2024-06-06 15:52 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Thursday was a positive 94-89-127 as the TSX Venture Exchange added two points to 601. Slumping rough diamond prices have miners and explorers worried, although most put on a brave face by suggesting that with supply of mined diamonds falling and demand increasing, prices must surely rise. Those optimists got some encouraging news this week -- or did they? -- with word that a major purveyor of synthetic diamonds is leaving the business.
De Beers -- yes, mighty De Beers -- had been producing and selling jewellery featuring man-made diamonds through its Forevermark brand for over eight years. In fact, for a year or two, it expanded its synthetic wares into the bridal sector -- to the horror of other miners. The company soon saw the error of its ways and the Forevermark foray might have left just a brief black mark on the bridal sector, but once the walls of the fortress had been breached, others raced in to take De Beers's place.
That may now be the case in the broader jewellery sector, even with De Beers turning its chemical vapour deposition plants, where its synthetic diamonds are grown, away from gem-quality stones and toward the industrial sector. (Rare is the explorer of any mineral that does not use drill bits studded with shards of diamonds too homely to adorn a finger, but just as strong as their sparkling cousins.)
With De Beers among the manufacturers of synthetic diamonds, prices slumped dramatically with increasing demand and decreasing costs of production. Falling prices triggered a disconnect between man-made and mined diamonds, as consumers apparently are willing to accept the miners' spiel that mined diamonds are "real" and the just as real synthetic stones are not, even though it takes a diamantaire with special equipment to tell them apart.
Indeed, that has been what Canada's tenacious diamond companies had been predicting -- a list that includes Ewan Mason's advanced Saskatchewan diamond explorer, Star Diamond Corp. (DIAM), which jumped 1.5 cents to eight cents on 1.02 million shares today. Mr. Mason has consistently pooh-poohed the threat posed by synthetics, and the De Beers move suggests he may be correct.
Or not: The departure of Forevermark from the synthetic sector may bolster prices on that side, at least once De Beers sells its way out of its mountain of inventory. (It has enough to last for the "foreseeable future," De Beers says -- a phrase that usually translates to "a long time." Still, one should remember that De Beers has not been much of a seer of late when it comes to diamond strategies.)
De Beers offered another, perhaps less welcome jolt this week, when it said it would "pause all operations in Canada" except for its Gahcho Kue mine in the Northwest Territories. The company owns a 51-per-cent interest in that mine, which has been in production since late 2016 and which should last into the early 2030s if all goes well. Its minority co-venturer is Dermot Desmond's Mountain Province Diamonds Inc. (MPVD), which rose one-half cent to 18 cents on 17,000 shares today.
And so, De Beers will be spending construction capital on expanding its Venetia mine in South Africa underground, and carrying on with underground mining at Jwaneng, in Botswana. Further, the company will be putting its exploration dollars into Angola -- a diamond-rich, safety-poor country that has not seen the incessant murder and mayhem that plagued generations of Angolans for several years now. (This would be an appropriate time to take a hearty knock upon the nearest wooden object.)
De Beers will also become more secretive with its sales. Rather than revealing terse snippets of information after each of its 10 yearly tenders, it plans to tell you a bit more, but only on a quarterly basis. That will make assessing short-term trends in rough diamond prices more difficult. (Indeed, as a mathematician can tell you, the limiting destination along that path would be offering to tell you everything, but never doing so, and these days are a bad time to be withholding information.) Stay tuned -- these are "interesting times" in the diamond business as the Chinese might say.