Gem Diamonds

It has been a busy week for me this week so im spending Friday night just relaxing and putting my feet up. I have a friend who works in the jewellry quarter here and he was telling me that diamonds would be a good investment over the next ten years. Now two ways to do this. Firstly, the most obvious you go out and buy diamonds from a reputable dealer. The second way in would be investing through a company that mines diamonds.  This had me take a look at the largest diamond mining company on the FTSE which is Gem diamonds (GEMD). Their recent quarterly statement looked promising.

The CEO of the company probably sums their position up more succinctly than i could when he says:-

 

 

 

"The recovery in sentiment in the rough diamond market and resultant recovery in rough diamond prices through 2009 has been impressive, even though prices are still below the 2008 highs. Prices for rough diamonds from the Letšeng Mine, which continues to produce some of the world's rarest large, top quality, top colour diamonds, have risen from an average of US$1 017 per carat in Q1 2009 of to US$2 070 per carat in December 2009. We have also signed an agreement with Tiffany to ensure long term market prices and a revenue stream for the Ellendale Mine in Australia. The medium to long term supply/demand equation for diamonds remains positive, especially at the top end of the market where Gem Diamonds is focused. We have weathered the worst downturn in the diamond industry in living memory and with the support of our shareholders Gem Diamonds has emerged with no debt, US$113 million cash and is well positioned to continue to take advantage of the recovery of the global diamond industry. Gem is also continuing to assess ways of further enhancing the performance of its producing assets and of assessing other opportunities in light of the improvement of the rough diamond market."

 

 

 

This article is worth reading also:

  

http://www.diamonds.net/news/NewsItem.aspx?ArticleID=29588

 

Now I had a look at the last financial report they poseted and they seem to have done well despite the challenging conditions. The company has a lot of great things going for it/

  

• They have just signed a deal with Tiffany to lock in long term market prices
• They company itself cleared all debt last year and managed to also raise $98 million. This coupled with the $120 or so million they have in reserve puts the company in a good position for future expansion.

 

 

 

The misgivings I have are that despite the company on a solid footing it is still at the mercy of the market. When i had a look at the share price for GEMD early last week i felt the company was way over priced. The recent rise in price i see as the general rise you always get when a company is expected to post favourable results. The price this week looks a bit more attractive. Now I think there isnt a question of the fundementals of the company I feel the difficulty Id have if i was going to buy this stock would be when to get in. At the end of last month it was around 220- 230. It had recently been as high as 250p. Now id be watching the FTSE and getting in when its hit its low. I bought some cranswick shares this week as I'd read some great things about the company. However, as soon as id bought them the share price fell. Not to worry though the drop was reflective of the market and i like the company.