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Today, blue is the color of money

Big blue diamond from South Africa's Cullinan mine to be auctioned.

If it performs as well as expected the diamond could be a useful stimulus. Panic selling hit the diamond industry hard at the top of the world credit crunch, and diamond prices have plunged since July last year, registering a 16 percent fall on the International Diamond Exchange (IDEX) price index. Overall sales fell about 30 percent since the September crash.

“Some diamonds dropped 60 percent, but since then they’ve come back a bit again,” said Adonis Pouroulis, chairman of Petra Diamonds, the world’s largest independent diamond producer and owner of the Cullinan mine, northeast of Pretoria, South Africa, where this diamond was discovered last year. Petra is putting this latest blue up for auction. The same mine also produced the whopping 3,106-carat great Cullinan stone a century ago.

As demand has dropped off, diamond-mining giant De Beers — which handles about 40 percent of all rough diamonds — quickly responded by pushing production down 91 percent in the first quarter of the year, and it has laid off a quarter of its British staff. Although it has now re-started production at its three Bostwana mines, De Beers will still reduce its annual production by 40 percent overall. A fourth Botswana diamond mine remains on hold for the rest of the year.

In Angola, the world’s biggest miner, BHP Billiton, withdrew from diamond exploration projects last year to help cut costs. In India, 200,000 diamond cutters and polishers have been laid off — a quarter of the diamond workforce. Meanwhile, traders in Belgium’s diamond cutting and selling capital, Antwerp, struggle with high debt as stones go unsold.

Even Petra – bullish about this latest blue – has scaled back its exploration ventures in Sierra Leone and Botswana, and closed down its diamond mine in Angola altogether. Despite that, it has acquired new producing mines and hopes to boost considerably its output from 200,000 carats last year.

“We’ll do 1.5 million carats this year,” said Petra’s Pouroulis, who earlier this year took a 4.95 percent stake in the company. “You can’t stop your business.”

With a bullish attitude, slick marketing and the odd rare find, the interest piqued by the as yet un-named blue stone might just help stave off the diamond blues.

More GlobalPost dispatches on  mining:

Gold mining loses its luster

Even as gold prices rise, South Africa's miners struggle

Ghana weighs boosting tax on gold