THERE is a recovery going on in the world's industrial diamond markets, and Australia is leading the way.
After a prolonged slump, reflecting worldwide recession, diamonds for industrial use are expected to be a major beneficiary of economic recovery in Europe, more vigorous United States expansion, and rapid growth in the rapidly growing economies of the Asia Pacific region.
Australia produces 40 percent of the world's diamonds, most of them industrial cutting diamonds. A high proportion come from Argyle Diamonds, the largest diamond mine in the world, in terms of carats. Argyle, owned by CRA Ltd., had a record production year in 1993 of 41 million carats.
``CRA and Ashton [Mining Ltd.] both produced significant volumes of diamonds in a recovering world market,'' says David Walker, senior mining analyst with CS First Boston, a brokerage house in Melbourne.
``With industrial production worldwide rising for cutting and machine tooling, you need industrial diamonds,'' says David Galloway, research manager at the brokerage firm McKinley Wilson. ``They have been depressed because of recession for many years.
``But they should be turning around quickly in the next year or two. Gem-quality diamonds will go up too. They're coming along.''
DIAMOND production here is forecast to reach a record 43 million carats in 1993-94. Export earnings from diamonds are forecast to increase 20 percent in 1993-94, to around $600 million (Australian;US$426 million), according to the Australian Bureau of Agriculture Resource Economics.
High production and the easing of the Central Selling Organization's purchasing quota put in place last July are expected to increase export volume. The CSO is the world body that contracts with producers to sell diamonds.
``The diamond market is firmly in recovery and we're optimistic that CSO [purchasing quotas] will be relaxed or removed in 1994,'' Mr. Walker says.
With the exception of South America and Australia, diamond production at major diamond-producing centers was down or flat compared with 1991.
Production is down in Angola because of fighting. And in the Commonwealth of Independent States, production declined 13 percent to an estimated 13 million carats in 1992-93 because of political and economic reform disruptions.
At the same time that business is picking up for its major mines, Australia is undergoing something of a diamond ``rush.'' The last two years have seen a significant number of diamond finds, mainly in the Kimberly region in the northern part of Western Australia. Prospecting is going on both on land and in the sea, where rivers in diamond-producing areas converge.
``There's a fair bit of excitement there at the moment,'' says Stephen Gerhardy, an economist with the Chamber of Mines and Energy in Perth. ``A number of discoveries are still to be assessed in terms of their commercial value.''
Cambridge Gulf, the only company doing marine alluvial mining, found 23 rough-cut diamonds of gem quality with a combined weight of 5.87 carats in December. The company's stock shot up $2 a share after the announcement but has since simmered down.
``The Cambridge concept is exciting, but there are a lot of technical difficulties to be overcome before those projects move to production,'' Walker says.
Anton Gans is a mining engineer with Cambridge Gulf who pioneered marine alluvial mining in South Africa in the 1960s.
``It's encouraging that we found submerged gravel, that they are of terrestrial origin, and that they contained some diamonds,'' he says. ``That doesn't mean there is a mine out there yet. We have a long way to go.
``In South Africa, it was brand new and nobody believed you,'' Mr. Gans says. ``Now in South Africa, on the weekends they go out in wetsuits and find diamonds offshore.''
``In Australia it's the same situation as 35 years ago - people haven't heard of it,'' Walker adds.