– Gahcho Kué is too far north for trees. In the few snowless months, its surroundings in Canada’s Northwest Territories resemble a sprawling archipelago, as much lake as land, dark ponds stretching flat to the horizon. Wolverines roam, as well as bears, foxes, hares and caribou, though the herds have dwindled. There are no roads, no pipes, no electricity cables. So it seems strange when, flying over the tundra, a giant truck appears, then another, then a steel factory, rows of trailers and a big gray pit, deepening by the day.

De Beers, the world’s biggest diamond company, marked the opening of its Gahcho Kué mine in September. Local indigenous leaders prayed for the mine, beating drums. Bruce Cleaver, the firm’s chief executive, and Mark Cutifani, the boss of its parent company, Anglo American, stood by a ceremonial fire, flames tilting in the wind.

Gahcho Kué is an astonishing endeavor, the biggest new mine in the world in more than a decade. De Beers has no plans for another.

It is a turning point for one of the world’s oddest industries. The diamond business gained its sparkle around 1866, when a farmer’s son picked up a glistening pebble on the bank of the Orange River in South Africa. For most of the next 150 years, De Beers would dominate the global market. Success depended on manipulated supply and skillfully cultivated demand.

Much has changed since then. De Beers can no longer control the market. Though it is the biggest producer by value, it accounts for only a third of global sales, down from 45 percent in 2007. It faces many uncertainties, from synthetic diamonds to changing relationships with polishers and cutters. Its loosening grip is reflected in increased volatility: its sales fell 34 percent in 2015, before bouncing back by 30 percent last year. Meanwhile the source of the demand that drives sales — the link between diamonds and love — looks weaker than it used to.

But one forecast seems solid: there will be fewer new diamonds. De Beers seeks new places to mine, but has slashed its exploration budget. The supply of new diamonds is expected to peak in the next few years, before beginning a slow decline.

Speculation that diamonds might be found in Canada dates from the 19th century, when gems were found studded through the American Midwest. In 1888, the year Cecil Rhodes founded De Beers in South Africa, a 22-carat stone was unearthed near Milwaukee. Glaciers, it was posited in 1899, might have carried the diamonds south. It was decades before exploration took off.

De Beers began quietly scouring Canada in the 1960s, but it was not until 1991 that BHP, one of its rivals, found kimberlite, an igneous rock, with enough diamonds to merit a mine.

The objects of these frenzied searches have intrinsic value for scientists. But diamonds’ principal value has nothing to do with science. In September, Cutifani reminded Gahcho Kué’s visitors that the ancient Greeks regarded diamonds as the tears of the gods. Their modern status, though, is a corporate creation, a story inextricably linked with that of De Beers itself.

Diamonds had been rare before 1866; the South African finds threatened to send prices plunging. Rhodes founded De Beers to consolidate the area’s mines and to restrict sales. By his death in 1902, the firm accounted for 90 percent of the world market. More discoveries were made in the 20th century, notably in Siberia in the 1950s, Botswana in the 1960s and Australia in the 1970s. But De Beers kept tight control of supply, both by owning mines and by buying diamonds from others.

That alone would not have turned De Beers into an empire. As essential was its scheme for conjuring up demand. In 1938 the company, then led by the Oppenheimer family, hired advertising agency N.W. Ayer to coax Americans to buy more rocks. It dreamed up the notion that a diamond ring should be an essential display of love and status, its gift a rite of passage.

The limits of De Beers’ power have been revealed in the past two years. Demand slumped in China in late 2014, prompting retailers to buy fewer polished diamonds. Companies that cut and polish stones became weighed down by inventory. But the tools De Beers once used to use to prop up prices were no longer at hand.

A long-term risk looms over the industry: one day young couples may no longer want diamonds at all.

De Beers is now focused on expanding existing mines, not building new ones. New technologies may help liberate more diamonds from kimberlite more efficiently. Even so, Bain estimates, production will peak in 2019. Supplies of new diamonds will then start to fall, sinking by 1 to 2 percent each year until 2030.

For now, aircraft shuttle staff to Gahcho Kué, dropping off miners to work for two-week stretches. No workers touch the diamonds with bare hands. Only a few see the gems before they are sent off by plane to be valued. Rob Coolen, who oversees the ice road, said, “Occasionally you see one and it’s just gorgeous.”

The mine is expected to reach full production in March. By 2030, its diamonds extracted, it will close.


Copyright 2013 The Economist Newspaper Limited, London. All Rights Reserved. Reprinted with permission.