Although it may be several months before Dia Met Minerals (TSE) and BHP Minerals Canada release further news from their Lac de Gras property in the Northwest Territories, some analysts say the time is ripe for thick-skinned speculators to move back into the diamond market.
“The play dies without news and it’s languishing right now,” says Richardson Greenshields’ David James. “I certainly regard this quiet market as a buying opportunity.”
Shares of most of the companies exploring for diamonds in the Northwest Territories have fallen sharply since June 21, when the Dia Met-BHP joint venture
announced positive results from its winter drilling program at Lac de Gras.
Analysts believe the setback began with a wave of profit-taking followed by further selling as investors anticipated a prolonged Dia Met news drought. A subsequent shake-up in the gold and junior oil sectors spread to the speculative diamond market, eroding share values even more.
Dia Met closed at $41 on July 9, down from a pre-release high of $67. “This is not uncommon in even the best mining developments where the share price declines after the exciting exploration stage, continuing through the more mundane development and construction stage, then recovers as production approaches,” says John Hainey of Canaccord Capital.
Next year, the Dia Met-BHP joint venture plans to take at least one 5,000-tonne sample from its diamond-bearing kimberlite pipes — a program which may involve sinking a decline.
Other key diamond players whose shares took a hit recently include: Aber Resources (TSE), down $1.35 to $3.90, and SouthernEra Resources (TSE), down $1.50 to $7.25. Their share prices had recovered to $4.10 and $8.25 respectively by presstime.
Some investors worry that the 18-month diamond rally may finally be over. But many analysts argue that even if Dia Met has settled in a narrow trading range for the short term, the speculative appeal of many of the satellite diamond players has actually improved. They caution, however, that only those with strong stomachs should be dabbling in the volatile market, which is sure to encounter further dips.
“My view is that the current period is a setback in a long-term play that continues to have a great deal of running room ahead of it,” says Robert Bishop, editor of the Gold Mining Stock Report.
He says further news from DHK Resources’ Tli Kwi Cho pipe is forthcoming. James adds that the Humpy Lake area, west of Lac de Gras, is also heating up.
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