Buying a diamond is the ultimate in discretionary spending.

So it should be no surprise that with the world's worst financial crisis since the Great Depression in full swing, sales of both rough and cut diamonds have plummeted.

As many as 300 workers at Rio Tinto's Argyle mine in Western Australia's remote Kimberley region have just discovered that hard truth.

The mining contractor to Rio and Argyle, Macmahon, spent yesterday telling the workforce — it has the highest indigenous representation of any mine in Australia at 25 per cent — that the operation was about to get considerably smaller, reducing annual output from 20 million carats to about 15 million.

More ominous was Rio's decision to adopt a go-slow approach on a $US1.5 billion ($A2.2 billion) life-extending move to begin mining Argyle's billion-year-old diamonds from an underground position, with the existing open-cut operation now on its last legs.

Debt-ridden Rio stressed its need to conserve cash under its $US10 billion debt-reduction target for 2009, as well as the "current global conditions".

Rio did not say so but industry participants have reported that the trade in rough and polished diamonds in the all-important US market tanked in the second half of 2008 as the global financial crisis took hold.

Argyle — the world's biggest diamond mine by volume but not by value because of the relatively low quality of its stones — is the single-biggest contributor to the Kimberley economy and is the major supplier of low-value rough diamonds to India's huge cottage-based diamond cutting and polishing industry.

The move to underground operations was given the go-ahead by Rio in late 2005 and meant that Argyle stones, including the world-famous $US500,000-plus a carat "fancy pinks" that make up a small percentage of its production, would continue to be produced until at least 2018 on the exhaustion of the open-cut diamond resource in the AK1 kimberlite pipe.

Before that 2005 commitment was made, Rio extracted a deal on royalty relief (down from 7.5 per cent to 5 per cent of revenue) and the waiving of secondary processing obligations (fancy pinks would still have to be cut and polished in Perth) from the WA Government.

The plan now is to mine some extensions to the open-cut resource for at least two years and hope that the diamond market bounces back sufficiently to warrant a full-blown move to underground mining.

Average annual production over the life of the underground mine was expected be about 60 per cent of Argyle's historical annual average of 34 million carats.

The quality of the rough stones is expected to be similar, with a value of about $US10 a carat. That low average value compares with gem-quality rough stone values of more than $US150 a carat.

Only 5 per cent of Argyle's output is of gem quality.

The job losses in the Australian mining industry has gone from a trickle to a spurt to a gush.

Thousands of workers have been laid off across the country.

Now it's not just miners on site who're likely to lose their jobs, big city head offices are also being culled.

The job losses started around the middle of last year when commodity prices nosedived, and they just kept on coming.

Then three weeks before Christmas the worlds third largest miner, Rio Tinto, announced plans to shed 14,000 workers.

And although the company has gone public with cuts of mainly contract workers, it's remaining tight lipped about head office job losses.

The ABC's been told some 200 people will be made redundant within weeks, most of them in office jobs in Perth.

Rio Tinto wont confirm or deny the figure and plans to keep details under wraps until it posts full year results in February.

Research analyst, with Ord Minnett Peter Arden, says it's a sign the global downturn is getting rapidly worse.

Small businesses in mining towns across the nation are being squeezed as their customers disappear.

Tom Price is an iron ore town in outback Western Australia.

Hardware store owner there Greg Musgrave says the bad situation is being made worse because mining companies aren't communicating with them.

Unwanted dumping has lead the Mineral Village Board to close its recycling center. The recycling center was designed for the residents of Mineral, with receptacles labeled glass, aluminum cans, broken down cardboard, and newspaper and other recyclable items.

Lately, village officials say, it has become the site of unwanted dumping.
People from outside the area have been seen depositing trash at the center. Proof has been found that residents of neighboring towns are using the center through address labels from mail, catalogs and other identifications.

To add to the headache, a new quote for recycling pick up has more than doubled in price.

“It has gotten out of hand,” said Mayor Glenn Morey. “It leaves us with no choice but to close the center.”

The Mineral Recycling Center will be closed Feb. 1. As of that date, anyone dumping at the site will be fined $500.

In other business, bids were reviewed from several area firms for household garbage pickup. Almost all bids were more than double the current rate of $7 per month.

A bid from Illinois Valley was accepted with a monthly charge of $13.28 per household.

The board agreed to set the garbage pickup at $40 every three months and water usage from $46.50 to $50 every three months. With these increases, curbside recycling was vetoed. The board then decided to increase the number of pickup tags from 13 to 26 allowing another bag to be placed at the curb each week.

The village board also reminded Mineral residents that dry, readily combustible material can be burned from 7 a.m. to sunset daily.

Research and Markets has announced the addition of the "Norilsk Nickel (GMKN) Update Report" company profile to their offering.

At least 3 years of history are available for most ratios. Additionally, information on business segments, competitors and future outlook are provided. Information on competition includes short overview of competitive situation in the market, comparison of key stats and description of competitors. Also future plans and strategy of the company is covered in this report. Conclusion contains opinion of our analyst on company's performance, business risk and growth possibilities providing reader with necessary information to make decisions.

Key reasons to read this report:

- Report contains only relevant information, leaving out excessive data.
- Understand company's historic performance and opportunities, competitive situation and business risk.
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MMC Norilsk Nickel benefits from its large, high-grade reserve base, which supports massive production, product diversity, and low costs. On the other hand, the decrease of nickel price, decrease of demand on nickel from China and other giant consumers of this metal have a negative influence on Norilsk Nickel's activity.

Charles Supapodok, who has traded silver for six years, is seeking to raise a $300 million hedge fund to invest mainly in the precious metal after its spot price tripled since 2003.

Artemis Silver Fund, advised by Artemis Capital Management, will put 80 percent of the fund's holdings in silver, Supapodok said in a phone interview from New York. The rest will be in metals such as gold, nickel and uranium.

"I don't think we're anywhere near the top at all for silver or gold,'' said Supapodok, who will manage the fund. ``You look at the amount of metals coming out of the mines every year and the projected demand, there's a gap there for many of these commodities that's not going to be filled for several years.''

Demand for silver has outstripped supply every year since 1996, according to the Silver Institute, an industry group. Mine production grew 3 percent to 641.6 million ounces in 2005, less than the 864.4 million ounces used, with the gap filled mostly by silver scrap.

The spot price for silver has tripled from the beginning of 2003 to $14.20 an ounce, exceeding the 92 percent gain of gold and the 62 percent increase of the Dow Jones Industrial Average over the same period.

Supapodok, 38, started managing private accounts to invest in silver in 2001. The funds had an average annual return of more than 50 percent, he said. Supapodok set up Artemis Capital this year.

Silver Demand

``There is a certain element of hedge fund speculation that's brought the base metals and precious metals up to a certain height,'' said Supapodok. Still, ``phenomenal'' growth in emerging countries such as China and India is a more important trend, he said.

The world's two most populous nations are snapping up natural resources to fuel their growth. In China, the world's biggest user of copper, the economy expanded 10.7 percent last year. Silver's industrial uses include battery cathodes, switches in microwave ovens and televisions, and photovoltaic cells for generating solar energy.

Of the 80 percent of funds earmarked for silver, Artemis will invest 10 percent in an exchange-traded fund by Barclays Plc and the rest in mining stocks, Supapodok said. An exchange- traded fund tracks a particular index or security. Barclays' iShares Silver Trust has gained 9.8 percent this year.

The strategy of investing most of the funds in equities rather than the metal itself, will add uncertainty to returns, said Jonathan Barratt, managing director of Sydney-based Commodity Broking Services.

Going Long

``It puts a little bit of clouds on it mainly because you don't know which equities he's going to invest in,'' said Barratt. ``You don't know whether it's going to be exploration, or blue chips, or whether the stock tracks the silver price well.''

Hedge-fund managers and other large speculators increased their net-long position in New York silver futures in the week ended Feb. 20, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets that prices will rise, outnumbered short positions by 46,428 contracts on the Comex division of the New York Mercantile Exchange. Net-long positions rose by 2,866 contracts, or 7 percent, from a week earlier.

Artemis will charge investors a management fee of 3 percent of assets and 25 percent of any profits. Hedge funds are loosely regulated private pools of capital that allow managers to partake in gains.

Supapodok used to cover property and hotel stocks as an analyst at Deutsche Bank AG in Bangkok and formerly worked in the merger and acquisition department of Credit Suisse Group in New York.

To contact the reporter on this story: Patricia Cheng in Hong Kong at pcheng9@bloomberg.net