Diamonds will continue to sparkle despite a US recession – MoneyWeek

“Wearequitepositiveaboutdiamondsalesthisyear,”hesaid“anditwillbetwotothreeyearsbeforesupplyincreasesagain。



Steimetzcoverstheentirediamondpipelineexcludingmining–fromroughdiamondtradingandmarketing,manufacturingandcutting,polishedsalesandmarketing,tojewellerycreationandretail。

BothSouthAfricaandZimbabweareincrisis

MiningisextremelyimportanttotheSouthernAfricaneconomy…butmostoftheregion’scountriesareinthemidstofapowercrisis。

InSouthAfrica,itisdowntoaboomingeconomycoupledwithanincompetentgovernment。

InZimbabweitisdowntotheactionsofadelusionaldictator。

OutagesinSouthAfricahavecausedthegoldandplatinumpricestosoartonewhighs。

RioTintohasalreadysaidthatitwouldreviewplansforamajoraluminiuminvestmentinSouthAfricabecauseoftheshortages。

Allthismeansthatsupplyofthesecommoditieswillplummet,whichwillsupportprices。

Butit’snotjustSouthAfricathatishavingpowerproblems。

ThesituationisactuallyworseinZimbabwe–andthecountrycouldofferaninsightintowhatistobecomeoftheSouthAfricanminingindustry。

Let’shopenot…

OnWednesday,RioTinto(RIO)saidthatits78%-ownedMurowadiamondminehadseena40%fallinproductionin2007,hurtbyfrequentpowercuts,equipmentfailuresandadelayedexpansionprogram。

Themineproduced145,000caratsin2007,comparedwith240,000caratsin2006。

Adeclineindiamondgradehadbeenexpected,butthecompanyhadnotexpectedtheextensiveimpactofelectricityoutages。

Besidestheanticipateddecreaseingradewithdepthandthedelayintheimplementationoftheexpansionproject,productionwasadverselyaffectedbyZESApoweroutagesandcontractorminingfleetbreakdownsduetolackofspares,thestatementsaid。

OtherUK-listedminingstocksexposedtothepowerandpoliticalproblemsinZimbabweincludeAngloPlatinum,Implats,AquariusPlatinumandMwanaAfrica。

ThenewsfromRioTintomakesmeevenmorebullishonthediamondprice。

ManyinvestorshavebeenconcernedaboutinvestinginthesectorbecauseoffearsofaUSrecession。

UScitizensbuy50%ofdiamondssoldannually。

However,withtheemergenceofIndiaandChina,therelianceoftheindustryonUSsalesappearstobewaning。

DeBeersrecentlysaidthatitexpectedstrongdemandfromChina,IndiaandtheMiddleEasttohelpsustainpricesforlargerandbetterqualitydiamonds。

Thistrendwillcontinue,aswillelectricityshortagesinmining-driveneconomies。

Forthisreason,Inowlikediamondsevenmore…despitethecrumblingUSeconomy。

Aperfectstormisbrewingonthecommodityfrontoverthenext5to10years。

Iftheworldkeepsupitsinsatiabledemandforcommodities,thenwatchout…therewontbemuchleftofanything。

ThisarticleistakenfromGarryWhite’sfreedailyemail‘GarryWrites’。

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