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Vladislav Zhdanov: Questions of efficiency and investment potential of diamond mining versus diamond growing pique keen interest

02 july 2024

vladislav_zhdanov_xxc.pngVladislav Zhdanov is Professor at the National Research University Higher School of Economics (HSE).

He got his education at the Ural State University (General and Molecular Physics), Diplomatic Academy of the Ministry of Foreign Affairs, City University London, Oxford University, and Russian Presidential Academy of National Economy and Public Administration (RANEPA).

He is the author of more than 50 studies and scientific articles in applied physics, economics and philosophy published by the leading Russian and foreign journals.

He worked as Vice President of ALROSA, Advisor to the Director General of the Russian Railways company.

Vladislav Zhdanov told Rough&Polished about new researches into the effectiveness of diamond production methods.


You continued your series of studies on the effectiveness of diamond production methods and your work resulted in another publication in the Heliyon journal. Please tell us what became the object of your team’s research this time?

The Dutch academic journal Heliyon has just published the final article of a trilogy comparing diamond production methods - Comparative analysis: CapEx in diamond mining versus diamond growing, based on open data sources and experimental results.

In this article, my colleagues and I analyzed specific investments in diamond mining and two types of diamond synthesis, the HPHT and CVD methods. I would like to briefly explain the methodology: we correlated the CapEx with the expected projected annual diamond production in carats.

As an example of diamond mining, a relatively new deposit Gahcho Kué in North America was considered. With an announced stated investment level of US$500 mn for a 51-percent stake and a planned production of 4.5 mn carats per year, simple calculations show that it is necessary to invest US$217 per carat of annual diamond production. Accordingly, if annual diamond production is stable for more than 10 years, the influence of the initial investment will be less than $22 for each carat of diamonds mined during this period.

We see completely different figures in diamond synthesis, they start from $500 per carat of diamonds synthesized per year, and this is the lower limit for both CVD and HPHT technologies, which, frankly speaking, came as a certain surprise to us, because I had a feeling that the specific CapEx in the diamond synthesis was more ‘friendly’ when I started this study. Let me explain, as I did in the case of diamond mining: if we begin to synthesize diamonds, and the equipment as a whole is designed for relatively uninterrupted continuous operation during 10 years and more, the share of the initial investments, according to our calculations, can be approximately $50 for each carat of diamonds grown during this period.

In your opinion, which method of diamond production is the most attractive from an investor’s point of view?

From a business point of view, it is more interesting to invest in diamond mining, adjusted, of course, for the entry barrier: while the purchase of equipment for diamond synthesis is approximately hundreds of thousands of dollars as a minimum entry cost, diamond mining needs initial investments that are orders of magnitude larger.

Assuming that a financially stable group makes its decision to diversify its business into diamond production without being limited by the amount of funding, from the CapEx point of view, I would recommend diamond mining - the old school does not ’give up’.

If we summarize the conclusions of a series of your studies, what method of rough diamond production can be considered the most effective?

As I mentioned above, our article completes the trilogy, the first two parts of which describe mainly the base of operational expenditures - labor and energy costs (Comparative analysis of labor input required to produce one carat at different methods of synthesis and mining of diamonds, Heliyon 2022) (A Comparative Analysis of Energy and Water Consumption of Mined versus Synthetic Diamonds. Energies 2021). The articles were published in established academic journals and I highly recommend reading them.

You know, even taking into account that I am an ardent proponent of the CVD technology, nevertheless, if I were an investment consultant for the above-mentioned hypothetical financially stable group, I would not risk offering investments in the CVD synthesis - I would choose between the HPHT technology and diamond mining.

On the one hand, the HPHT method outperforms diamond mining in terms of energy consumption. If we convert the energy costs into currency, taking approximately the cost of one kilowatt-hour as 10 cents, the total cost of all types of energy required for mining one carat of diamonds will make approximately $10, while it will not exceed $4 for producing the same amount using the HPHT synthesis - you can agree that the difference is substantial.

On the other hand, the HPHT synthesis of one carat takes almost one man-hour, and the time is less than half an hour when diamonds are mined. For example, in Canada, where the minimum hourly wage is over $11, this difference can be at least $5 per carat - that is, it ‘offsets’ the increased energy costs in diamond mining - and, by the way, the wages of miners are always significantly higher than the minimum values, which makes the labor costs the main part of the operational expenditures. As for the Southeast Asian countries, where the wages are significantly lower than in Canada, and the energy prices are comparable to those in North America, the HPHT method has a certain economic advantage over diamond mining, even with high unit labor costs. It is no coincidence that in the early 21st century, De Beers was actively using the possibilities of the HPHT synthesis in China, which we mentioned in the article as a classic example of an economically feasible approach to diamond growing.

We can keep on interpreting the results of our study for a long time, linking the data obtained with the geographical distribution of diamond production, as well as with the technological trends in all three diamond production methods. We will be glad if our readers draw their own conclusions, and perhaps, our research will be useful in practical terms to those who are seriously thinking about their own business in the diamond production sector. We only provided a basis for calculations, a very approximate one, where some of the results were obtained from our own mistakes as well. Our team has practical experience in all three types of diamond production, including diamond mining, and we can ‘venture’ a certain impartiality - however, my sympathies, no doubt, are with the ‘ugly duckling’ - the CVD synthesis.

There is a place for emotions in science, too. What are your future plans based on the results of your research?

In the future, our plans are to summarise the results of the trilogy: we are going to publish a monograph in the format that will allow us to present everything without excessive academicism, with a lot of original graphics, and probably, with the author’s stories from our own practice, including the analysis of the mistakes we made. I am sure that the monograph will be of interest to a wide non-specialist audience, and I hope, it will inspire some young people to become interested in the diamond world, just as I was once inspired by the works about the discoverers of diamond deposits in Africa and Siberia.

Your research has piqued Rough&Polished readers’ keen interest. Do you receive feedback from the market players and representatives of the scientific community on the results of your research?

I would like to thank Rough&Polished and its readers for their interest in our research and the opportunity to share our results on the R&P platform, as well as for the feedback and comments I keep on receiving following the publication of the articles. I see that many colleagues from the academic community, diamond market experts and practitioners read your materials and scientific articles, to which we post links. Comparing diamond mining and diamond growing, the efficiency and investment attractiveness of diamond mining and diamond growing, as well as discussing the prospects for the development of the lab-grown diamond and natural diamond consumption markets are of keen interest. After the publication of the article Comparative analysis: CapEx in diamond mining versus diamond growing, based on open data sources and experimental results, I received a wonderful comment from my Indian colleague who spoke in favor of the CVD technology and shared a very interesting information that will be, certainly, taken into account in our future research. The Indian colleague, in particular, wrote about diamond synthesis on several substrates simultaneously; (the full version of the commentary can be read on the academic portal, and you can leave your comments there, share your experience and contact me for a discussion); of course, this can increase the capacity greatly - our experience is based on mono-synthesis, so the volumes are more moderate. In other words, the Indian experience suggests that, as for the CapEx, the CVD synthesis is completely economically sound. I am very pleased with the feedback and am confident that sharing experiences, expert discussions, cooperation, involvement in topics and discussion of the research results by the scientific and expert community (diamond market theorists and practitioners) is an important step for the development of the diamond industry, both in terms of diamond mining and diamond growing.

Galina Semyonova for Rough&Polished