|MadSci Network: Earth Sciences|
Natural diamonds are formed deep in the Earth, most likely in the upper mantle, and far below the level at which coal is found. Diamonds are found only when brought up via volcanic action, usually in a rock called kimberlite. Thus, coal is never turned directly into diamonds. One might make an argument that carbon-bearing rocks carried down into the mantle by subduction may at one time have contributed to the formation of diamonds, but that really is speculative. How diamonds are formed in the mantle is still not fully understood.
Now, man-made diamonds can be produced in extreme high-pressure presses from any carbon-rich material (even moth balls and peanut butter!), with graphite being the most commonly used. The time it takes is dependent on how large you want the diamonds to be (bigger ones take longer). Crystals 150 microns across can be grown in a few minutes at the extreme conditions in the presses.
There is a wonderful book that discusses the making of artificial diamond in great detail, "Gems Made by Man", chapters 14, 15, and 16, by Kurt Nassau. You should find it fascinating reading.
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