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Golden Saint joins the 'diamond club' at propitious time

City firm Investec reckons the diamond sector is at a major turning point, so the immiment launch of Golden Saint's ‘Diamond Club’ looks well timed.
Golden Saint joins the 'diamond club' at propitious time

As we approach the first anniversary of Golden Saint (LON:GSR) listing on AIM, the company is set to reap its first revenues.

The company is about to launch its ‘Diamond Club’ in the next few weeks that will see registered shareholders given the opportunity to buy gems directly from the Sierra Leone-focused diamond and gold exploration company.

“It’s a display showcase,” says Cyril D’Silva, Golden Saint’s executive chairman.

In the UK, where we are more accustomed to shareholder perks offering discounts on more mundane things such as entry to theme parks or a night in a hotel, the idea of being able to buy a cut-price (not to mention cut & polished) diamond is unusual, but D’Silva notes: “Loyalty programmes are very popular in Asia. Retailers, including jewellers, have them.”

The first batch of 107 diamonds going up for sale on the site will bring in some early revenues, in keeping with the company’s pragmatic philosophy of not chasing the pot of gold at the end of the rainbow.

“We’re bringing mining back to basics, concentrating on generating revenues before going for the blue sky potential,” D’Silva told Proactive Investors.

D’Silva is determined that Golden Saint will not be one of those binary play ‘death or glory’ companies, always promising a big payday down the road while, in the meantime, shareholders get diluted almost out of existence.

“The initial aim is to protect the investors, to avoid them getting diluted,” he says.

However, for those investors who do like a bit of ‘blue sky’, the company does offer the prospect of plucking the odd corker out of its diamond assets, especially as Sierra Leone does have a reputation for producing some of the highest class diamonds in the world.

“There is the potential of us finding a really big gem,” D’Silva said. Should that happen – and, of course, there are no guarantees - the plan is to enable shareholders to participate in the company’s good fortune through the payment of a special dividend.

In the meantime, diamond prices seem to be moving in the company’s favour. City firm Investec recently upgraded its price target for sector peer Petra Diamonds, after increasing its diamond price inflation factor from 2% per annum to 4%.

“Note that rough diamond price indexes are up 10-12% this year, implying that our 4% p.a. assumption is conservative,” the broker notes.

“We see the diamond sector as being at a major turning point, akin to that of the mining sector in 2003,” it added.

“The financial crisis hit the diamond industry particularly hard since it led to a cutting of credit lines to diamontaires and drastically reduced demand for stones, since the chain post the mine-gate is largely debt financed,” Investec opined.

In Investec’s view, the diamond market is set to move to deficit from 2016 as demand increases and new supplies fail to meet rising demand.

Backing up D’Silva’s view that the idea of a Diamond Club will be particularly appealing to Asian investors, Investec reckons diamond demand “looks set to be increasingly driven by the growing middle class in nations such as China and India”.

If supply does get tight by 2016, Golden Saint’s idea of cutting out the middle men might be replicated by rivals but in the meantime, the Diamond Club is set to be a unique selling point.

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