Diamond prices have bounced back….

Posted by Miningmarkets.ca

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……but investors reluctant to follow

While rough diamond prices have surpassed their pre-recession peak and polished prices are also doing well, money isn’t flowing into the diamond space as it has with every commodity in the mining sector.

At this week’s Prospectors and Developers Association, it was evident that diamond juniors are looking for alternatives while they wait for the money to return.

“People don’t realize that the recovery in diamond prices since the recession has been second only to gold,” said an investor relations representative for one junior.

In the meantime, they are continuing a trend that started during the recession, branching out to other commodities. Junior diamond companies are marketing gold, iron ore, nickel and copper projects – either as a way to lure investors, or to make a few bucks to support their diamond exploration activities.

After receiving disappointing microdiamond results from its Nanuq North JV with Peregrine Diamonds (PGD-T) in November, Indicator Minerals (IME-V) is now focusing on its Mohave copper project, in Arizona, acquired last year. Arctic Star Diamond (ADD-T) has turned its attention to rare metals, and Sanatana Diamonds (STA-V) to gold. Dianor Resources (DOR-V) is still advancing its Leadbetter project, near Wawa, Ont., but is also trying to attract a buyer for the iron ore potential on the property, 500 metres northeast of the deposit. Diamonds North (DDN-V) is continuing to explore its Amaruk project for diamonds, while also scoping out nickel, gold and iron potential at its properties.

Although diamond juniors are still waiting for investors to catch on to the diamond story, there was a noticeable increase in interest in the annual diamonds session at the PDAC. The room was full for the “21 years of diamonds: Coming of age?” talk – a marked improvement over last year’s numbers (which themselves were up significantly from the 2009 attendance).

The importance of the developing world to all commodities markets, including diamonds, was a running theme at the convention.

In a luncheon that examined the sustainability of China’s role as a demand generator for commodities, Ray Goldie, a senior mining analyst at Salman Partners, noted that while up-market diamond sales in the U.S. were recovering “nicely,” the real growth is in Asia. Peregrine Diamonds’ president Brooke Clements pointed out in a separate presentation that diamonds are very popular with men in China, for example in wrist watches, opening up yet more potential.

And in a presentation about the Bunder diamond project in India,  Andy Davy, a consulting geologist for Rio Tinto (RIO-N) noted that the project is actually pretty small for a company like Rio, with the Attri South lamproite pipe containing about 27.6 million carats. A central reason the company is moving forward with the project, where a prefeasibility study is under way, is to get a “foothold” in India, where Rio Tinto is not all that well known, despite its size. The country’s economy is expected to overtake the size of China’s in 2040.

Conference attendees received updates on diamond projects including: Peregrine Diamonds’ and BHP Billiton’s (BLT-L) Chidliak project, where 50 kimberlites have so far been discovered; Stornoway Diamonds’ (SWY-T) Renard project, for which a feasibility study is expected to be released in the third quarter of the year; and Shore Gold’s (SGF-T) Star-Orion South project, for which a feasibility study is expected in the second quarter.