thanks for that post Bishop....
9IKC should be interesting for sure..... I think the Leadbetter will show up well during the conference..... advanced, cheap, lucrative..... a nice JV target for a cash rich major...... see comments outlined in red below....
MORE CONSOLIDATION EXPECTED
Diamond stocks down sharply on depressed US economy
Leading diamond analyst Des Kilalea says diamond stocks are well down from 12 month highs as the market expects the US to enter a recession. However stable producing companies such as Petra, Rockwell and Gem Diamonds could still be among investors picks.
Author: Tessa Kruger
Posted: Tuesday , 15 Jul 2008
JOHANNESBURG -
World diamond stocks have plunged 41.8% from twelve month highs and leading diamond analyst, Des Kilalea of RBC, says the fall comes as the market votes on the US consumer that accounts for 50% of diamond sales.
Kilalea told Mineweb that investors were expecting the United States to enter a recession and during times of uncertainty and higher risk like these they typically moved their money to larger corporations with stable production in known areas.
He said China, India and the Middle East still only accounted for a small part of the diamond market with China at less than 10% of market share, while the US accounted for about 50%. This contrasted with China's larger share of resources such as base metals that amounted to between 20-40% of global demand.
Kilalea said a 10% drop in diamond demand from the US, translated to a 5% drop in global market demand and the Chinese market for diamonds would have to grow 60% to compensate for a drop of this size.
Kilalea said that China was an important, growing long-term market for diamonds, but growth in the country would be slower this year compared to last year. Diamond sales in China could still grow this year or remain flat, but was not expected to slump.
Under current circumstances investors were expected to buy shares in diamond companies that had stable, growing and quality production such as Gem Diamonds (LSE:GEMD), Petra Diamonds (AIM:PDL) and Rockwell Diamonds (JSE:RDI, TSX: RDI) - if they still chose to buy diamond stocks.
Kilalea said the world would see poor economic growth for the balance of this year and nobody was going to rush to buy shares right now. "People are more likely to stand back and have a look at what transpires," he said.
"US consumers are in real trouble and consumers in Japan that are typically risk-averse, can't make up for lower demand from the US. In troubled times like this, investors tend to be more interested in diversified companies such as BHP Billiton, Xstrata and Anglo American that have stable production in known areas."
The analyst added that risk-averse investors will probably not be interested in smaller and exploration diamond companies that offer less liquidity as they wanted to be in a position to sell if they needed to.
As a result, the diamond sector could see more consolidation as juniors that need money for their activities merge with larger companies with cash.
It has become expensive for juniors that need money to raise money in the market and he expected to see more transactions similar to the recent deal between BRCDiamondCore and Rio Tinto that involves Rio taking on BRCDiamondCore's exploration work in the DRC.
| Selected diamond stocks | | |
| | Stock | From | From | Value | |
| | price | high* | low* | USD bn | |
| Bonaparte Diamonds | AUD 0.08 | -48.0% | 21.9% | 0.01 | |
| Diamondex | AUD 0.24 | -53.9% | 4.4% | 0.04 | |
| Target Resources | GBP 0.10 | -62.3% | 0.0% | 0.02 | |
| Kimberley Consolidated | ZAR 0.66 | -56.0% | 32.0% | 0.04 | |
| African Consolidated | GBP 0.12 | -65.4% | 2.2% | 0.05 | |
| Gem Diamonds | GBP 9.79 | -19.5% | 22.4% | 1.22 | |
| Shore Gold | CAD 2.36 | -57.9% | 15.1% | 0.44 | |
| Petra Diamonds | GBP 0.96 | -38.1% | 2.7% | 0.35 | |
| Mountain Province | CAD 0.04 | -17.6% | 17.0% | 0.27 | |
| Firestone Diamonds | GBP 0.99 | -52.2% | 6.5% | 0.11 | |
| African Diamonds | GBP 0.64 | -47.1% | 1.6% | 0.09 | |
| Rockwell Diamonds | ZAR 3.90 | -13.3% | 17.1% | 0.12 | |
| Trans Hex | ZAR 9.40 | -34.5% | 14.6% | 0.13 | |
| Tawana | ZAR 0.34 | -72.2% | 36.0% | 0.01 | |
| Pangea Diamondfields | GBP 0.42 | -30.8% | 0.0% | 0.10 | |
| Namakwa Diamonds | GBP 1.40 | -24.2% | 22.0% | 0.32 | |
| Kopane Diamonds | GBP 0.07 | -70.5% | 3.5% | 0.02 | |
| Diamondcorp | GBP 0.71 | -31.6% | 0.0% | 0.05 | |
| Stornoway Diamonds | CAD 0.26 | -74.3% | 2.0% | 0.05 | |
| Vaaldiam Resources | CAD 0.20 | -81.8% | 2.6% | 0.04 | |
| Harry Winston | CAD 24.24 | -44.1% | 15.3% | 1.51 | |
| BRC Diamondcore | CAD 1.28 | -84.0% | 26.7% | 0.03 | |
| Averages/Total | | -48.7% | 11.1% | 4.99 | |
| Weighted averages | | -41.8% | 18.1% | | |
| | | | | | |
| Diversifieds with diamonds | | | | |
| Anglo American** | GBP 29.25 | -20.6% | 35.0% | 77.98 | |
| BHP Billiton | GBP 17.24 | -21.8% | 50.2% | 205.07 | |
| Rio Tinto | GBP 54.10 | -24.5% | 92.7% | 155.09 | |
| * 12-month | | | | | |
| ** Holds 45% of unlisted De Beers |