Commodities
Diamonds and precious stones
Finally, it seems a little more positive sentiment is gently diffusing through the diamond industry at the moment. A lot of it emanating from the Hong Kong show (admittedly not the main show, that’s in Sept, but still important nevertheless) as the demand outlook improves, notably in china. Large stone demand, as noted by Gem, has firmed in recent weeks, both as a function of optimism and (unfortunately) lower sales of exceptional stones, when compared to this period in recent years.
However, a Christian pastor in Sierra Leone has been reported as discovering a 706ct diamond in the week (not 709ct as reported). Sadly the stone is far from gem quality, but at least the stone will be sold for “the benefit of the community and country”. Good luck to them I say.
Precious metals
Hmmm, I could rattle on about Auntie Janet and the reaction in precious metals during the week, but to be honest, a lot of readers here had a similar view: Expectations for more than 3 rate rises in 2017 had gotten too optimistic.
My personal view is that whilst improving (undeniably) absolute growth is not exactly surging whilst there also remains a small matter of debt load and affordability plus the view that some inflationary pressures are those more prevalent in a stagflationary environment…
To be honest, our star economist Mr French knows infinitely more that I on this and much more, I would recommend a coffee with him.
Anyway, remember my commentary on the crypto- upstart the other week? I can resend if you wish
Well, last week, as the computer programmers managed to push fresh air to a record $1,327 per thingydodah, the SEC decided to deny the Winklevoss twins’ Bitcoin ETF proposal, the price collapsed to below $1000 before rallying back over $1200.
But beware, Chinese regulators are set to announce a ruling that means Chinese Bitcoin exchanges (>95% of all trades) comply with current banking and money laundering regulations.
Company announcements/news/meetings:
Polymetal* (LON:POLY), (Buy): Big initiation note published and appointment as broker
Polymetal is possibly one of the largest precious metal producers many investors have not considered. But, we believe Polymetal offers a sector leading growth profile, an efficient approach to geographically challenged, high-grade resources as well as being a market leader in POX plant operations recovering gold from refractory ore. We believe the low cost nature of Polymetal's "hub" operations coupled with further resource development and an increased dividend pay-out policy are more than sufficient reasons for investors to reappraise the Polymetal investment case.
We initiate with a Buy recommendation and 1192p target price and would recommend meeting management when possible.
*We have also been appointed corporate broking advisor to the company.
Gem Diamonds* (LON:GEMD), (Buy): FY results
Gem Diamonds full year 2016 results have carried the full weight of the Ghaghoo impairment within what has been, if we are honest, a disappointing year. We continue to believe that Gem can continue to tick off our three catalysts to regain investors' confidence in 2017
1. Ghaghoo closure (C&M)
2. Cost rationalisation, waste stripping optimisation
3. Evidenced based improvement in large stone recoveries
To these points, the analyst presentation contained details of improvements to the current long term mine plan at Letšeng as well as confirming the sheer effort placed in understanding the geology of Letšeng better.
My personal view is that there is much more to come from the cost saving initiatives and mine plan optimisation efforts being undertaken and that maybe, these advances could have been better presented, if not for the full year results being released at the same time (and obvious headlines from the impairment charge).