John Kaiser on Diamonds: Stock Picks, Synthetics and Prices

The 2015 Canadian Investor Conference, held in Vancouver from May 31 to June 1, wasn’t as busy as it’s been in previous years, but it still attracted some interesting companies and speakers. John Kaiser of Kaiser Research is part of the second camp, and he was able to take some time to talk with the Investing News Network about diamonds.

To start off he commented on the recent news that a group of major diamond companies — Alrosa (MCX:ALRS), Rio Tinto (ASX:RIO,LSE:RIO,NYSE:RIO), Dominion Diamond (TSX:DDC,NYSE:DDC), Lucara Diamond (TSX:LUC), Petra Diamonds (LSE:PDL) and Gem Diamonds (LSE:GEMD) — have created an organization aimed at supporting development in the diamond sector. One of the issues the organization will tackle is synthetic diamonds, and in Kaiser’s opinion, that’s definitely worth looking into.

“It is a serious concern because the technology to create gem diamonds just keeps getting better and better. And if you can produce a large, high-quality synthetic diamond that looks identical to a natural diamond, that could potentially destroy the diamond market,” he said. However, while that possibility exists, Kaiser pointed out that “diamonds are a marketing state-of-mind phenomenon, and the naturalness of [them] is a key part of the … mystique diamonds have that synthetic stones will never, never have.”

Kaiser also touched on the diamond price, which hasn’t fared particularly well thus far in 2015. On an encouraging note, he commented, “long term, if you’re optimistic about global GDP growth and believe that, say, 2020 and beyond India is going to finally get traction and start to imitate what China accomplished in the last 15 years, you’re going to see again expanding wealth and prosperity in the world” — that of course will likely mean good things for the diamond price.

Any uptick in the price will also likely be driven by diminishing supply as big mines come to the end of their lives. “There have not been any [major] discoveries in the last decade or so,” said Kaiser, “so there will be a decline in supply.” Looking at why discoveries have been so low, he noted that it’s partially because the cost of diamond exploration is so high — “that’s caused massive attrition amongst the juniors,” he said.

In closing, Kaiser gave an overview of some of the diamond companies he likes. They include Peregrine Diamonds (TSX:PGD), which he believes is “the most undervalued,” as well as Mountain Province Diamonds (NASDAQ:MDM) on the more advanced side.

Watch the video below for more insight from Kaiser.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

Related reading: 

John Kaiser: Diamonds Have a Positive Price Trend

John Kaiser’s Diamond Stock Picks