| The diamond and specialty minerals stocks box score on Friday was an upbeat 99-70-141although the TSX Venture Exchange lost three points to 552. Rough diamond prices continued flat for the third consecutive week, according to Paul Zimnisky's global rough diamond price index. Oh, there were modest machinations -- the index dropped 0.1 point to 148.9 while tardy data prompted a 0.2-point increase for the previous week -- but the salient point is that prices appear flatlined following a 4.5-per-cent drop from mid-December to late January. Oh, if that was the extent of the decline. Rough prices are down nearly 20 per cent over the past year and Mr. Zimnisky pegs current prices 28.3 per cent lower than in mid-February of 2022, when his index reached an all-time high of 207.3 points, at the apex of a nearly two-year-long surge following the COVID-induced collapse of 2020. And so, the 2020s are starting to look like a replay of the 2010s, when a hearty two-year rebound followed a near collapse of the diamond sector during the Great Recession -- only to have prices stagnate for several years thereafter. (Recall that Mr. Zimnisky's index hit a springtime high just short of 200 points in 2011, but by early 2014 his index stood at 174 points. Prices zigzagged lower thereafter, so that by early 2019, the index stood at barely 150 points.) One might think Mr. Zimnisky would become despondent, tracking decline upon decline over the past two years, but not so. Indeed, he is predicting rough diamonds are about to get a lot more expensive. He sees modest increases in prices of some categories of polished diamonds as an encouraging sign, as is the never-ending tightening of supply -- who wants to go diamond exploring these days, after all. Of course, there are some hungry weasels gnawing at Mr. Zimnisky's enthusiasm. While he cheers that jewellery retailers and manufacturers are busy restocking shelves after the holiday season, he concedes that significant quantities of rough had been held back by producers late last year. As those gems come to market, they will be "offsetting any potential for meaningful upward price momentum." Not to worry, that supply of excess inventory is finite, so by mid-2024, Mr. Zimnisky says that a more notable recovery in prices is possible, the result of a delayed effect of supply control efforts kicking in, an effect that could be compounded by the impact of anticipated additional sanctions on Russian diamonds by Western nations. (Yes, Mr. Zimnisky, like most analysts, is an optimist.) Still, there are the weasels: Even with a favourable supply situation, Mr. Zimnisky says that price fundamentals would need to be supported by demand this year. He looks to China, the world's second-largest diamond market, as key but also a wildcard, as it deals with a slowing economy and an emerging commercial and residential property crisis -- not the best of times to go diamond shopping, in other words. And so, take heart, diamond miners and investors -- perhaps better days are to come, if things go well. Meanwhile, there are just faint signs of life from Canada's main diamond miners. Mountain Province Diamonds Inc. (MPVD) closed unchanged at 25 cents on 21,000 shares today, a far cry from the $7.18 at which it traded in the fall of 2016, when the future looked bright at its 49-per-cent-owned Gahcho Kue mine in the Northwest Territories. (To be fair, the mine has done better than predicted -- the problems arose from the weak market for rough and from overinflated expectations for the value of the Gahcho Kue diamonds.) |