MINING

Quiet talk about the advantages of investing in diamond is now reaching a crescendo, with the launch by financial institutions of different diamond exchanges and traded funds. As with any new trend, those on the inside track have the initial advantage and can get on board before prices start to rise, ready to reap the profits at a later date.
“The Waldman Diamond Company has been selling diamonds directly to investors at wholesale prices for the past 18 months”, explains CEO Alexander Waldman. “We are seeing increasing interest because diamond prices are rising and because gold has become a more precarious investment. As consumer demand for diamonds in India and China increases, analysts say that diamond prices will rise by an average of 6% annually through to 2020, due to constrained supply not being able to meet rising demand.”
Various attempts have been made to standardize the classification of diamonds in order to ease their commoditization, and the US Patent Office recently issued a patent for identifying investment grade diamonds and bundling them in ‘baskets’ for sale to investors. Some financial institutions are launching diamond ETFs to allow investors to benefit from the predicted increase in diamond prices, but without allowing them to own or wear the stones that they invest in.
At the top end of the market, premier white diamonds (weighing 20 carats or more) sold at auction have increased in value by 5.5% in real terms since 1999. In his report entitled “The Returns On Investment Grade Diamonds”, Luc Renneboog of Tilburg University in the Netherlands says: “since 1999…. both white and colored diamonds have significantly outperformed the US and European stock markets, US and European real estate, US government bonds, as well as European government and corporate bonds.”
While the diamonds analyzed by Renneboog were “celebrity” stones sold at auction, Alexander Waldman believes that the best options today for diamond investing are the smaller, more popular stones. “Because of increasing demand from consumer markets in the Far East, small polished diamonds have increased in value by over 60% over the past 5 years. We usually guide individual investors towards certified diamond sized between 1 and 3 carats, which today cost between $6,000 and $60,000.”
Diamond investing is becoming easier through the openness and transparency of online investment diamond exchanges. Purchasers can look at the inventory listed on the internet to select their stones and inspect their recognized authenticity certificates, in order to check the purchase and resale prices of different diamonds. They are recommended to talk to expert gemologists at the Waldman Diamond Company to verify which stones are selling well around the world and are likely to increase in value.
A recent study by Ernst & Young has shown that the prices of gems offered on the Waldman Diamond Company’s Investment Diamond Exchange are 6% below average international wholesale prices and 25-46% lower than online retail prices. The Waldman Investment Diamond Exchange charges a flat 3% brokerage fee and will help investors who want to liquidate their investment to sell their diamonds on the wholesale market at minimal cost.

The last decade’s commodity supercycle, in which prices have been on an upward trend, has come to an end, said Tuesday Citi Research, which has been warning of a “supercycle sunset” since last year.
In today’s research note, Citi’s head of commodities research, Ed Morse, said it expects 2013 to be year in which “the death bells ring for the commodity supercycle after its duly noted sunset.”
This view is in open contradiction to JP Morgan’s, which said in March this year, the longer-than-average period of rising prices was set to last another 15 years. The basic idea behind that statement was that emerging countries, such as India and China, still had a lot of commodity intensive growth ahead.

However, Citi points out that the slower-growing Chinese economy, a lack of correlation between equities and commodities, and a stronger US dollar are all but clear signs of the end of an era, with gold serving as the lynchpin for understanding the “new regime.”
Morse said gold has lost “investment glitter” as investors seek higher returns in other investments and inflation fears are further postponed. “As fears of inflation driven by global QE (quantitative easing) recede, for the time being, so should the gold price. Our current projections are for gold price to average $1,555/oz in 2013 and $1,435/oz in 2014,” he said in Tuesday’s note.
The group concludes change is “ushering in a new decade of opportunities based on how individual commodities will perform against one another and against broader market indicators such as equities or currencies.”
Image Shutterstock/ ivosar

Rio Tinto Diamonds (LON:RIO) launched Thursday a sales platform to auction a portion of its Diavik diamond production outside of its usual supply agreements with diamantaires.
The online trading place is aimed at increasing efficiency for diamantaires’ rough sourcing activities. I t uses a proprietary auction mechanism, where specific product segments are offered for sale to a wider community of invited companies.
"The new auction platform complements our existing business model of placing a majority of our production through supply agreements, with a more limited proportion of production made available for sale to a wider selection of customers," Patrick Coppens, general manager of sales for Rio Tinto Diamonds, said in a statement.
Coppens added the platform was designed based on extensive customer feedback, indicating that customers would value a user-friendly and time-efficient system. The auction platform was built using technology that enables customers to manage the bidding process, product portfolio and budget allocation in real time, as well as receive instant feedback on their bids.
The company also announced the appointment of Paul Dean as the new Chief Financial Officer.
Dean, a graduate from Oxford University, has held a number of senior roles in publicly listed companies, most recently as Group Finance Director of Ultra Electronics Holdings plc., a FTSE 250 global electronics business.

Canada's Lucara Diamond (TSX: LUC) completed a $24.85 million tender Wednesday for 15 single stone lots, including $5.75 million for a 239 carat rough stone.
Four other rough diamonds sold for more than $2.5 million. For the whole sale, the average price was $30,468 per carat. All the gems came from its Karowe mine in Botswana.
The company said it was "ecstatic" with the results especially since the mine was in its first year of production, adding the sale validated the quality of the diamonds it's recovering.
Lucara said it has extracted more large stones and it may hold another tender later in the year.

Related: Miner finds 239 carat raw diamond in Botswana