Mining, sources and production

Only a very small fraction of the diamond ore consists of actual diamonds. The ore is crushed, during which care has to be taken in order to prevent larger diamonds from being destroyed in this process and subsequently the particles are sorted by density. Today, diamonds are located in the diamond-rich density fraction with the help of X-ray fluorescence, after which the final sorting steps are done by hand. Before the use of X-rays became commonplace, the separation was done with grease belts; diamonds have a stronger tendency to stick to grease than the other minerals in the ore.

Historically diamonds were known to be found only in alluvial deposits in southern India. India led the world in diamond production from the time of their discovery in approximately the 9th century BCE to the mid-18th century AD, but the commercial potential of these sources had been exhausted by the late 18th century and at that time India was eclipsed by Brazil where the first non-Indian diamonds were found in 1725.

Diamond production of primary deposits (kimberlites and lamproites) only started in the 1870s after the discovery of the Diamond fields in South Africa. Production has increased over time and now an accumulated total of 4.5 billion carats have been mined since that date. Interestingly 20% of that amount has been mined in the last 5 years alone and during the last ten years 9 new mines have started production while 4 more are waiting to be opened soon. Most of these mines are located in Canada, Zimbabwe, Angola, and one in Russia.

In the US, diamonds have been found in Arkansas, Colorado, and Montana. In 2004 a startling discovery of a microscopic diamond in the US led to the January 2008 bulk-sampling of kimberlite pipes in a remote part of Montana.

Today, most commercially viable diamond deposits are in Russia, Botswana, Australia and the Democratic Republic of Congo. In 2005, Russia produced almost one-fifth of the global diamond output, reports the British Geological Survey. Australia boasts the richest diamondiferous pipe with production reaching peak levels of 42 metric tons (41 LT/46 ST) per year in the 1990s.

There are also commercial deposits being actively mined in the Northwest Territories of Canada, Siberia (mostly in Yakutia territory, for example Mir pipe and Udachnaya pipe), Brazil, and in Northern and Western Australia. Diamond prospectors continue to search the globe for diamond-bearing kimberlite and lamproite pipes.

"Blood" diamonds

In some of the more politically unstable central African and west African countries, revolutionary groups have taken control of diamond mines, using proceeds from diamond sales to finance their operations. Diamonds sold through this process are known as conflict diamonds or blood diamonds. Major diamond trading corporations continue to fund and fuel these conflicts by doing business with armed groups. In response to public concerns that their diamond purchases were contributing to war and human rights abuses in central Africa and West Africa, the United Nations, the diamond industry and diamond-trading nations introduced the Kimberley Process in 2002, which is aimed at ensuring that conflict diamonds do not become intermixed with the diamonds not controlled by such rebel groups, by providing documentation and certification of diamond exports from producing countries to ensure that the proceeds of sale are not being used to fund criminal or revolutionary activities. Although the Kimberley Process has been moderately successful in limiting the number of conflict diamonds entering the market, conflict diamonds smuggled to market continue to persist to some degree (approx. 2–3% of diamonds traded today are possible conflict diamonds). According to the 2006 book The Heartless Stone, two major flaws still hinder the effectiveness of the Kimberley Process: the relative ease of smuggling diamonds across African borders and giving phony histories, and the violent nature of diamond mining in nations that are not in a technical state of war and whose diamonds are therefore considered "clean."

The Canadian Government has setup a body known as Canadian Diamond Code of Conduct to help authenticate Canadian diamonds. This is a very stringent tracking system of diamonds and helps protect the 'conflict free' label of Canadian diamonds.

Currently, gem production totals nearly 30 million carats (6,000 kg) of cut and polished stones annually, and over 100 million carats (20,000 kg) of mined diamonds are sold for industrial use each year, as are about 100,000 kg of synthesized diamond.

Distribution

The Diamond Trading Company, or DTC, is a subsidiary of De Beers and markets rough diamonds produced both by De Beers mines and other mines from which it purchases rough diamond production. Once purchased by sightholders, diamonds are cut and polished in preparation for sale as gemstones. The cutting and polishing of rough diamonds is a specialized skill that is concentrated in a limited number of locations worldwide. Traditional diamond cutting centers are Antwerp, Amsterdam, Johannesburg, New York and Tel Aviv. Recently, diamond cutting centers have been established in China, India, and Thailand. Cutting centers with lower cost of labor, notably Surat in Gujarat, India, handle a larger number of smaller carat diamonds, while smaller quantities of larger or more valuable diamonds are more likely to be handled in Europe or North America. The recent expansion of this industry in India, employing low cost labor, has allowed smaller diamonds to be prepared as gems in greater quantities than was previously economically feasible.

Diamonds which have been prepared as gemstones are sold on diamond exchanges called bourses. There are 26 registered diamond bourses. This is the final tightly controlled step in the diamond supply chain; wholesalers and even retailers are able to buy relatively small lots of diamonds at the bourses, after which they are prepared for final sale to the consumer. Diamonds can be sold already set in jewelry, or as is increasingly popular, sold unset ("loose"). According to the Rio Tinto Group, in 2002 the diamonds produced and released to the market were valued at US$9 billion as rough diamonds, US$14 billion after being cut and polished, US$28 billion in wholesale diamond jewelry and retail sales of US$57 billion.