There seems to be some disconnect between the way financial analysts see the diamond mining industry and what current industry players and analysts think. At inaugural diamond conference hosted by RBC Capital Markets, the corporate and investment banking arm of Royal Bank of Canada, managing director for global investment banking Patrick Meier said he believed that the demand for diamond jewellery in the US and the new markets of India and China would grow in excess of 5% in the foreseeable future. He said market interest in diamonds would “justify our renewed focus”. He added, “Other factors have also contributed to this strong demand including supply shortage, the need for further exploration and the potential threat from synthetics. RBC Capital Markets is proud to host this conference at such an exciting time for the diamond market and is dedicated to taking a leading role in the global mining industry for many years to come.”Alluvial diamond miners

Should we be looking for nickel instead? Sierra Leonian alluvial diamond miners

The conference was attended by representatives of the world’s largest mining companies including De Beers, Aber, Rio Tinto, BHP Billiton and Petra.

A post-conference report posted on Mineweb.com notes that though the prospects are good, there aren’t any opportunities for investors. The report states that of the world’s 100 diamond mining companies, just 10 account for two-thirds of the $10 billion market capitalisation. The report also notes that, “diversified majors BHP Billiton, Anglo American and Rio Tinto, Russian producer Alrosa and small non-listed companies produce all but 500,000 to 650,000 carats of total diamond production.” A tight, closed-door market, seems to be the indication of the report.

So are the financial markets really chafing to get in and open up the diamond mining industry with fresh investment? They shouldn’t be, according to Chaim Even-Zohar, who thinks there’s “something quite sick” in the management of the diamond mining sector. He quotes De Beers Diamond Trading Company managing director Varda Shine as saying that “rough prices are very much where they were in 2000.” He then cites gold, which has climbed from $250 an ounce in 2000 to $685 today and nickel, which has zoomed from $2 a pound to $22 over the same period and a couple of other commodities.

According to him, the mining industry has posted its poorest ever results and can’t increase rough prices (De Beers has actually had to officially go down on prices in the last couple of years) because polished prices have just not risen. Incredibly, he holds out the possibility that a rise in polished prices may actually soften consumer demand and thus crush any hope for higher rough prices.

“Whatever it is,” says one diamond manufacturer, “the mines are making tons more money than any of us.”

I’m not sure what to make of it all.