Australia Diamonds and Argyle Diamond Mine

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Alluvial diamond deposits were known in Australia as far back as 1851. Diamonds were situated predominantly in New South Wales, and by 1957 some 200,000 carats had been mined in the southwestern region of the country. Efforts were made during the 1960s to locate the primary sources, and although several kimberlites were found, they were deemed uncommercial. Gold miners discovered the first diamonds in Western Australia. Seventeen diamonds were found at Nullagine, in the Pilbara region.

A systematic exploration of the area between 1965 and 1971 failed to turn up the primary sources. For decades there had been reports of diamonds in the Kimberleys region, to the north. This area, the northwestern corner of the Australian continent, had no connection with the similarly named South African town. Lamproites, rocks similar to kimberlite, were known to exist in the West Kimberleys.

A London based mining firm, Tangyanika Holdings Limited, known as Tanks, decided to explore the Kimberleys in the late 1960s. The company interpreted the West Kimberley lamproites as the equivalent of barren kimberlites surrounding cratons, where the continental crust and the mantle below them have been stable for more than 2 billion years. This phenomenon was common in South Africa and Siberia.

Most of Tanks' exploratory efforts were focused in the core of an old craton in the North Kimberleys.In 1972, Tanks and four other companies formed the Kalamburu Joint Venture, and it started surveying a 200,000 square kilometer area. After four seasons and $2 million, the only results were a few small diamonds and indicator materials at four different places.

In February 1976, CRA Exploration, a wholly owned subsidiary of the CRA mining development and investment company, joined Kalamburu to form the Ashton Joint Venture (AJV). During the years that followed, several kimberlites were discovered. Two of them, one in the north and one in the east, were diamondiferous but uneconomic. Steam gravel sampling was also being carried out in the West Kimberleys. Indicator materials were identified in association with several lamproites, and a rare diamond was discovered.

In November 1976, a 76 hectare diamondiferous lamproite was found at Ellendale, near the Lennard in the West Kimberleys. Called Ellendale 4, it was large enough to justify the construction of a heavy mineral separation plant. AJV initially kept the discovery secret, because the area was claimed by another prospecting company searching for other minerals in the area. AJV was granted prospecting rights in the West Kimberleys in June 1978.

AJV discovered some 50 kimberlites and lamproites, many of which were diamondiferous. Two pipes, Ellendale 4 and 9, were listed as sub economic. All the others were graded as non economic. During this period, AJV was still prospecting in the east. On August 28, 1979, two diamonds were recovered from a gravel sample in Smoke Creek, west of Lake Argyle. Nine additional diamonds were found in the days that followed.

Prospecting continued up the creek until the Argyle lamproite was located. It was a linear ore body, 1,600 meters in length and 150 to 600 meters in width, and was judged to contain a high concentration of diamonds. Its discovery was made public on October 21, 1979. The mine changed the face of world diamonds production. In October 1982, AJV was reorganized so that a commercial mining operation could be undertaken.

The company was replaced by two new joint ventures: Argyle Diamond Mine Joint Venture (ADMJV), established to develop, mine and manage the diamond interests in the Argyle and Ellendale areas; and the Ashton Exploration Joint Venture (AEJV), to continue prospecting in the remainder of the joint venture area in the Kimberleys region. CRA held a 56.8% interest in both operations, and was charged with managing them through wholly owned subsidiaries.

The Ashton Mining Group held 38.2%, and a company called Northern Mining held 5%. Northern Mining sold its share to the Western Australiastate government in 1983, which created the Western Australia Diamond Trust. The Argyle Mine reached full production in 1985, yielding about 30 million carats a year.

The figure climbed to 33 million carats of rough diamonds by 1990. Only 5% of its output was gem quality, but in terms of carats it was the world's most prolific mine, accounting for more than 30% of all diamonds extracted each year. Australia, which in 1977 was considered a minor (alluvial) diamond producer, had become the largest within the space of a decade.

Australia boasts primary diamond deposits on both the eastern and western flanks of the continent. Diamondiferous kimberlites have been found in South Australia, New South Wales and Victoria, as well as on the Lachlan fold belt on the eastern seaboard. In general the pipes were judged to be uneconomic, but prospecting has continued, particularly in those areas of Victoria and New South Wales which once were the heart of the Australian diamond industry.

Most of the prospecting, and the bulk of diamonds production away from the Argyle Mine, is centered in Western Australia. Diamonds production makes up less than 1% of Australia's mining revenue. But itcomprises 3.5% of Western Australia's mining production, and is important in fostering the economic expansion of the state.

The country's second largest diamond operation is not far from the Argyle Mine, and is located on the Lissadell station in the East Kimberleys. In 1985, a joint venture agreement, which came to be called Poseidon Limited, led to the development of the Bow River alluvial deposit, a 47,000 hectare area north of the Limestone Creek and west of the Bow and Ord rivers. A feasibility study had indicated alluvial deposits of about 10.5 million tons of mineable reserves, yielding 43 carats per 100 tons. In total, the diamond reserves at the site were estimated to total 5 million carats of diamonds.

In terms of the Argyle mine's production, this seemed insignificant. But diamonds found at Bow River were on average twice the size of those found at Argyle, and the alluvial field's gem quality content was between 18% and 22%. Construction of the Bow River Mine began in 1987, and it was commissioned in February 1988. Poseidon was also developing the Mount Elizabeth Project in the Phillips Range.

Deposits were first located there in 1986, and, while yields were low, diamonds of good quality and shape were recovered. Another diamond deposit which showed promise of developing into an economic operation was the original AJV find at Ellendale. Leases at the site were held by Argyle shareholders CRA and Ashton. The grade (carats / ton) of the deposit was high, but its low value made it a more risky venture.

Nevertheless, the company pushed ahead with its plans to develop the mine, and formulated new recovery schemes that would make the entire project more economic. Diamonds exploration continues to have a high profile in Western Australia, with more than $30 million spent each year. About 15 separate companies are involved, all harboring the hope that another pipe of the stature of Argyle is waiting to be uncovered. Prospecting firms include Trias Minerals, Capricorn Resources, Metana, Century Metals, Carr Boyd, Audimco and Auridiam.

The Argyle mine reached full production in 1985, a year in which the world diamond market finally emerged from the worst recession it hadknown in modern times. Not only did the Argyle mine inject a large volume of stones into the world market, but it also changed the mix of diamonds that was available. Some 40% of Argyle1 s production was classified in the near gem quality range, and De Beers led the way in expanding the perception of what constituted a diamond fit for a piece of jewelry.

The creation of less costly diamond ranges, largely made up of Australian diamonds, was welcomed by an expanding consumer market. It also proved to be a great opportunity to cutting centers that concentrated on producing inexpensive polished goods. India was the primary beneficiary, but cutting industries were developing in several Southeast Asian countries and they also became adept at working with goods in those price ranges.

In 1982, a year before Argyle began selling diamonds on the world market, Argyle Diamond Sales was created as a wholly owned subsidiary of CRA and Ashton. Its role was to market the production of the Argyle Mine. In 1985, a five year agreement was struck between the Australian firm and the Central Selling Organization. Under the terms of the agreement, Argyle retained the right to sell 5% of the run of the mine production independently. The Argyle Mine also produces an unusually large number of extremely rare pink diamonds.

The best of these were to be retained by Argyle, to be sold each year by tender. When Argyle's marketing contract came up for renegotiation, there were rumors that the company was looking to expand its 5% "window" into the market. But the diamonds market had slumped, and De Beers held stronger negotiating cards. On May 7, 1991, De Beers Centenary, CRA Limited and Ashton Mining announced that they had signed the heads of agreement for the coming five years.

Australia Flag.
Australia Flag

No details were divulged, but a De Beers spokesperson said that the agreement was similar to the one that preceded it. One of the De Beers negotiators later said that, although the terms of the contract were not yet final, it was considered wise to announce agreement to end speculation in the media. It later was revealed that, not only did Argyle not increase the size of its market "window," but it ceded to the Central Selling Organization the 5% share previously held by the West Australia
Diamond Trust.

The company evidently retained its 25% share of the near gem quality and industrial production. Argyle's interest in near gem quality diamonds inspired it to step into the advertising arena, a role in which De Beers traditionally represented the industry. A significant percentage of the Argyle Pink Diamonds goods were in brownand yellow colors, traditionally not considered desirable. A series of attractive names for the colored stones was devised; yellows became champagnes, and browns were dubbed cognacs.

A campaign was started in the United States, and similar forays were planned for the Japanese and European markets. The Bow River mine's production was not sold through the Central Selling Organization, but was handled independently by several Antwerp dealers. The company conducted discussions with the De Beers marketing division, but decided that its interests would be served better by putting diamonds on the spot market.