TORONTO – Dec 3 (Reuters) – Rio Tinto Plc’s re-commitment to diamonds with a $350 million Canadian mine expansion has highlighted the prospects for a handful of smaller players boasting one of the sector’s rarest commodities – new mines.
After two decades without a big discovery, the $18 billion diamond mining industry will need fresh resources to feed a growing consumer appetite for the elusive stone, industry forecasters predict.
They say demand has been boosted by marketing aimed at convincing couples in China and India that diamonds are forever and single women to treat themselves to a right-hand ring.
Global consumer demand for diamond jewelry is forecast to grow at 4 to 5 percent annually, to $31 billion in 2018 from $25 billion last year, Anglo American Plc-owned De Beers said in a presentation last month.
De Beers, the world’s biggest diamond producer by market value, has also said it expects global supply to decline after 2020, with demand outstripping supply in the next 10 years.
BMO Research forecasts rough diamond prices will increase 5-7 percent annually from 2015 through 2017, helped by solid retail sales.
That outlook contrasts with sinking prices for commodities ranging from oil to iron ore, which have forced natural resource companies to scale back production and exploration.
Only a few new diamond mines are due to open in coming years, including junior-backed developments in Canada and Firestone Diamonds Plc’s Liqhobong mine in Lesotho. Russian state miner Alrosa also plans a handful of new operations.
Stornoway Diamond Corp, which is building Quebec’s first diamond mine, was worth just C$120 million ($105.21 million) in April when it secured nearly C$950 million in financing.
The mine, which starts commercial production in 2017, is expected to produce 1.6 million carats annually.
“We were the litmus test for whether or not the diamond supply and demand thesis … was a good investment,” said Chief Executive Matt Manson.
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