Hello Tomato
That expert you quoted may have been correct two years ago. There was a real threat that the Russians were going to go it alone and possibly dump production directly onto the market. Argyle (Australia) I believe was making similar noises and in fact I believe this is there intention as that mine is expected to close within a few years. If you check the data on the Diamond Page website I believe you can see some of the background statistics. Generally, prices have dropped or remained level for smaller goods and gone up for better quality goods over a carat.
I noted in yesterdays Globe & Mail (Canadian newspaper) that Debeers is losing its exclusive marketing arrangement with Zaire's rebel alliance. But last year this only represented $70 million and only of "near gem quality stones". This is a mosquito to Debeers. If they wanted to bring these small producers back into the fold, they could mearly flood that end of the market with similar goods until price drops forced them to see the error of their ways. They control so much production that they set the beat and everyone had better mach to it. (You can see why Camafuca could be so influential or low grad volume production from Saskatchewan's huge deposits)
I believe the figure for Southernera's Klipspringer is twenty-three percent of production of one carat or better. I presume Angola will be an even better number if average carat prices are any indication ($175/carat for Camafuca and $460 - $940/carat for the aluvial concessions). That can only mean large high quality stones, which is where the real money is. I believe prices are projected to rise 6% year over year for goods over one carat.
As far as the seasonality of diamond stocks issue is concerned. A lot depends on the investors' perspective and the stock's producer/explorer & cold/warm climate status. Historically, there have been price slides from June through December. However, in my opinion this was more true of cold climate early days plays when pipes had not yet been found.
In the NWT, once you have found pipes, if they are far off shore, they can be drilled from barged rigs once ice is out (Aber). If they are near shore they are drilled from shore (Diamet). If they are near shore, they can be bulk sampled from adits (Aber & Diamet), and if they are on land you are unrestricted (Lytton).
Once the pipes are found, the only real climate influenced delays associated with additional resource establishment should be for bulk supply deliveries. These are generally brought in over winter road from January to March. Lessor quantities can be delivered by helicopter or float plane.
There will always be tax selling dips in November through December but increasingly for Aber, Diamet, Southernera and possibly Lytton, I expect Funds and large investors to buy when individual investors are selling so dips on these stocks may not be as significant.
Once Diamet, Southernera and possibly Lytton are in production in 1998 I don't expect dips of any significance.
Juniors still exploring in cold climates, not exploring in warm climates and/or with no production probably will sell off anywhere between June and September depending on the state of completion of their program. The smarter $$ probably will be out or starting to get out of Winspear by mid-June. I expect Cypango and Kalahari's stories to carry on into September because of all of the prospects they have to drill and all the cores that will have to be analised, pipes follow-up drilled and those results released. If you look at the E&P seasonal charts, you will notice Southernera, Diamet, Aber and Lytton's prices didn't start to fall off until after September. Winspear had the anomoly of finding all those surface diamonds at that time therefore their price spiked up then but lost ground shortly after.
The four bigger players can feed good news into the market all year round and this is especially true of Southernera. If you trade it on that seasonal theory you can easily miss a big move. I made that mistake in August of 93 and I probably will not make it twice.
The other thing to consider is that if a takeover bid was to be made, on any of these plays, I would be willing to bet it will occure in the late fall when no one wants to think about frozen tundra.
No, I didn't bother Chris with questions on that Manitoba play as diamonds are his focus. I am guessing that the only reason they are even entertaining that play is the need to develop some assets in less politically volatile parts of the world. I would be honestly surprised if that was pursued intensely.
I know you are a Winspear investor and I don't want to rain on your parrade but thats just what I think.
Chris did mention one other thing of interest (for Southernera) apparently there is something in the works on a very good Platinum prospect, but he didn't want to elaborate on it. Now if that were in Manitoba you might see immediate progress.
He made it quite clear that they didn't want to spread themselves too thinly right now, and in fact have farmed out some of their diamond prospects to partners (Uruguay to Rea Gold & Zambia (I believe he said) to Debeers). They want to concentrate on their better prospects and to get into production so that they do not have to return to the markets to dilute shareholder equity.
One point of interest to GJT. Apparently both Fipke and Chris were involved in the early days samplings taken along the Mackenzie. Chris was the original consultant that helped Grenvill T. identify and assemble Aber's land package around Lac de Gras. Grenvill subsequently helped Chris buy up and get control of Southernera. He apparently still holds a 1% (I think he said) share in Aber as payment for helping them, (it could have been production royalty though, as I didn't hear that clearly). Regardless, there is a close relationship there.
Regards |
