Thursday, May 07, 2009

Why are diamonds expensive?

Diamonds are rare:
It is estimated that over 1.5 billion carats of diamonds lie around the coastline westward in the Orange River to the Atlantic Ocean. Over 90% of these are thought be of gem quality. In excess of $ 8 billion worth of diamonds are to be mined at the Ekati mines of Canada in the next 25 years. It is amazing the why one would consider this priceless gem as "rare".
Let us study what goes into actually getting one of these 'not so rare' gemstones into a piece of jewel and the expenses that make it so valuable.

The formation of a diamond:
The formation of a diamond requires a perfect combination of pressure and temperature which takes place deep inside the earth. The only passage of escape for these diamonds is to travel up the violent volcanic explosion to reach the earth's surface. It is crucial that the diamond takes no more than the adequate amount of time to travel up to the surface of the earth, and even a few moments in excess could destroy the identity of this diamond.

Retrieving the diamond from nature: Once the diamond has reached close to the earth's surface, it is up to human intervention to retrieve it. The prospect or search for a fruitful diamond bearing site is an expensive and tentative job which can take several years, money and equipment. Furthermore, not every diamond bearing site is profitable.
Once a site has been targeted, the cost of developing and operating the mines are just some of the factors that add to the cost of the diamond that we see in the market. Only few of these diamonds that survived their journey to reach human appreciation are of gem quality.

Separating After extraction of the material, gem quality diamond is segregated from the industrial quality. The diamond becomes a part of the parcel sold to the various site wholesalers or site holders. Millions of dollars, minds, hands and hours are put into the extraction of these gem quality diamonds each year.

Into the jewel:
The diamonds are then passed on for polishing and cutting. This is another vital part of the diamond industry which employs communities of people and consumes hours of service to produce what will then be sold to the wholesaler or retailer to further set into jewels.
The diamond jewelry, through further channels and media finally reaches the showroom of the retailer who can finally bring it up to its final owner.

Are diamonds worth it?
So when you do find this perfect piece of elegant brilliance in your hand, something that will last you through thick and thin, something that has survived the worst of its days and has come to you with love, you would think it is definitely worth it.
Moreover, once you calculate the cost of naturally forming, finding, mining, segregating, polishing and setting of gem quality diamonds, you will realize that what you are buying in a diamond is actually the rarity of the "biggest value in the smallest volume".

3 comments:

Anonymous said...

All this sounds well and fine, but the prices of diamonds are controlled like a monopoly and any excess kept out of the market to maintain the high prices. You could do this sort of write up on any product sold.

Look at the process for car tires, leather jackets, anything you name it. You could describe the tedious processes involved with them as well. The bottom line is diamonds are expensive because the 4-5 diamond companies make them this way by controlling supply.

Design Depot said...

I completely agree with you that De Beers has been a monopoly for the longest period of time in the history of the diamond industry and they have raised the bar in creating the aspiration for a diamond.

But actually, now that there is competition from the free trade in South Africa, Canadaian diamonds and most of all, the Australian mines, De Beers is no longer the monopoly. They may still be the main culprits in creating a hype about diamonds, but all the same, they are the biggest promoters of diamonds as well.

At the end of the day, leather jackets, tires, fabric and as such any other commodity goes through a tedious process of getting to the end consumer.

But a diamond is expensive because not every other trainee can go out to the kimberlite, dig out a diamond, process it and sell it further... a fact that makes a diamond rarer to most of us who cannot process it.

The procedure is more expensive than what you would find on leather etc because you would have to filter over 250 tonnes of gravel to get 1 carat (0.2 gm) of gem quality diamond.

surbhi@jewelsutra.com

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