Hello Frank
I am not sure what you believe I could add to the discussion. There is ample information published on all the companies that have been noted. That information pretty much speaks for its self.
Judging the profitability of a company by virtue of transitory market cycles does not strike me as a rational investment philosophy. People who buy investment quality diamonds do not shop a J.C. Penny nor retire on a pension.
Investors are well healed individuals, governments, funds and/or people living in countries where there are severe restrictions on the movement of wealth across borders. Gold can be a cumbersome smuggling medium. But one need not look very far to observe the need for the choice of refugees throughout history for a discrete wealth transportation medium. Gold and dollars can be seen and easily confiscated. Diamonds can be hidden easily and I will leave it to your imagination as to where.
The more world economies teeter and the more economic turmoil results in unrest, the greater the demand for discrete ways of hiding and transporting wealth. Diamond smuggling is an age-old tried and true reality.
As an investor, the last thing you would want to do is buy these companies when the market is hot, they have already appreciated. Why would anyone want to buy at the top? I am sorry if my tone offends, but hasn't the recent market meltdown taught investors that lesson yet? You buy when everyone else is selling and you wait. Unless you have inside information on a stock, that is the only way I know of to guarantee yourself a windfall return.
The mining companies who will have short-term financial difficulties are those who recover predominantly small poor quality goods. ABZ will not be mining until long after any recession is old news. SUF's RSA production has a locked in price for five years in US $'s and their Angolan production is premium quality rough selling for on average between $150/carrat and $250/carrat with individual parcels bringing in as much as $950/carrat. Prices for these goods have not dropped to my knowledge and they are tendered in bidding on the Johannesburg market. There are a few companies mining off shore in Africa who also recover high quality stones but I believe they tend to be small. I have not followed these companies closely; therefore I could not comment on their profitability.
Perhaps the following will answer Ted's question about the relative quality of ores out there hence likely profitability hence eventual investor interest.
WORLD DIAMOND MINE LEAGUE
VALUE (US$/TONNE)
SUF - Klipspringer M-1 pipe (South Africa)* 335
Aber-RTZ Diavik (Canada) 210
DB - Jwaneng (Botswana) 139
SUF - Klipspringer Leopard (South Africa)** 106
Udachnaya (Russia) 100
Dia Met-BHP Lac De Gras (Canada) 92
DB - Venetia (South Africa) 78
Rex - Koidu Fissure (Sierra Leone) 63
DB - Jubilee (Russia) 53
DB - Letlhakane (Botswana) 50
Other fissure mines (South Africa) 48
Dancari Fissure (South Africa) 45
Helam Fissure Mine (South Africa) 36
Aykhal (Russia) 35
Ashton - Argyle (Australia) 32
DB - Orapa (Botswana) 31
DB - Finsch (South Africa) 31
Miba (D.R. of Congo) 31
Guaniamo Fissures (Venezuela) 25
Kimberley Mines (South Africa) 20
DB - Premier (South Africa) 20
DB - Koffiefontein (South Africa) 15
Namdeb (Namibia) 14
Williamson (Tanzania) 11
River Branch (Zimbabwe) 8
Kelsey Lake (U.S.A.) 6
The question about the potential for artificial diamond manufacturing companies to be profitable and kill DeBeers, has been specter raised repeatedly for decades now. The reality of any mass manufacturing of such goods would be simply to make natural stones even more valuable just as artificial sapphires, rubies and emeralds have pushed the better quality natural rough up in price.
Mines producing predominantly low quality rough would close making natural diamonds scarcer.
In the case of low-end goods, I would expect DeBeers and any other miner or cartel of miners to collectively undercut the price of manufactured stones by flooding the market with their low quality rough. It offers little to the mines profitability anyway and by doing that, they could effectively keep the artificial stones from making significant market penetrations while increasing the value of their high quality goods.
Bottom line if you were DB's advertising diamonds you know what the message will be:
If you are a 19 year-old buying an engagement ring, you had better drop two months salary on a real diamond because you don't want her to find out at the corner jewelry store that it was a fake (what will she think about you)?
The flash and trash crowd will buy big artificial diamonds, but if all they want is flash, they can by zircons cheaper so that market is a loser.
I would stick with rarity and quality.
Regards |
