Post by
Aberlour on Apr 08, 2009 1:42pm
Why buy diamond stocks?
In this global crisis of confidence, why would you buy shares in a diamond company? Certainly in the near-term. sales of luxury goods will suffer somewhat. Assuming the world recovers, the annual growth in demand for diamonds of about 3%, will resume. However, production won't. In fact production will not increase for at least a decade. How do we know this? The new mines that have come on stream - Tahera (closed), Victor and Snap Lake will only replace old production that is being depleted. No major deposits were discovered in the last decade in spite of billions spent in search of them. Any new discoveries (keep an eye on PGD), will take 7 to 10 years to bring on stream. Therefore, demand will increase, production won't.
In addition, the world's highest grade hard rock diamond deposit Harry Winstons' Diavik, is currently on sale (why do you think Kinross bought now?). That's why I am buying HW.