Ten top tips for investing in diamond mining

By Author Charlie Gibson May 25, 2006

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diamondIf diamonds are a girl’s best friend, says Lee Wild in Investors Chronicle, then the firms that mine them must surely be an investor’s best friend. Thanks to De Beers’ marketing campaign, diamond retail sales in China alone “are expected to grow at up to 20% a year”. Coupled with similarly burgeoning demand from India, that should sustain worldwide demand growth of “around 5% a year for the next decade”.

Simultaneously, production at some of the world’s biggest mines is beginning to tail off; in-ground resources have declined from 85 years worth of production in the mid-1980s to around 20 years worth today; and De Beers’ fabled $5bn stockpile “has been sold off”. Indeed, the diamond-mining industry is in “the most positive situation” it’s seen for the last 30 years.

London’s Aim market is currently host to 20 diamond exploration firms. One favoured by broker Collins Stewart is Petra Diamonds (Aim:PDL, 93p), which has exposure to three South African mines through its merger with Crown Resources a year ago and to Botswana through its acquisition of Kalahari Diamonds in September. The broker has a short-term price target of 121p per share on the company (32% above current levels), while Hargreave Hale has one of 135p (47% above).

Apart from the majors, other diamond firms to look at include Dwyka Diamonds (Aim:DWY, 34p); Gravity Diamonds (Aim:GRN, 14.5p); BDI Mining (Aim: BDI, 27p); Firestone Diamonds (Aim:FDI, 136p); African Diamonds (Aim:AFD, 165p); The Sierra Leone Diamond Company (Aim:SLD, 105p); SouthernEra Diamonds (Aim:SRE, 26.5p); Karelian (Aim:KDR, 5.75p) and European Diamonds (Aim: EPD, 24.75p).

Published in Tips & advice | More articles by Charlie Gibson

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