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Diamond & Specialty Minerals Summary for Aug. 5, 2022

2022-08-05 19:26 ET - Market Summary

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by Will Purcell

The diamond and specialty minerals stocks box score on Friday was a ho-hum 99-88-123 as the TSX Venture Exchange rose four points to 664. Dwindling supply or not, the trend continues. Rough diamond prices dropped another 0.3 per cent this week, according to Paul Zimnisky's global rough diamond price index. With new tweaks to the most recent data, the downward trend in prices is clearer than ever. Mr. Zimnisky now has rough prices down 6.4 per cent since they reached an all-time high in mid-February.

This chart looks all the world like that of 2011, when a great rally in rough diamond prices peaked with a short-lived bubble that spring. After that bubble burst with a brief but sharp decline, rough prices then stagnated -- or drifted lower -- over the following eight years.

There are other similarities: Diamond promoters and miners, having barely escaped the sector meltdown that came with the Great Recession, cheered the subsequent recovery as one likely to run indefinitely. Accordingly, the dream sheets and feasibility studies in those days gushingly assumed that rough prices would perennially outstrip inflation in the coming decades -- sometimes by more than 2 per cent annually. Now, promoters are bullish anew, but inflation is a far more potent adversary today.

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