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Diamond & Specialty Minerals Summary for Sept. 20, 2024
2024-09-20 14:28 ET - Market Summary
by Will Purcell
The diamond and specialty minerals stocks box score on Friday was an upbeat 81-69-160 although the TSX Venture Exchange added two points to 584. Paul Zimnisky offered beleaguered diamond miners and explorers a hint of encouragement this week with the latest setting of his global rough diamond price index. The new fix tacked on 0.4 point to 136.3 points, putting the index up 0.3 per cent on the week. (Mr. Zimnisky always corrects his most recent data when tardy information arrives, but if there was any late data, they merely confirmed the earlier setting.)
And so, Mr. Zimnisky charts what he deems to be a third attempt at a turnaround over the past year, depicting each period of flatness with a dashed horizontal line. Unfortunately, the market's hopes were dashed when prices broke southward through his two earlier drawn lines of defense. The first metaphorical trench, hastily dug along the 153-point mark last fall, corresponded with the two-month-long voluntary moratorium during which the Indian diamond sector chose to pause rough diamond purchases, which in turn prompted many miners to pause their sales.
Once the pauses ended in mid-December, rough diamond prices resumed their decline. The market steadied in mid-January, as manufacturers restocked supply to replenish their wares after the holiday season, but Mr. Zimnisky's second dashed line, this time drawn along the 149-point mark, was breached in mid-March. The subsequent decline was longer and harsher than the earlier one, as Mr. Zimnisky's new dashed line now tenuously guards the 136-point mark.
Whether this new line will hold off the relentless horde of gloom and doom is unclear, but rough diamond prices often increase during the fall. Further, with current prices now 34.3 per cent below their record highs of early 2022, when Mr. Zimnisky's index stood at 207.3 points, there would appear to be limited need -- or arguably much room -- for further declines.
Even so these are unusual times, as synthetic diamonds have wormed their way into the lower end of the jewellery business and now account for about 20 per cent of the rough diamond market. Despite that, these are not rosy times for manufacturers and purveyors of jewellery featuring man-made diamonds. Most companies are taking losses, and some are facing bankruptcy, as prices of synthetic diamonds have plunged, eroding any sense of lasting value to the stones, and eroding market margins in the process.
Accordingly, analysts and miners alike continue to cheer what they fervently believe -- or at least hope -- is a coming rebound in the market for mined diamonds. Supply is limited, after all, as a decade of slumping rough diamond prices have forced some important mines into early closure and have all but killed off exploration for new deposits.
Of course, while rough diamond prices are well off their record highs, they are still 36 per cent higher when Mr. Zimnisky began his index in late 2007. Yes, inflation has eroded that increase, but the financial situation for miners should arguably be little different today than it was 17 years ago. The reality is much different, of course, as the share prices of diamond miners are a tiny fraction of what they once were, as unbridled optimism has been supplanted by unfettered gloom.
Mountain Province Diamonds Inc. (MPVD) traded at $6 in 2007 as an explorer, and above $7 in the fall of 2016 as its 49-per-cent-owned Gahcho Kue mine began operation. Unfortunately, eight years of less-than-expected revenue and higher-than-anticipated costs have taken their toll: Mountain Province rose one cent to 14.5 cents on 80,000 shares today.
Still, it could be worse. Stornoway Diamond Corp. fell to bankruptcy five years ago, and while its $800-million Renard mine was revived under new ownership, the second coming of Stornoway failed again last year amid the deepening depression across the rough diamond market. Renard has another new owner, but it is looking to repurpose the Renard plant for lithium. Therefore, it appears that the rest of the Renard diamonds -- millions of carats of them -- will stay in the ground forever.