30 www.resourceworld.com
o c t o b e r / n o v e m b e r 2 0 1 5
IT WILL BE OF nO SuRPRISE to readers
that the mining industry is on the ropes. It
begs the question – why should anyone be
interested in the mining sector? However,
there has been one group of mining com-
panies that has fared much better with
little or no fanfare – select Canadian dia-
mond companies.
At Canaccord, our main business is
diversified, blue-chip portfolios of div-
idend-paying companies. However, we
have run a small portfolio of what we con-
sider to be the best plays in the diamond
sector since 2011. Our portfolio was initi-
ated in June 2011. Between June 11, 2011
to May 1, 2015 the TSX Diversified Metals
and Mining Index (TMN) dropped by
40%. In the same period, our select dia-
mond portfolio had slightly positive return
of +0.82%. While these are not returns to
brag about, it does indicate that even in a
period of extreme duress for the mining
sector, these companies held their value.
While things were bad for mining for
the last four years, they got worse in the
last couple of months. Since May 1, 2015,
the TMN dropped another 40%! That
equates to a 70% loss in value in the last
four years. Our diamond portfolio was also
affected by this latest wave of capitulation,
declining 10.50% since the beginning of
May – still nothing to write home about,
for sure, but a significantly smaller drop
than the TMN. What is it about diamonds
that makes them different? Firstly, the
profitability of diamond mines is much
better than most other types of mining.
Secondly, there is a looming demand/sup-
ply imbalance.
It's been a quarter of a century since
Chuck Fipke and Stewart Blusson found
Canada's first diamond mine at Lac De
Diamond exploration and Mining 2015
by Prentice Lee
