This story is set after the events of "A Dog and Pony Show". Beyond that, its exact place in the continuity is debatable.
The Diamond Dogs have long lived in the gem fields not far from Ponyville. There, they use their innate connection with the earth to find and mine the magical jewels that are then used far and wide. But when their past comes back to bite them in the tail, they will have to stand up for their right to their way of life.
This story was written for EQD's "Outside Insight Summer Fanfic Contest", which I only just learned about now on the last day for submissions.
Bad blueblood, bad
Extra space.
You probably need to revisit your understanding of dialogue transitions, too; you don't use capitals or periods when attributing.
Should be:
You do this many times.
Nice story, but it did feel rushed. Also, I can't for the life of me figure out why the DD's would trade their gems away. (What could the ponies have that the DD's would want.)