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Gold/Mining/Energy : Canadian Diamond Play Cafi -- Ignore unavailable to you. Want to Upgrade?

To: james flannigan who wrote (4809)	11/24/2006 10:40:18 AM
From: WillP	Read Replies (1) \| Respond to of 16206

Attention WillP. Attention James Flannigan: James Allan & Associates spoke this week at the 2006 World Diamond Conference in Perth. Woo-hoo. Sorry, but I don't place much stock in forecasts of any kind, be they economic, weather, sports or diamond price forecasts. What will be will be. You seem easily wowed by names, titles, and predictions that you like. Good luck with that. Highlights are 1) diamond production to be US$ 11.3 billion in 2010. 2) demand to grow by $1 billion per yr over the next 5 yrs.3) short fall in 2008 of US$ 3 billion to be fully evident by 2010. So you're prediction a recession? "The production of diamonds globally in 2005 was estimated to be a total of 160 million carats, with an estimated value (rough diamonds) of US $13.4 Billion. " (from diamineexplorations.com ) Here's another: De Beers identified its major challenges as the company's market share ,renewing the strength of the South African rand and its on marginal mines, working stock levels, the Jwaneng lease in Botswana, , and the Alrosa contract. The first half sales for DTC were close to $ 3 billion an increase of around 2 % whereas headline earnings were at $425 million, up 13 %. Compared to the world production of $9.1 billion in rough De Beers production was worth $ 3.6 billion. For a total world supply of $10.1 billion De Beers also supplied $5.6 billion worth of rough. (From: diamondchatforum.com ) So much for your prices "can't double in the next 10 yrs". Excuse me? You can put things in quotes, but it doesn't mean I ever said them. Prices will do what they will do. I would be suprprised if rough diamond prices doubled over the next decade, coming off a 5-year stretch when they went up 50%, but they can. Recall my comments about dot-coms and tulips? Your forecasting is not in line with most of the worlds diamond experts. I don't forecast diamond prices. I don't think there is much value in forecasts, because people tend to believe them. I do put considerable stock in real data. The value at GK of your model of $4 billion becomes at some point in the future becomes $8 billion. Well, it's Canadian dollars, and a gross rock value, and it's De Beers and WWW's model, not mine. Beyond that, I'll agree with you. "At some point in the future" it will double. That is were I think Debeers is counting on a better RR,and could be the very reason that GK was developed at a snails pace,because time is a friend of GK as long as costs rise slower than prices. If so, Rio Tinto has another opinion. Running the Diavik processing plant at 150% of rated capacity and pushing as much production forward into the next 15 years as it can would make little sense, if rough prices were to significantly outstrip inflation and expected rates of return. If De Beers has such a rosy outlook on diamond prices, why did it sell a 42.245-per-cent share of the Fort a la Corne joint venture for $180-million. The company and its partners said they had outlined pipes with about 70 million carats of diamonds, with valuations well above Gahcho Kue. A quick doubling of rough prices really would have paid off there, no? Regards, WillP

To: james flannigan who wrote (4809)	11/24/2006 11:15:31 AM
From: WillP	Respond to of 16206

James, your post got me curious, because the numbers didn't add up, so I went after the original article. I have attached it below. Of course Mr. Allen is going to be bullish. He's a keynote speaker at a World Diamond Conference after all. What else is he going to say? Well, all he really did say was that diamond prices would rise in 2008. Further, he said that demand growth for diamonds would be around $4-billion to $5-billion over the next five years. He also said 2005 production was nearly $13-billion. So, even if all the pent-up demand goes to higher prices -- and it never, ever does, then Mr. Allen is expecting prices to rise by about one-third over the next five years. That figure compares well with the WWW forecast, which said diamond prices would rise by 20 per cent over the next five years. You'll note on second reading that Mr. Allen is exhorting Botswana to double its production to meet the demand, and I'm sure other mines will boost production as well. Therefore, much of Mr. Allen's 35-per-cent increase in demand will not translate into higher prices. Based on the figures on its web site, De Beers also anticipates a slow but sustainable growth in diamond prices. Here is the Allen article: (From www.idexonline.com/portal_FullNews.asp?id=26578 ) Analyst: Demand for Diamonds Expected to Outpace Production Diamond consumption will rise so high by 2010, that a doubling of Botswana’s current production levels are needed, says analyst James Allan of corporate finance and advisory firm James Allan and Associates. Botswana is the largest producer of gem quality diamonds. According to Allan, who was speaking at the 2006 World Diamond Conference, in Perth this week, diamond production by 2010 is expected to be $11.3 billion. Chaim Even-Zohar’s pipeline puts 2005 production at $12.67 billion. “Demand growth for diamonds over the next five years will be equivalent in value to around $4 billion and $5 billion,” Allan was quoted in Mmegi. “However, the diamond supply shortfall worth in value around $3 billion will start kicking in by 2008 and be fully evident by 2010.” As a result, Allan expects rough prices to rise in 2008.