In the midst of what may be the diamond industry's deepest depression in 50 years, a huge new mine -- one of the world's largest -- has just opened in southern Botswana.
At first blush the Jwaneng mine opening seems as incongruous as a new motor plant starting up in Detroit during a long slump in auto sales.
But the mine, located in the Kalahari Desert, is testimony to the peculiar and somewhat mysterious workings of the international diamond industry and its near monopolistic system of marketing diamonds.
The system works because most all the producers that matter agree to participate. Archenemies like South Africa and the Soviet Union -- the world's top two producers of diamonds in value terms -- evidently work together when it comes to selling diamonds.
Angola, another major diamond producer, does not let periodic invasions by South African troops across its border stop it from taking part in the system that is controlled by a South African company.
That South African company is De Beers Consolidated Mines, which owns the Central Selling Organization. The CSO buys and sells about 80 percent of the world's diamonds through a London office. It opens and closes the supply tap to maintain diamond prices to the liking of world producers. The CSO insists that its operation benefits retail buyers of diamonds by keeping prices stable.
Not everyone likes, or participates in, the tightly controlled quasimonopoly. But Julian Ogilvie Thompson of De Beers could not be accused of overstatement when he says, ''We like to feel that we are respected.''
The Jwaneng mine is expected to produce some 3 million carats of diamonds in 1982, and 4.5 million by 1985.
Combined with Botswana's two other diamond mines, Jwaneng will give that country a total production equal in quantity to that of South Africa. Just as important as overall quantity, the Jwaneng mine has an exceptionally high recovery rate, yielding one carat for every ton of ore.
The Jwaneng mine also has a high ratio of gem diamonds. About 20 percent of the world's diamond production is of gem quality, with the rest being used for industrial purposes. At Jwaneng, 30 percent of the production will be of gem quality.
Still, Jwaneng comes into production at a treacherous time that would spell disaster for a new operation in most any other industry. Closely guarded vaults in London are already brimming with an excess stockpile of diamonds that won't sell. The start up of Jwaneng is not a signal for investors to rush back into the rare gems.
Overall, the pure investment market in diamonds has collapsed and consumers are avoiding purchases of high-quality diamond jewelry, due in part to the attractiveness of other investments.
However, by joining the CSO, the new Botswana mine is guaranteed that the London-based operation will buy some of its diamonds. The CSO operates a quota system, promising to buy from all members a fixed amount of gems based on a mine's total capacity relative to total production available to the CSO.
In effect, diamond producers can keep selling rough stones despite a poor retail market in the more profitable high-quality gems.
Jwaneng is owned in equal parts by the Botswana government and De Beers. The Botswana government was keen to open the Jwaneng mine for its jobs and the revenue it will provide the state.
De Beers, on the other hand, may not have been so anxious to open the mine had it been able to act on its own. As principal owner of the CSO, De Beers earnings are affected by the stockpile glut, which must be financed at today's high interest rates.
In his annual statement for 1981, De Beers chairman Harry Oppenheimer pointed out that CSO sales fell by 42 percent and the De Beers group's net profits fell by 46 percent last year.
If there is a silver lining for De Beers, it is that the bleak conditions of the diamond market underscore the value of CSO marketing. A De Beers spokesman says prices would plummet and the market would be in disarray if the diamond glut were not being withheld to ensure some price stability.
Still, the CSO system has taken some knocks. Last year Zaire pulled out of the CSO. Although Zaire is the world's largest producer of diamonds in terms of quantity, its diamonds are generally of low quality. Because of the low standing in value terms of Zaire's diamond production, the withdrawal has not greatly upset the CSO operation.
One of the most important diamond developments will be the decision in the next few months on how the huge diamond production from the Argyle mine in Australia is to be marketed. The main partners in the Argyle mine have already agreed ''in principle'' to market all the mine's gem production and 75 percent of the ''near gem'' and industrial diamonds through the CSO.
While De Beers is confident the final decision will follow this preliminary agreement, the politics of the situation make it somewhat unpredictable. The Australian government may find it difficult to appear to cooperate with South Africa, whose racial policies it condemns.
Similar concern led the Soviet Union to terminate its contract with the CSO in 1963. Still, no one doubts the CSO ultimately handles much of the Soviet production. With the CSO claiming to handle 80 percent of world production, it must be marketing Soviet stones. There was much speculation in 1980-81 about the nature of the agreement.
De Beers denies any direct contract with the Soviet Union. But there is no quibbling that the Soviets and South Africans find the CSO works to their mutual benefit.