By Gavin du Venage | From The National
Diamonds it turns out, are not forever — at least not when it comes to supply.
Declining deposits present a looming shortage but also an opportunity for investors.
Although the wealthy have traditionally collected precious stones, diamonds have not been part of a formal portfolio of value, such as gold, cash and equities. However this may change as natural stones become harder to find, something on which a UK company with Emirati backing is hoping to capitalise.
AIM-listed Paragon Diamonds is developing the sizeable Lemphane Mine and has recently agreed to acquire another sizeable mine, the Mothae Mine, both in the tiny mountain kingdom of Lesotho, in southern Africa. In January, Paragon announced it had teamed up with International Triangle General Trading, a Dubai-based firm, for a debt and equity package of up to US$28 million.
“These investors are connected to the royal families of the UAE and Saudi Arabia,” says Hugo Philion, a member of the management team at Paragon, although he declines to name them. “Through them, we will be talking to some very interesting people who are interested in acquiring our sizeable supply of large investment grade diamonds direct from the mine, and intent on making Dubai the number one Diamond centre in the world.”
Strong demand and a decline in world production will kindle interest in gems as a long-term asset that grows in value over time.
“We see a shift into diamonds both as an asset class and a store of value as a currency surrogate, especially for the ultra-wealthy, as both geopolitics and the global monetary system becomes more unstable with persistent quantitative easing,” Mr Philion says.
Most of the world’s diamonds were formed deep in the earth millions of years ago — up to 300 kilometres down, in some instances. They are usually brought to the surface by volcanic activity — in pipes of larva. These pipes harden and become the diamond-bearing kimberlites that miners seek.
However, the pipes are exceedingly rare. “There’s been no major kimberlite discovery in 25 years,” says Mr Philion.
Read more at The National