Diamonds look ‘relatively good’

We are now more than two years into a mining industry downturn that has punished miners, developers and explorers of all commodities.

But many of the Toronto-listed diamond stocks that Diamonds in Canada covers in these pages have seen strong gains this year.

This includes producer Lucara Diamond, developer Mountain Province Diamonds, companies in between like Diamcor Mining, and explorers Kennady Diamonds and newcomer Pangolin Diamonds.

While there is merit in each of these individual success stories, has there also been a shift in sentiment toward the entire diamond sector?

Patrick Evans, the president and CEO of Mountain Province Diamonds and Kennady Diamonds (see Page 6) doesn’t see it that way, exactly.

“I don’t think it has anything specific to do with the diamond sector because rough diamond prices have actually been quite weak in the last two quarters,” Evans told Diamonds in Canada in October.

“Of course, the long-term fundamentals remain pretty strong, but the short-term fundamentals are soft. It’s probably more a case that, for lack of a better phrase, the stuffing’s been knocked out of gold, copper, and so many of the other commodities, that diamonds are looking relatively good.”

While Evans sees diamonds as appealing only by comparison to other commodities, Matt Manson, CEO of junior Stornoway Diamond, has noticed genuine interest coming back to diamonds.

As the head of a junior looking to finance the $755-million Renard diamond mine on its own (see Page 10), Manson says after a “bleak” two or three years, institutional investors are now much more interested in hearing Stornoway’s story.

“All of the excitement around the BHP Billiton and Rio Tinto sales processes created a lot of renewed interest: that was the first time it was possible to buy large-scale producing assets in the diamond sector,” he said.

While in the end, only BHP actually sold its diamond assets, perhaps some of the money that was ready to flow into those assets is still looking for a home.

That would be good for both Mountain Province, as the junior partner with De Beers in the Gahcho Kué development project, and Stornoway with Renard.

Gahcho Kué and Renard, both currently in financing mode, could begin production as soon as 2015 and 2016, respectively — just ahead of a supply/demand gap predicted to start in 2018 by Bain & Co. in its 2013 Global Diamond Report.

In the meantime, “relatively good” may be enough for diamonds to shine in the beaten up commodities sector.

What do you think? We welcome your feedback at ahiyate@northernminer.com.

–This editorial originally appeared in the November 2013 issue of Diamonds in Canada.