Under the watchful eye of closed-circuit cameras (the process is secret and off-limits to visitors) the diamond-rich chunks next pass through a series of X-ray machines. The invisible rays cause the stones to emit an ultraviolet light that is picked up by sensors. The diamonds are then sized and transferred into heat-sealed plastic boxes, which in turn are put into self-locking stainless-steel suitcases. These are stored in an onsite vault before being whisked to the airport and eventually, to sorting facilities in Toronto and Antwerp.
For all that effort, Diavik collects four kilograms of the rough, mottled diamonds a day, just enough to fill a two-litre milk carton. The mine owners are loath to disclose exactly what the gems fetch on the open market, but Diavik is estimated to churn out anywhere from $1.4 to $2 million (U.S.) a day in diamonds. Its profits are even more amazing, with a gross operating margin of eighty-two percent, say analysts, compared to less than ten percent for a base-metal mine.
No one has understood or exploited the potential of diamonds better than De Beers, the world’s dominant diamond miner and the mastermind behind our modern-day love affair with the gems.
While treasured for thousands of years as symbols of wealth and power, their rarity ensured that diamonds were restricted to royalty and the very rich. Then, in the late 1860s, a spectacular discovery was made in the Kimberly region of South Africa. Those diamond mines became the foundation of the powerful De Beers dynasty, which would go on to establish an iron-fisted control over some eighty percent of the world’s rough diamond supply. To ensure a steady retail demand for its product, it tied the gems to the centuries-old aristocratic practice of giving engagement rings and in 1938, it launched its now-famous advertising campaign, “Diamonds Are Forever.”
Dubbed the world’s longest-running monopoly, De Beers ran its company like a cartel, carefully controlling the amount of diamonds available on the market to maintain the illusion of scarcity and keep prices artificially high. Its cutthroat tactics, combined with its secretive style and magisterial airs, earned the entire diamond business a reputation for being the most impenetrable and least accountable of industries. “When you talked to De Beers executives, you had the feeling you were speaking to God,” says Luc De Smet, a former De Beers employee who now runs Tiffany’s cutting and polishing plant in Yellowknife.
The first crack in the cartel’s armour appeared in the early 1980s, with the discovery of diamonds in Australia. Rio Tinto, the owner of Australia’s Argyle mine, the largest in the world, opted to bypass the cartel and sell its diamonds on the open market. The decision set an important precedent, but its impact was blunted because the majority of Argyle’s diamonds are of low quality, averaging about $12 (U.S.) a carat.
When the two Canadian mines, which were scooped up by Rio Tinto and by Australia’s BHP Billiton, the world’s largest resource company, began producing, the balance was decisively tipped. Neither sells its diamonds to De Beers.
Canada and Australia now account for some forty-one million carats out of an estimated world diamond production of 120 million. Their combined clout has effectively broken the cartel. “Half the world production is now outside De Beers’s control,” says Pierre Leblanc, a diamond consultant based in Yellowknife. “Canada was the straw that broke the camel’s back. The impact has been very significant.”
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