A Diamond in the Rough of Diamond Stocks

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Diamond stock performance hasn’t been the greatest over the past few years. However, there’s an expectation that diamond stocks will experience a rise in the future and there is one in particular that is recovering diamonds in record amounts. 

In 2020, things did not look well for the diamond industry. The pandemic affected both the US and Chinese diamond market, which makes up 10% and 15% respectively of global demand.

There is a lot of time between the exploration stage and the commercial production stage during which the price of a diamond stock can fluctuate greatly but the shareholders of diamond companies that find mineable diamonds in large quantities can benefit greatly. 

Lucapa Diamond Company Ltd. trades on the Australian stock exchange under the symbol LOM.  Its current market cap is around $52.5 million AUD and its trading at around .06 per share. 

Lucapa Diamond Company (ASX: LOM) is a niche diamond producer with high-value mines in Angola (Lulo) and Lesotho (Motahe).  Between the two mines they have produced 28 +100 carat diamonds to date, and two of which were a 404 carat D-colour Type IIa stone, and a 215 carat D-colour Type IIa stone. 

The trend of all diamond stocks affected by the global currencies are sensitive to the U.S. dollar. A fall in the value of the dollar creates a better financial environment for diamond mining businesses. 

The purchasing power of a currency is the amount of goods and services that can be bought with one unit of the currency. 

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For example, one U.S. dollar could buy 10 bottles of beer in 1933. Today, it’s the cost of a small McDonald’s coffee. In other words, the purchasing power of the dollar—its value in terms of what it can buy—has decreased over time as price levels have risen and about 20% of all U.S. dollars in the money supply, $3.4 Trillion were created in 2020 alone. 

Lucapa Diamond Company (ASX: LOM) intends to separate itself from its rivals or 95% of the diamond industry, bringing to market only the best gemstones available. Since re-opening following the six-month COVID-19 suspension, Mothae has shown its quality with regular recoveries of large and high-value diamonds leading to run-of-mine diamond prices above US$1000 (about A$1300) per carat for the second sale running.

Considering the declining US Dollar and under the low-interest-rate environment in China, the wealthy upper-class consumers and investors want to hold on to something more tangible, with high quality in mind. 

On top of that, Chinese affluent buyers are eager to buy such gemstones for personal and financial reasons. With global wealth and commerce gravitating toward the Asian market, the high-end diamond space is rapidly becoming a no-brainer investment category, and Lucapa is on the forefront of quality.  A diamond in the Rough. 

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