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MARKET COMMENT
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How much is a diamond worth? The answer is nobody really quite knows. This is because diamonds are valued on four main criteria, which are commonly known as the four "C"s. These are Clarity, Colour, the weight in Carats and the Cut. So, a heavy rock of poorer clarity could be worth just as much as a well cut but smaller diamond of a more usual colour. I was recently asked if diamond investing was a good idea. The truth is I'm not entirely sure. Furthermore, I don't think many of us know enough about the subject to give an honest answer. Additionally, I was recently told that a white diamond (these are the ones you find in most high street jewellers) that costs less than £30,000 was not considered to be rare enough to be a serious investment. Chance would be a fine thing! While investing in "bling bling" itself may not be a viable proposition for most of us, the same may not be said of investing in the diamond miners. For instance Dwyka Diamond (LSE: DWY), the AIM-listed South African diamond miner, said it recently sold a 57.5 carat diamond for $483,420! That equates to $8,407 per carat, which is much higher than the $60/carat that rough diamonds currently fetch on the open market. (For those who may be interested, a carat is equivalent to 200 milligrams.) Dwyka Diamonds is only one of the many diamond miners listed on the London stock market. Some of the others are shown below together with their market cap and most recent earnings. The mining conglomerates, which also have substantial interests in diamond excavation, are also shown. For those who are interested in diamond investing, Anglo American (LSE: AAL), which has a 45% stake in De Beers, would perhaps be a safer play on the diamond sector. Diamonds account for around quarter of the group's operating profit, which is about the same as the contributions from platinum and gold combined. Anglo American recently said retail sales of diamond jewellery have recovered, and it expects De Beer's results to be ahead of last year. Anglo American is forecast to produce a pre-tax profit of £1,643m this year. This values the shares, which currently trade at 1,217p, at a relatively modest 15 times prospective earnings. The forecast dividend yield of 2.8%, whilst not especially generous, is decent enough.Company Mkt Cap Profit
£m £m
Anglo American (LSE: AAL) 17,947 932
Rio Tinto (LSE: RIO) 15,509 434
BHP Billiton (LSE: BLT) 11,563 1,134
Interestingly, though perhaps not entirely surprisingly, the smaller diamond miners, with the exception of one, are not profitable. Even Dwyka Diamonds, which made that significant gemstone find, could not turn in a profit. In general, the limited scale of production of the smaller miners prevents them from even making a profit at the operating level, though many believe they can.
Petra Diamonds (LSE: PDL) 20 (2.3)
Firestone Diamonds (LSE: FDI) 17 0.1
European Diamonds (LSE: EPD) 14 (0.6)
Dwyka Diamonds (LSE: DWY) 13 (9)
African Diamonds (LSE: AFD) 9 n/a
Mano River Resources (LSE: MANA) 9 n/a
Conroy Diamond (LSE: CDG) 4 (0.2)