Diamonds and the CSO

The fact that the value of a company's production over a given period of time depends not only on volume, but on quality are what sets diamonds and other gems apart from the metals. To put it in other words, gold is gold and copper is copper, but there are more than 5,000 categories of rough diamonds. The quality and, through this, the cost, of a diamond is based on four parameters known as "the Four Cs": crystal shape, color, and clarity and carat weight.

Diamond projects are evaluated not only by the average dollar price per carat of the diamonds produced, but also by the grade (carat per tonne) and tonnage in a kimberlite or lamproite, the two most typical host rocks for diamonds. These factors change from mine to mine. The large Argyle mine in Australia has high grades, but the cost per carat is low at well below US$20.

The first diamond mine in Canada — Ekati in the Northwest Territories — compares with the world's best mines in terms of dollar value favorably per carat (an average of US$85 per carat) and grade (1.09 carats per tonne), but the tonnage is most of the time lower than in some other kimberlites. To compensate, Ekati exploits five kimberlite pipes, instead of one. It is expected to produce 3.5 million to 4-5 million carats of diamonds per year, about 6% of current global production by value. Canadian production could increase to 12% to 15% of global production as other nearby; mines are developed.

The Central Selling Organization (CSO) was established by the South African company De Beers Consolidated Mines in 1930 to promote the marketing of diamonds from its own mines. It has since been expanded to include other producers. While the Central Selling Organization has been successful in establishing a marketing agreement with Russia, which is a major diamond producer, some mines there have been selling some of their diamonds outside this agreement in recent years. However, companies from most other producing nations, are still permitting their rough gems to be sorted, valued and distributed through the Central Selling Organization.