Diamond News Archives

From February 15th to March 13th, a market-cap weighted aggregation of diamond miners in U.S. dollars including ALROSA Joint-Stock Company (RTS: ALRS), Petra Diamonds Ltd (LSE: PDL), Dominion Diamond Corp (TSX, NYSE: DDC), Gem Diamonds Ltd (LSE: GEMD), Lucara Diamond Corp (TSX: LUC), Stornoway Diamond Corp (TSX: SWY), Firestone Diamonds Plc (LSE: FDI), and Mountain Province Diamonds Inc (TSX, NASDAQ: MPVD), was down 14.3%.

During the same time period, the S&P 500 (the U.S. broad market proxy) was up 1.1% and notably made an all-time high on March 1st. The FTSE 100 (the European broad market proxy) was up 1.0% and also made an all-time high on March 1st.

On February 24th Stornoway hit a 52-week low of C$0.81, through March 2nd Dominion shares were down 10 days in a row, and on March 8th Mountain Province made a 52-week low of C$4.51. From February 15th to March 13th, $1.8B was erased from ALROSA’s market cap, a 14.1% decline.

The recovery of the diamond industry last year following the 2015 indigestion, a strong post-election U.S. economy, and a more stable Chinese economy, are all fundamentals supportive of diamond miners, but the stocks have recently displayed weakness.

Here are some thoughts as to why:

1. The effect of India's demonetization has been felt in diamond miner’s Q4 2016 reports which have come out in recent weeks

While the market expected India’s demonetization to have a negative impact on global diamond prices, recently released official sales results from Dominion, Stornoway, and Mountain Provence have highlighted the severity of the impact on smaller, lower-quality stones.

On February 22nd, Dominion released that in the three months ending January 31, 2017, diamonds from its primary mine, Ekati, only sold for $77/ct, versus $175/ct during the same period a year ago. In the recent quarter, 90% of Ekati’s diamonds came from the Misery Main pipe, which is rich in diamond quantity but poor in diamond quality, versus a year ago when more carat volume came from Ekati’s Koala pipe which produces diamonds that are typically worth 3-4x that of Misery Main. That said, Misery Main diamonds probably would have sold for closer to $100/ct without the effect of the demonetization.

In Stornoway Diamond’s first ever sale, which was held in November of last year, the company achieved an average price per carat of $185, but noted that the price was skewed higher because lower quality diamonds were withheld from sale due to a lack of demand. On February 6th, the company released 2017 diamond price guidance of $100-132/ct (inclusive of lower quality stones), which is $30-60/ct below the mine plan diamond price.

In addition, Stornoway noted diamond breakage from processing, which further increased the distribution of smaller diamonds produced by the company.