Global demand for diamonds will continue to outstrip production in 2014, according to broker Charles Stanley Securities.
In a bullish overview of the diamond sector, Charles Stanley said polished prices will continue to follow the trends seen in 2013, with demand for smaller, commercial goods rising as retailers manage lower inventory levels and focus on boosting asset turnover.
“We believe that mid-2014 may see a recovery in larger goods coinciding with the annual wedding season which, if the economic recovery continues, could be the strongest in years,” said analyst Kieron Hodgson.
There has been plenty interest of late in shares in diamond companies following a huge £136mln funding deal for Firestone Diamonds (LON:FDI) and the discovery of a rare 29.6 carat blue stone by Petra Diamonds (LON:PDL).
Paragon Diamonds (LON:PRG) and DiamondCorp (LON:DCP) both welcomed target price upgrades in the 52-page note.
The former, which is working towards mining diamonds from its 85%-owned Lemphane project in Lesotho, is upgraded to ‘hold’ from ‘reduce’, with a higher target price of 3.6p, (previously 2.4p).
Paragon recently acquired a processing plant to help it produce around 100,000 carats per annum.
Buy-rated DiamondCorp, meanwhile, is lifted to 11p from 10.1p as the Lace mine in South Africa moves towards production.
The broker is a fan of companies in or close to production and raises its target prices for Gem Diamonds (LON:GEMD) and Petra Diamonds accordingly.
The broker also kicked off coverage of coloured gemstones specialist Gemfields (LON:GEM) with a ‘buy’ recommendation and 41p target price (current price 35p), even though it digs up emeralds and beryls rather than diamonds in Zambia.
“We believe that Gemfields offers an unrivalled proposition for investors, providing exposure to the rapidly growing precious stone industry through a world class emerald mining operation, an emerging ruby operation and finally exposure to the prestigious luxury goods retail market, through the recovering Faberge brand,” said analyst Hodgson.