financial crisis hit last September, it was no surprise global demand for sparklers collapsed.
But it isn't all gloom for diamonds. In fact, the world is short of new mine supplies. According to Rio and BHP Billiton analysis, most existing mine resources for rough stones will be gone within 15 years.
This is because new diamond discoveries are becoming increasingly rare. According to Rio, annual discoveries of kimberlite ''pipes'' - kimberlite is a host rock for diamonds - have fallen (on a five-year moving average basis) to little more than 100. And history shows that only one in 10 kimberlite pipes contain diamonds and only one in 100 of those are economic to mine.
The lack of new discoveries since the mid-1980s means the world's mine reserves of rough diamonds have fallen from 80 years' supply to the 15 years that Rio now forecasts.
The squeeze on new mine supplies comes as Rio forecasts 4 per cent compound annual growth rates in rough diamond demand out to 2020 - as supply contracts at a 1.6 per cent rate.
Unlike most things that have peaked and are now in decline, diamonds are, mostly, optional and discretionary.
It will be interesting to see whether the diminishing possibility of owning diamonds increases the desire for them or causes it to wane. For a while it will drive the desire even higher, along with prices, but I'd bet that, once they are all gone, like Tuna, we will discover that we didn't really need them after all and our desire for them will disappear.
Except, of course, for those things for which they are a commodity, like drill bits, and a black market will open up where drillers sneak around back alleys buying up stolen necklaces and bracelets for their bits and grinders.