Glittering prospects in the Kimberleys

As if it needed it, Australia is now adding another jewel to its growing mineral treasure-trove -- diamonds. After years of exploration in a remote corner of Western Australia, a group of mining companies is poised to make the country a major world diamond supplier.

The group known as the Ashton Joint Venture is expected to begin commercial mining at its diamond-studded Argyle deposit in the steamy Kimberley region by 1985.

No formal decision on a mine is expected until next year. But a spokesman for the partnership here says flatly: "We are saying confidently it is a mining proposition."

With a planned output as high as 20 million to 25 million carats a year, the project would thrust Australia ahead of such big-league diamond producers as the Soviet Union, Zaire, and South Africa.

There's at least one drawback, however: The stones are believed to be primarily of industrial grade, and some analysts doubt the world can absorb such a large booty.

"The good news is there is a lot of it [diamonds]," says Greg Walker, a CRA public affairs manager. "The bad news is the quality."

Even so the sheer size of the deposits points to the possibility of diamonds being near the top of Australia's export ledger in the future. For the United States the find could mean an important alternative source for industrial stones , which are strategically important for use in drilling and cutting.

"It is very significant," says Jean Pressler, a commodities specialist with the US Bureau of Mines, of the Argyle prospect. "Australia is a country that is very closely associated with the US and doesn't have the [political] problems South Africa does."

The glit-edged mining prospect comes after nine years of exploration in the area by the Ashton Joint Venture. So far the group -- managed by Conzinc Riotio of Australia Ltd. (CRA), the nation's largest mining company -- has pumped more than $41 million ($36 million Australian) into exploration and testing, probing some 40 geological formations known as "kimberlite pipes." Another $25 million is expected to be spent this year.

About 20 companies are believed to be poking around the 77,000-square-mile Kimberley area, including representatives of some of the world's biggest diamond firms. CRA's glittering find will likely trigger even more intensive exploration in the area, particularly near the Argyle deposit.

Lying some 1,500 miles northeast of Perth in a barren corner of Western Australia, the Argyle is one of two major areas being explored by the Ashton venture in the Kimberleys. The site encompasses two formations, the "AK1 kimberlite pipe" and nearby rich alluvial deposits.

Kimberlite pipes, actually volcanic plugs, are the principal host rock for the shiny bits of pressurized carbon. Featuring the classic champagne glass shape, the AK1 pipe has been estimated to contain more than 500 million carats.

About 60 to 70 percent of the stones are thought to be industrial quality and about 10 percent gems. The rest are believed to be "near gems." Intensive drilling is now going on in the red-rock area to determine the extent of the formation. If the Ashton group gives the go-ahead next year, construction could begin in 1983.

The first mine, expected to come on line by 1985 with an output of 25 million carats a year, would more than dent the world market. Last year total world production amounted to some 40.1 million carats, of which 29.4 million were industrial stones and the rest gems.

The two top producers, the Soviet Union and Zaire, churned out an estimated 10.85 and 8.7 million carats respectively. The bulk of those were industrial diamonds.

"There's no question that it is going to be a major producer on the world scene," says an official with the Western Australian Department of Resources Development.

Yet analysts question whether there is enough elbow room in the world market for such an infusion. The Australian group will face stiff competition from regular producers as well as the blossoming synthetic diamond industry. The noncommunist world produced 100 million synthetic carats last year, the US Bureau of Mines estimates, half of which were made in the US.

"At this stage we are very confident we are going to mine," says Mr. Walker. "It's just a question of how big and how long. The limitation to produce might be the ability to sell."

It is generally believed that Ashton will market through the London-based Central Selling Organization (CSO), although at least one of the partners has talked of going it on its own.

The CSO, which markets 80 percent of the world's diamonds, is a subsidiary of De Beers Consolidated Mines of South Africa. Analysts contend De beers will be anxious to bring Ashton into the CSO fold, particularly since Zaire recently decided to sell its diamonds independently of the monopoly organization.

CRA chief economist John D.S. Macleod leaves little doubt about plans to plug into the CSO monopoly. "We're not about to reinvent the wheel," he said.

The three partners in the Ashton venture that own the site are CRA (57 percent), Ashton Mining (38 percent), and Northern Mining (5 percent).