Diamonds Are a Great Way to Diversify: Expert

Diamonds are an attractive option for investors looking to diversify portfolios because they don't move in relation with other assets such as commodities and stocks, according to David Riedel, President of equity research firm Riedel Research Group.

“Over the past decade cross-asset correlations have nearly doubled, (but) diamonds have exhibited very low correlations to other assets making them an attractive source of diversification. They have almost no correlation to anything else – commodities, gold, equity markets,” Riedel told CNBC on Wednesday.

In 2011, the RapNet Diamond Index (RAPI) for one carat polished diamonds rose 19 percent outpacing gold,which rose 10 percent. And supply constraints are expected to take diamond prices even higher in the coming years, says Riedel.

He estimates demand for diamonds will grow 50 percent between now and 2015, driven by consumption in the United States, China and India, while production will rise by just 24 percent.“Diamond mines tend to be most productive near the surface, and like a funnel become less productive as you go deeper,” says Riedel, which restricts supply.

Demand out of the U.S., which currently accounts for 40 percent of global diamond purchases, is set to strengthen alongside the pick up in its economic recovery, he said.The rise in household income and the young population in India and China will support demand out of these two countries, which are already the world’s top two consumers of gold jewelry, says Riedel.

“We expect cultural trends throughout emerging markets to drive demand for diamonds further. A major trend increasing demand among the Chinese is a desire to display wealth,” he said.

Addressing the growing supply of synthetic diamonds, which are available at a fraction of the cost of natural diamonds, he says the former will not impact demand for the latter.“There is a growing supply of synthetic diamonds but there is a certain cache and investment value in natural diamonds and we think that will continue.”

Sotheby's annual spring sale of “Magnificent Jewels” in Hong Kong this week highlighted Asia’s booming interest in diamonds. The highlight of the auction was the sale of an 8.01-carat blue diamond ring for $12.7 million - the second highest price per carat for a blue diamond at an auction.

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A $2.5 Million, 10-Carat Pink Diamond At Edmonton Jewelry Store

An Edmonton retail jeweler will showcase a 10-carat fancy light purplish pink diamond from April 13-17. The radiant cut diamond with SI1 clarity is owned by a private collector and is available for $2.5 million CAD ($2.52 million).

The diamond will be displayed at the Birks jewelry store at Manulife Place, 10180 – 101st St., part of the Birks Canadian fine jewelry retail chain.

The pink diamond originated from a rare rough stone of 21.35 carats found in a South African mine, making it one of the world’s largest pink diamonds ever mined, Birks said in a statement. Because of its large size, it took 3½ months to cut and polish the stone. The pink diamond, with its purple and pink hues, is set on a platinum ring.

Pink diamonds of this size, as regular readers of this blog know, are extremely rare. The auction house Christie’s – one of the most important resellers of diamonds in the world—has reportedly auctioned 18 polished pink diamonds over 10 carats in its 244-year history. The South African 10-carat stone, made from a 21.35-carat rough stone, is even larger than Australia’s biggest rough pink diamond weighing 12.76 carats, recently unearthed at its Argyle mine, the most famous mine in the world for pink diamonds.

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Paragon Diamonds reports consistent results from Motete micro samples

 Paragon Diamonds(LON:PRG) said results from the final part of its micro-diamond sampling programme at Motete, Lesotho showed results consistent with the previous samples.The sample, from the western end of Motete Dyke, included 17 macro-diamonds (greater than 0.5mm/600μm) and a single diamond greater 1.18 mm.

The overall sample’s combined results of 2,655 diamonds included 131 macro-diamonds and six diamonds greater than 1.18 mm from 1,355 kg of samples. These are now being interpreted to establish a modelled grade for the Motete Dyke.

Paragon owns 83.75 per cent of Motete Dyke. The micro diamond analysis results in 2012 indicated that an in-situ grade of up to 1 carat per tonne is likely.

Paragon added that the road access to extract a bulk sample is proceeding with six kilometres of access track built to within one kilometre of the main dyke. Mining equipment will arrive and begin sample extraction by the end of March.

Paragon said it has also negotiated a contract to drill approximately 1,400 metres of NQ core at depth for a series of 12 intersections into the dyke up to 150 metres below surface. This drilling, in addition to providing further sample material, is intended to demonstrate the continuity of the dyke at depth, it said.

Meanwhile, Ntate Bataung Leleka, former Principal Secretary to the Lesotho Ministry of Natural Resources, is to be a consultant to the Lesotho subsidiaries, while Alastair Garner and Radiant Diamond Consulting will be professional diamond valuers to the company on a non-exclusive basis.

Francesco Scolaro, chairman, said: "Our management team continues to deliver positive results in a timely manner. I am encouraged with these results and remain confident that Lesotho will deliver a revenue stream for the company."

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Stellar Diamonds soars after Tongo resource wows brokers

Shares in Stellar Diamonds (LON:STEL) soared as brokers hailed the maiden resource estimate for its Tongo project in Sierra Leone as a significant milestone.The Africa- focused diamond group revealed a JORC compliant 660,000 carat inferred resource for Dyke-1 with a resource grade of 120 carats per hundred tonnes.

Daniel Stewart said the most important figures for investors to focus on are the very high grade and diamond price per carat, reflected in the quantity and quality of the resource of 120cpht and US$225 per carat.House broker Northland meanwhile said it was reviewing its current price target of 15.1p and said parallels can be drawn between Stellar’s Tongo kimberlite dyke project and Petra Diamond’s long established Fissure Mines.

Fissures are currently the only actively mined kimberlite dykes being mined in the world. The ROM grade at Tongo is likely to be c. 54cpht and the average diamond value is estimated to be between $225/ct to $270/ct.

At Fissures, the grade is 39cpht and the average diamond value is $255/ct.Combined, this results in a higher value per ROM tonne from Tongo between $122/t and $146/t, compared to $99/t from the Fissures.

The Fissures have a combined strike length of 12.9km, at Tongo 1.9km of the 2.5km long Dyke-1 has been tested and there is further potential from other Dykes in the area (c. 2km). The current depth of mining at Fissures is 750m at Tongo the resource extends to a depth of 200m - further drilling could extend the resource to a greater depth.

The Fissures have been in production for more than 50 years and have a remaining 15 years of mine life, demonstrating the longevity that kimberlite dyke operations can have. Karl Smithson, Stellar’s chief executive, said: "The high diamond grades and values exhibited by Dyke-1 make it one of the highest value kimberlites in terms of dollars per tonne worldwide."

Smithson added that the maiden inferred resource had confirmed the potential of the Tongo Kimberlite Dyke project and was a “significant milestone” for Stellar Diamonds.He added that the project also had potential for major expansion and development.

“In addition there is 25% of the mapped strike of Dyke-1 yet to be drilled into the resource category and there is considerable potential to expand the resource with depth. Similar operational kimberlite dyke hosted diamond deposits in South Africa are mined to a depth of 700m below surface.

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Gem Diamonds 2011 Revenues +49%

Gem Diamonds reported record earnings in 2011 driven by higher rough prices and increased production at its high-value Letšeng mine in Lesotho. Revenues grew 49 percent year on year to $395.6 million and attributable net profit more than tripled to $67.7 million. Revenues include about $67.4 million worth of diamonds from the company’s downstream activities. Cost of sales increased 11 percent to $196.8 million.

“[The year] 2011 saw several exceptional diamond discoveries at Letšeng, including the 550 carat Letšeng Star (pictured), and we continue to see strong demand for our high quality diamonds from both developed and emerging markets, despite the backdrop of challenging times for the global economy,” said Clifford Elphick, the chief executive officer of Gem Diamonds.

Gem Diamonds noted that rough diamond prices rose sharply in the first half of 2011 but fell by about 30 percent in the third quarter due to the deepening Eurozone financial crisis and tightened bank liquidity, before stabilizing in the fourth quarter. Prices for rough diamonds overall ended the year approximately 16 percent higher than at the end of 2010, the company reported.

Elphick explained that there has been some restocking in the cutting centers following the U.S. holiday season, which was reflected in the continued strengthening of prices at both the Letšeng and Ellendale sales held so far in 2012. He added that there will likely be some volatility in rough prices in the first half of 2012 given the global economic uncertainties and as the market goes through a period of consolidation after the exceptional growth experienced since the 2008 financial crisis.

“From the middle of 2012, based on current supply expectations, rough diamond prices are expected to improve,” Elphick said.

Sales at Letšeng rose 58 percent to $300.6 million during 2011. The company sold 107,700 carats from the mine as the average price of sales from the mine grew 29 percent to $2,776 per carat. Sales included the 550 carat Letšeng Star which was sold into a partnership arrangement for $16.5 million, where Gem Diamonds will benefit directly from the sale of the resultant polished diamonds.

Letšeng’s production increased 24 percent to 112,367 carats during the year. The mine launched its $280 million expansion project in January, designed to raise annual production to about 200,000 carats by 2014. 

Sales at Gem Diamonds’ Ellendale mine in Australia rose 15 percent to $89.4 million with the average price of the goods sold rising 54 percent to $731 per carat. The increase was driven by sales of Ellendale’s fancy yellow diamonds to Tiffany & Co, where the average price rose 53 percent to $4,409 per carat.

Ellendale’s production fell 28 percent to 120,302 carats in 2011. Gem Diamonds reported that processing challenges continued to be experienced at Ellendale and that the company continues to consider its options for the mine.

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Colored diamonds becoming investors' best friend

Yellow, pink and blue diamonds are catching the eye of investors around the world, according to dealers and industry insiders.

Natural colored diamonds make up only 1% of global production, which gives them "unquestionable value," said Bruno Scarselli, who represents the third generation of U.S.-based colored diamond specialist Scarselli Diamonds.

"There is a tremendous demand for yellow diamonds, but also blue and pink," Scarselli told Reuters at the Baselworld watch and jewelry show.

"There are not enough diamonds to satisfy one-tenth of the new billionaires that every month are created in China," he said as he handled a $9 million ring featuring a 12-carat internally flawless blue diamond and two smaller pink stones.

Scarselli said he expects financial institutions to be increasingly attracted to the diamond industry, which has traditionally been in the hands of family businesses.

"This is associated with the fact that currency is losing its value, government bonds are a risk, and nations are losing wealth."

Colored diamonds are piquing investors' interest because they are more difficult to find in nature than white diamonds, industry spokesmen said.

Simon Zion, whose father founded Hong Kong-based diamond company Dehres Ltd, said blue diamonds are coveted not because they are the rarest but because there are not many left after a boom in demand.

Investors' relationship with diamonds has been rocky.

The first diamond investment trust, set up by investment firm Thomson McKinnon in the 1980s, was wound up after a slump in the market.

The first publicly traded fund to invest in diamonds, Diamond Circle Capital Plc, has lost more than half of its value since it started trading in 2008.

At the beginning of 2011, investors seeking shelter from a weakening dollar were drawn back to the diamond market, expecting diamonds to go the same way as gold, said Martin Rapaport, whose diamond indexes are used as a reference by the diamond industry.

"In fact, the dollar went up and the store-of-value investment argument became weaker," he said.

Excess liquidity in India, one of the biggest diamond players, pushed up the price of diamonds in the first half of 2011, triggering a wave a panic among Chinese buyers who stocked up on diamonds fearing the price would keep rising.

"Then when credit became tighter in India, the thing that was fuelling the fire settled down," said Rapaport.

He expects the diamond market to be stable for the first half of 2012 as overstocking works itself out, before starting to rise in the second half.

Frédéric de Narp, president and chief executive of U.S. diamond miner and jeweler Harry Winston, said he will increase prices as he anticipates diamonds will go up again.

A Chinese love affair with diamonds has fueled a growing trend for watchmakers to decorate their timepieces with the gems.

Diamonds of all shapes and colors sparkled in the crystal windows of the Basel fair, mainly aimed at buyers from China, the Middle East and the United States.


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Lighting in the sky with gemstones

Could lightning storms in clouds made of gemstones hold a clue to the ignition of life on planets outside our solar system and on Earth?

Supported by a Starting Grant from the European Research Council of € 1.5 million for five years, Dr Christiane Helling from the University of St Andrews is trying to find out.

Her LEAP project stands for Light, Electricity, Atmospheres and Planets and studies charge processes in atmospheric environments.

She explained, “Brown Dwarfs and giant gas planets have atmospheres too warm to form water-clouds, but are just right for the formation of small grains made of silicates, metal oxides, and iron.

“The composition of these grains changes with height in the atmosphere, hence the top of such extra-terrestrial clouds may well glitter yellowish with dark red or green shining through from ruby or opal grains from lower layers.

"We want to understand how thunderstorms in gemstone-clouds might affect the atmosphere such that biomolecules as the precursor for life can form."

The ERC anniversary special publication presents Dr Helling's LEAP / Lightning project as one of 27 projects selected from over 2500 other ERC-funded projects.

The ERC celebrates its fifth anniversary, on 29 February - 1 March 2012, in Brussels by inviting high-level figures such as the Research and Innovation EU Commissioner, research ministers, representatives from national funding agencies from the US, China South Africa, Brazil, Russia, and the Jawaharial Nehru Centre for Advanced Scientific Research in India.

Dr Helling added, "I feel very honoured that my project is amongst the top 1.3 per cent of ERC projects from all ERC funded domains (Physical Sciences and Engineering, Life Sciences, Social Sciences and Humanities) that are presented to Commissioners, world-leading researchers and policy makers.

“This shows once more that our research in St Andrews carries a long way beyond Scottish borders.

“Leading the academic field and keeping ahead is also at the heart of the University's 600th anniversary, in which I am involved with the project ‘“Other Worlds” ThinkTank and Observatory’.”

Diamond Earrings

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