Australia’s Argyle Mines- The End of a Colorful Era

Since operations began in the early 1980’s, the famed Argyle mines of Western Australia have conjured up diamond fantasies for consumers, collectors and dealers alike. Excavating tons and tons of rock, traditional diamond mines yield minute amounts of diamonds. Even within this yield, most diamonds are commercial quality used in manufacturing with little to no profit viability. This is where things get interesting- Of the remaining high-quality diamonds, most mines in the world see 85% of their diamonds within the “colorless” or white range and the remaining 15% are natural color diamonds. Mysteriously, the Argyle mine presented itself in the reverse numbers- Approximately 85% of its high-quality diamonds in color and 15% in the “colorless” range. This upside-down equation baffled the industry as it was never seen before.

Natural color appears in diamonds when small impurities and at times, molecular imperfections cause the colorless carbon to exhibit specific colors. But not all colors are precious and desirable. In fact, of the 15% color diamond yield mentioned above (and the approximately 85% in Argyle), the vast majority are usually in the less precious, brown color palette. You do not have to be a mathematical genius to appreciate the rarity of unearthing a diamond, that diamond being high quality and precious, then that same diamond containing native structural imperfections that cause it to exhibit natural color, and finally that diamond’s imperfections flashing back not just any color- but a color that is deemed most rare and desirable. To add to Argyle’s allure, prehistoric occurrences caused a disproportionally large amount of the diamonds to contain the red, pink and purple color palettes which are among the most rarified. This has been the magic of the Argyle mines!

From the onset, the international mining behemoth, Rio Tinto became Argyle’s caretaker. Along with Rio Tinto came the company’s vast financial prowess and some of the best minds in the industry. Taking a cue from De Beers’ epic advertising success in promoting “A Diamond is Forever,” Rio immediately recognized the power of marketing. It did not take long for the name Argyle to become tantamount to a brand name. Not only did the Argyle brand soon represent luscious color diamonds- especially in the pink and red tones- but consumers liked the concept of Australian diamonds. The Australian origin stood out, especially in the 1980’s when issues with a small amount African diamonds and conflict diamonds were first coming to light. For decades, the future looked rosy. In fact, some consumers were willing to pay a premium for the Argyle origin when presented with the exact same quality color diamond found in Africa. This proved especially true of Aussie consumers who found a certain nationalistic charm in Argyle diamonds- At times paying 20-30% premium for Argyle stones over their exact African counterparts.

Unfortunately, the Argyle business model was impossible to maintain. To begin with, the natural topography of Western Australia and its mines made it increasingly expensive to unearth diamonds. Additionally, operating in Australia (An expensive first world country) put extra pressure on profitability. Mix into this equation, the natural decrease in yields as a mine ages and becomes deeper, and it is understandable that by the year 2000, Rio Tinto was struggling to maintain profitability. Unofficial rumors were circulating for years until 2019, when Rio Tinto announced that it would seize operations and physically close the mine by the end of 2020.

What does this mean for the future of color diamonds? Obviously, a significant supply of color diamonds is being shut off. Since any other mining operators will be faced with the same business model and issues, we can fully expect Argyle’s closure to be permanent. There is no question that the decreased supply will cause large increases in color diamond prices- especially in the classic Argyle pink-red-purple color palettes. On the more positive note, yes you will be able to purchase collectible grade color diamonds. High-end consumers are inherently well informed and educated about their purchases. They have now recognized that an equal color diamond, unearthed in democratic countries like Botswana, Namibia and South Africa for example, are equally desirable- Albeit even more rare. But even greater pressure on prices will come from the demand side and this writer sees this as the most significant force at play. High-end Chinese consumers are flush with disposable income and looking at rare, small, portable gemstones as one of their favorite investment purchases. The pressure on prices for high-grade, collectible color diamonds is tremendous and this phenomena will only amplify going forward.

Rodney Rahmani is President of Brilliant Stars and a 3rd generation International Gemstone Merchant. He is considered a leading authority in the subjects of gemstones, jewelry, mineral economics and the global luxury consumer market. He is a noted speaker and author of many articles on these subjects. He may be reached at [email protected]