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By John Helmer, Moscow

After more than forty years, the last great Soviet state secret is out. And in its wake, a sensitive Chinese state secret, too.

Russian geologists reported over the weekend that the Popigai crater on the border between the Krasnoyarsk and Sakha regions of north eastern Siberia, formed by the 100-kilometre wide impact of a meteorite about 35 million years ago, could contain trillions of carats of small diamonds. The secret has been locked up in the Soviet archives since the discovery of the crater at least forty years ago.

The stones are sized between 0.5mm and 2mm, and are super-hard, compared to boart, as such small-sized diamonds are known. Because of their multiple applications in drilling, sawing, cutting, sanding, abrading, and coating, such stones are also known as industrial diamonds.

Most natural diamonds of any size, those of industrial application and the larger sizes used in jewellery, are found in kimberlite ore formations which look like this, because they were formed by subterranean volcanic pressure. The Popigai diamonds were formed by superterranean impact, and the diamond-bearing ore is different geochemically and crystallographically.

Mining is expensive, and industrial diamonds are useful only if they are plentiful and cheap. So building high-pressure machines to mimic geology, subject carbon to ultra-high pressure explosions, and synthesize diamonds has proved to be commercially profitable. For as long as the Soviet military believed they needed diamond crystals for their precision equipment, they paid for machines like these in places like Novosibirsk and Alexandrov, on the outskirts of Moscow.

Boris Yeltsin and his family were keen on pocketing the cash that selling the Soviet stockpile of gem-sized diamonds could bring in. They weren’t interested in investing in synthetic diamond machines. So the Soviet gem stockpile was raided and sold off, while the diamond press plants in Novosibirsk and Alexandrov were scrapped or smuggled out of the country. The initiative in the synthetic diamond sector passed to the US, and then to China. According to the latest annual report of the US Geological Service (USGS), in 2010 worldwide production of industrial diamonds came to about 4.5 billion carats, mostly synthetics produced in China.

But industrial diamonds can also be dug out of the kimberlite deposits that make conventional diamond mines. Natural industrial diamond production worldwide was estimated by the USGS in 2010 to be more than 63.8 million carats. Congo (Kinshasa) was the leading producer with 22.2 million carats, followed by Russia (15 million cts) and Australia (9.9 million cts). These three producers accounted for more than 74% of the world’s natural industrial diamond production. The value of the entire industrial segment of the market, including synthetics, is between $1.5 billion and $2.5 billion, according to USGS.

For comparison, the volume of the gem-diamond production at the minehead, covering all producers across the globe, is about 170 million carats per annum, worth about $14 billion. Russia’s latest mine production and sales figures for the six months to June 30, released last week, indicate that Alrosa mined16.4 million carats, and sold $2.4 billion worth of diamonds. For the full year 2011, mine production came to 34 million carats; sales revenue to $4.3 billion. In another decade, Alrosa claims it will be mining almost 40 million carats, and earning about $12 billion in sales revenues.

None of this is likely to be hurt if the Popigai crater is mined for boart, even if in Novosibirsk at the weekend, Nikolai Pokhilenko, head of the regional Geological and Mineralogical Institute, declared to the press that reserves in the Popigai crater have been estimated at more than 140 billion carats. That’s a hundred times more than the 1.2 billion carats estimated for reserves of jewellery-quality stones in Alrosa’s deposits to the east.

Alrosa spokesman, Evgeniya Kozenko, says that Alrosa’s reports indicate that the share of industrial diamonds in the sales aggregates of the company comprises 35% in carat volume, 1% of sales. revenue. Last year, the average sale price of the industrial diamonds was $ 7.7 per carat. But if stones with purely industrial applications were counted, and cuttable small sizes excluded, this average price would be even lower.

Regarding the Popigai stones, Kozenko said: “Impactites are not suitable for the jewellery industry, but perhaps could be used as industrial raw material. However, we consider it premature to assess the potential (including the commercial value) of impact diamonds. First we need understand the potential market demand for additional volumes of technical material, the possibility of using impactites in industrial production, and the technology of their production.”

Sergei Goryainov, editor of Rough & Polished, said it is clear the market impact of the Popigai diamonds would be “no damage at all. The fact is that Popigai diamonds have really unique characteristics in terms of hardness, and of several other factors. But, first, they are not jewellery, and this has already been discussed. Second, the industrial diamond market is 80% to 90% filled with synthetic stones. This is because synthetics, due to the development of new technologies, have become cheap enough, and because they can be synthesized for particular industrial applications and technologies; that is, the factory orders diamonds with the desired properties.”

“Popigai diamonds, although they have unique characteristics, are not formed according to technological requirements. Therefore there is no meaning at all to develop this field for the sake of industrial diamonds. That’s why this field has lain undisturbed since the 1970’s.”

Funding for fresh exploration and mine feasibility studies is badly needed for the Popigai project, hence the publicity. But the challenge will be calculating the market for the vast new volumes of stones that may be dug up. These volumes are so large, and depending on the mining and processing costs, so cheap, they may threaten the Chinese synthetics industry next door.

That’s how the door opens to the sensitive Chinese secret. If Popigai diamonds are to see the light of day after 35 million years, a new source of demand must be found to absorb the supply at a profitable margin. And this is where the now notorious Chinese power couple, Bo Xilai and his wife, the demented, homicidal Gu Kailai, come in – and also go out. That’s a secret story not quite ready to be told.

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