Diamond is a raw material found in Shale Outcrops, and in raw crystal form on the seabed. There are a large number of diamonds in the shale outcrops which Sea Treaders stomp up. Due to the number of shale outsrops stomped up by Sea Treaders, this is more viable as a strategy than going to the Mountain Island caves to find the Shale outcrops there.
Uses in Crafting
Spoiler alert: The following section contains story related material.
Mobile Vehicle Bay
Vehicle Upgrade Console