But to say diamonds can't double in 10 yrs is the liken to living in a plastic bubble.
LOL. I would never say that. I marvelled at human nature during the dot-com craze less than a decade ago, and recall reading of tulipmania in the Netherlands several centuries ago.
Prices will be whatever people want them to be.
If that's your theory, screw geology, look at it rationally:
ASSUME: Prices double by 2011.
ASSUME: Diavik, Gahcho Kue and Star are at least marginally economic at current diamond prices.
THEREFORE: Any price increase will be "pure cash flow".
QUESTION: Who gets more?
Mountain Province will have annual production of 0.36 x 3 million = 1.08 million carats, or about 0.02 carat per share. Doubling $83, the highest modelled figure, would get you an extra $1.66 in cash flow per share.
Aber's share of Diavik production in 2011 will be 0.40 x 9 million carats, or 3.6 million carats, or just over 0.06 carat per share. Doubling $95 would get you an extra $5.89 in cash flow per share.
Shore's theoretical plan for Star is a 50,000-TPD mine at a grade of 0.15 carat per tonne. That works out to 2.6 million carats per year, or 0.015 carat per share. Doubling $135 would get you an extra $2.03 in cash flow per share. Shore also has to build a billion dollar mine somehow, without adding to its share tally. That won't happen.
QUESTION: What happens if we finally get a recession, and diamond prices are 10 per cent lower in 2011, with prices 25 per cent higher?
Regards,
WillP |
