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Diamond & Specialty Minerals Summary for September 27, 2024 by Will Purcell | |
The diamond and specialty minerals stocks box score on Friday was a mediocre 69-80-161 as the TSX Venture Exchange lost eight points to 585. The tide may have turned, as Paul Zimnisky's global rough diamond price index has posted its second weekly increase after months of declines. The latest fix came in at 137.1 points, adding 0.8 point to last week's unadjusted setting of 136.3 points. (Mr. Zimnisky amended his chart to accommodate late-to-arrive data, but if there were any, they did not affect the chart.)
And so, the latest period of price stability has now run for seven weeks as depicted by a dashed line on Mr. Zimnisky's chart. This is his third such depiction: The first, drawn at 153 points late last year, faltered when diamond miners resumed sales once a two-month moratorium on purchases in India ended. A new trench was dug at about 149 points and although it held until early spring, a five-month slump then peeled off another 13 points.
Rough diamond prices are now 70.2 points below their record high of 207.3 points, set in early 2022 -- a 33.9-per-cent decline that has stripped the last hints of optimism from retail diamond investors. Put another way, Mr. Zimnisky says that current prices are 20.5 per cent lower than they were a decade ago, when his index sat at 172.5 points.
That long slump is worsened when you consider that diamond miners were grumping about rough diamond prices at that time. In the fall of 2014, the late Robert Gannicott, chairman and chief executive officer of Dominion Diamond Corp., said that tightening credit terms had "led to softened prices for rough diamonds." As a result of that softening, Dominion decided to withhold nearly $100-million (U.S.) of rough from sale, "in the anticipation of improved demand."
Unfortunately, prices did not improve, and Dominion's shareholders sagely accepted a 2017 takeover offer of $14.25 (U.S.) per share from Dennis Washington, a Montana billionaire. Mr. Washington saddled Dominion with over $550-million (U.S.) in new debt through the $1.2-billion (U.S.) going private transaction, and the company succumbed to bankruptcy in 2020 amid the COVID crisis. Dominion's 40-per-cent interest in Diavik was reluctantly assumed by the majority owner, Rio Tinto, while its Ekati mine is now owned by Australia-based Burgundy Diamond Mines Ltd.
Weak diamond prices and hefty debt also killed off Stornoway Diamond Corp. and its Renard mine in Quebec -- twice. The first failure came in 2019, thanks to low rough diamond prices and high interest payments. The second came last year, when the main secured creditors who had reopened the mine in the hope of getting some of their money back, threw in the towel.
Canada's surviving mines continue to struggle in the market. Dermot Desmond and Mark Wall's Mountain Province Diamonds Inc. (MPVD), a $7 stock eight years ago when mining began at its 49-per-cent-owned Gahcho Kue mine in the Northwest Territories, closed unchanged at 14.5 cents on 583,000 shares today. The company survived COVID thanks to its major shareholder, Mr. Desmond, buying $50-million (U.S.) of its rough and lending it another $50-million (U.S.) to tide it over. (Mr. Desmond may rue his investment in Mountain Province's stock, but his loans and diamond purchases turned out well for him, thanks to the generous terms he received -- or exacted -- from the company.)
Those diamond juniors with the tenaciousness -- or temerity -- to carry on with their programs have also been struggling. Star Diamond Corp. (DIAM) traded as high as $8.75 in 2007, thanks to its effective 70-per-cent interest in the Star and Orion South kimberlites in central Saskatchewan. Today, Star has a 100-per-cent interest and has been through two major partners that spent upwards of $300-million on exploration from their own wallets, but Star is now twinkling faintly: Today, it closed unchanged at four cents on 31,000 shares.