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Diamonds & Specialty Minerals Summary for Jan. 29, 2013


2013-01-29 16:25 ET - Market Summary


by Will Purcell

The diamond stocks box score for Tuesday was a discouraging 47-72-124. The TSX Venture Exchange gained 14 points to 1,232 and polished diamond prices inched higher. Analysts predicting a tightening supply of rough got support this week, when De Beers said it produced just 27.9 million carats during 2012, down 11 per cent from the 31.3 million carats it mined in 2011. The decline was the result of intentional shutdowns for maintenance and upgrades most of them scheduled to take advantage of a temporary glut in the rough market. De Beers's production peaked at 40 million carats in the early 2000s, but never recovered following major cutbacks during the recession. De Beers is unlikely to get back to those record levels but the company appears capable of boosting production above 30 million carats, since it mined eight million carats in the final quarter of 2012.

Matt Manson's Stornoway Diamond Corp. (SWY), down one cent to 88 cents on 285,000 shares, has updated its plan to mine diamonds at Renard, in the Otish Mountains of Quebec. The work, according to Mr. Manson, contains "postfeasibility design adjustments" to Stornoway's 14-month-old feasibility study. No mere tweak, the update is "a mine design and cost optimization exercise" that "incorporates certain design refinements" undertaken over the past year. In other words, Mr. Manson was trying to make Renard seem more financially attractive. It was a lot of work for a minuscule gain. Stornoway cut capital costs to $752-million from $802-million, but it projected operating costs would rise nearly $3 to $57.63 per tonne. For all its redesigning and optimizing, the discounted net present value of Renard rose just $11-million, to $683-million. Fortunately, there are two big reasons for optimism beyond the lacklustre tweaks. Unfortunately, the regulators prevent Stornoway from including them in its study. The company includes just 17.9 million carats in its 11-year mine plan, but it also has 17.5 million inferred carats and perhaps 23.5 million to 48.5 million more carats in a "non-resource exploration upside." (All explorers tout the possibility of additional rock -- no, no, not a resource -- in their spiels, but Mr. Manson has one of the wordiest synonyms for "resource.")