Diamond

 is a high end crafting material. It is used in one recipe to craft the rocket top. It can only be destroyed with an explosive.

Location
Diamonds can be found deep within the volcano to the east; some ways below the rain line (the depth at which the storm gun no longer produces rain). For this reason, accessing diamonds can be particularly difficult.

Hit and run
Required set-up for this strategy:

Items: 2 teleporter, 1 thorium reactor , 1 copper wire , 30+ dirt , many wooden platforms , 1 explosive , 1 recoil-based weapon (preferably plasma shotgun or particle shotgun).

Set up: Have one teleporter placed outside the volcano any where in your world to teleport to later when you need to get away from lava.

N.B. This strategy will result in the loss of a thorium generator and teleporter. For a more sustainable strategy, see the volcano base strategy below.

One strategy for obtaining a diamond, for the rocket top, is to at early morning fall down the volcano. With the weapon still equipped, rapid-fire the weapon below you as you near the bottom to lessen your fall. At first sight of lava in your way place down wooden platforms to stand on. Upon a safe landing, quick-save so you do not have to repeat this step. Follow the lava down until you see the diamond. If the lava rises, keep going up until the lava starts subsiding. Build platforms to it if possible. If there is lava pouring between you and the diamond, use a roof of dirt to make the lava run over you. Quick-save again. Place your explosive, place the teleporter and thorium reactor away from the explosive, connect them with copper wire, and prime the explosive. As soon as the explosive goes off, grab the diamond and use the teleporter to escape as using the explosive will cause a volcanic eruption. (As a side note: don't stand in the floodplain where the lava will go as you will die and be most annoyed as your last save was inside the volcano.)

Volcano base
Requires: 1-2 Thorium reactor, 5-6 advanced auto-repair turret and a few auto-repair turret.

The easiest way to continue to farm lava plants and collect diamonds inside the volcano is to build a protected volcano base. The lava will continuously deal 20 HP damage per 0.5 second (40 DPS) to anything you place (except dirt, which will turn to basalt and then rapidly destroyed if the magma is under pressure). By comparison, an advanced auto-repair turret and auto-repair turret can heal 2 HP per 0.5 seconds (-4 DPS) and 6 HP per 0.5 seconds (-12 DPS), respectively. That means you can hold back the magma by placing at least 3 advanced auto-repair turret and 1 auto-repair turret repair turrets to protect your walls from damage. By placing walls in tunnels where only a single block is exposed to magma, and sealing off both ends of a cavern complex, you can achieve this with a single thorium reactor if you position them correctly, though you'll need a second if you want to teleport out without first dismantling your defenses. See the image for more details.

Note that you can use the water detector to check the pressure of the magma to determine when it will recede and you can safely leave the base. The image shows a pressure of over 200 but it will rapidly go down once the eruption has ended until the magma drops back below the walls.

This is also relatively safe from night raids, as the magma will kill almost anything which tries to swim through it, dealing 25 HP damage per 0.5 seconds (50 DPS) to most creatures, and even lava creatures will eventually drown in it, taking 8 HP damage per 0.5 seconds (16 DPS) when they run out of breath. If they manage to assault the walls, it's best to teleport away, hoping that they stop assaulting the wall.

In-Game Description
Formed at high pressure and temperature in the planet's mantle.