Portugal: Energia (e Recursos Minerais) – II

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Preços (€/kwh) da electricidade doméstica em Portugal desde 1985 – dados DGEG (recolhidos no Observatório da Energia). Domestic Electricity prices (€/kwh) in Portugal since 1985 (data from the Observatório de Energia) 

One decade of ups and downs in rough and cut diamonds

Quarterly Zimnisky Rough Index.png

Indices.png

The last two decades have been a carrousel of emotions in the mining industry:

  • Oil and gold prices had steadily been growing since 2001. Oil spiked to maximum historical values in 2008 (and then crashed, to climb again for 3 consecutive years, plateau for 4 years, until mid 2014, crashing again, reaching nominal values of 2005, and recovering marginally since then).
  • Gold has had a more regular pattern, growing since to 2001 until 2011, maintaining a high plateau until the end of 2012, crashing until mid 2013, becoming relatively stable since then.
  • Polished diamonds have shown a much less volatile behaviour, with some ups in 2008 and 2011 (mimicking the markets’ general mood) but rapidly stabilising into a nominal stability (a slow real price decline).
  • Rough diamonds prices rose roughly 50% in nominal terms (as measured by the Zimnisky Rough Index) since 2007, a more subdued increase in real terms. The price increased in the 2009 – 2011 period, after which it stabilised until early 2015, after which it slowly declined until today.

Why are diamond prices less volatile than other mineral commodities’?
Why do rough and polished prices behave differently?
New deposits discovery and production capacity expansion seem increasingly difficult; why don’t diamond prices increase significantly in real terms?
Are there two different markets in diamonds?
What is the impact of new recovery technologies (XRT) in diamond markets?

Will discuss that in the next post. What is your opinion?

The oil and gold indices were calculated by just dividing the monthly gold average nominal price in US dollars by their price (nominal US dollars) in January 1980.

The Antwerp Diamond Index is a set of indices used to measure the price variation of five types of polished diamonds. The index is based on prices in US $ and gives the average price evolution on the Antwerp market of diamonds ranging in colour from exceptional white + to white and in clarity from LC to VS2:

  • 1 ct diamonds (1973 =100)
  • 1/2 ct diamonds (1973 =100)
  • A = Small Brilliant (1980 =100)
  • B = Melée (1980 =100)
  • C = 1/4 ct diamonds (1980 =100)

The Antwerp Diamond Index is maintained by the Diamond Office of The Antwerp World Diamond Centre (AWDC). To know more about AWDC and the Diamond Office , just visit their website: https://www.awdc.be/en/diamond-office.

The Zimnisky Global Rough Diamond Price Index was created to consolidate rough diamond price information and publish current respective price changes of rough diamonds on a weekly basis in the form of an index.  The intent of the Index is to track, analyze, and disseminate current aggregate rough diamond price fluctuations for use by a range of diamond industry participants.

The proprietary index methodology primarily incorporates price data from rough diamond transactions in the primary market, e.g. sales via long-term contract, tender, and auction by commercial miners. The Index also includes a minor sensitivity to polished diamond prices, given that miners utilize the polished market as a factor when determining contract pricing of rough. In addition, the Index includes a minor sensitivity to stand-alone diamond mining equities, as the relative liquidity that equities provide can imply the current profitability and revenue generation ability of diamond miners, which is directly influenced by the current rough diamond market.

Given the nature of natural diamond production, the variance in quality of stones produced, or the product mix, can impact global rough diamond prices on an average price-per-carat basis. The Index strives to represent as accurately as possible current price changes reflected in the average rough diamond transaction valued on a per carat basis in U.S. dollars. The Index value does not directly represent the price of a 1-carat rough diamond, but the percentage change in the average value of a rough diamond transaction relative to the initial Index value, at a given point in time.

The Index is based on an initial value of 100 using data starting on April 4, 2004. The Index is updated on a weekly basis, typically on Saturday. Retroactive revisions to index data are made on a quarterly basis typically after public miners release official quarterly sales figures.
(adapted from http://www.paulzimnisky.com)

To know more about the Zimnisky Global Rough Diamond Price Index, or obtain Paul Zimnisky’s insight on the diamond markets, check http://www.paulzimnisky.com.

USGS Tantalum report (just published)

Two years ago I was involved in a very interesting tantalum project in the Republic of Congo (Brazzaville) – photo gallery here. I have since then followed with attention this metal’s market news (and its idiosyncrasies, being one of the 3TG minerals – subject to control under the conflict minerals framework).

USGS just published a report on the evolution of this metal’s market and production structure and origin in the last 15 years. It’s well worth reading (thanks to USGS for publishing the report) – you can get it here.

Angolan currency looses value (- 37%) in the last year

The Angolan currency (Kwanza- Kz) lost 37% of its value (in USD) as a result of last year’s crude oil price crash. A carbon-dependent economy (with oil and diamonds being, by far, the country’s largest exports), Angola was hard hit by the evolution of oil prices in the international markets.

One USD was worth Kz 135,968 – average oficial interbank exchange rate in the period of 14 to 16 September 2015, compared to Kz 99 around one year ago. The informal (street) exchange rate reaches values over Kz 200 – Agência Lusa values cited here.

The impact in daily life is felt through increased inflation. International money transfers have also been affected.

In an ironical twist, with crashing international oil prices resulting in plummeting fiscal income, the Angolan Government was forced to cancel fuel subsidies, increasing gas prices at the pumps. In addition to escalating transportation costs, increasing fuel prices are especially grievous as virtually any house in Angola depends on generators for electricity, at least as a (frequently needed) backup to the public grid (unavailable in many regions or unreliable at best). This counter-intuitive effect compounded the inflation generated by the deteriorated exchange rate.

You may read more on this subject in this article (Portuguese).

Mineral commodities 2013 total mined volumes and values, average prices

Commodities 2013

Diamonds mined in 2013 total 14 bn USD. How do they compare with other mineral commodities?

Rather than using somebody else’s compilations, I prefer to check values published by (commodity) specialised international organisations or public companies (OPEC, World Gold Council, KPCS, USGS, etc.). After some work, I have arrived to the estimates presented in the table to the left.

Is the ranking surprising? Any obvious error on the table’s values? Comments and suggestions (always) welcome. Yes, reality changed a lot since 2013 (only 18 months ago).

Really? The price of diamonds collapsing?

No doubt the commodities have seen recently a sharp decline in price (do you remember oil at 150 US/bbl and gold at 1.600 US per oz or iron, or copper?). Yes, there are problems brewing in China (perhaps brewing is an understatement in face of the stock  markets sharp decrease of the last few days) and Europe stagnates at best (but anyway this was never a major diamond market) and the Middle East is suffering . On the bright side, the US has shown a solid growth.

I have just read a post by Ben Moshinsky at the Business Insider claiming “The price of diamonds is collapsing”. The main arguments used are anecdotal and as such can be easily contradicted, starting a never ending, fruitless argument. I don’t like the use of one sided view “analysis”, pushing a perspective (in this case, the end is coming) as the complete indisputable truth. I would like to see a complete analysis, a broad balanced perspective on available data ; isn’t that what we analysts are supposed to do?

Conflicting views

Yes, diamond markets face plenty of threats: synthetics (I have heard about this since I started working in the industry) and stiff competition form other luxury/high end product categories, especially younger generations). Yet, diamonds still holds an allure as a symbol of status and love. Yes, diamond markets will survive and thrive in the future.

DE BEERS’ ROUGH DIAMOND PRICES DECREASE

According to http://www.bloomberg.com,

De Beers lowered prices by about 3 percent, with bigger reductions for certain categories, at a sale this week in Botswana, according to the people, who asked not to be identified as the information isn’t public. The miner offered about $450 million of rough diamonds at the sale, the people said.

Full story here: http://www.bloomberg.com/news/articles/2015-05-06/de-beers-said-to-cut-diamond-prices-in-surprise-blow-to-anglo

Angolan diamond June sales up 20% – Vendas de diamantes angolanos aumentam 20% em Junho

The sale of Angolan diamonds in June increased 20% (when compared to May), reaching 117 MUSD (780 thousand ct, 156 thousand more than in May). According to the Angolan Government (MGM – Geology and Mines Ministry), the positive variation is due to a 32% increase in the production of the Catoca kimberlite mine (partly owned by Alrosa). The Catoca mine currently produces the bulk of the Angolan diamonds. Given the lower than average value of Catoca diamonds (compared to the average Angolan production), the average sales price declined from 156 in May to 150 USD/ct in June due to the larger Catoca share (in June compared to May).
The Angolan Government aims to increase the diamond production by 5% annually until 2015 (from 8.3 Mct, 1,100 MUSD in 2013).
(based on Macauhub, quoted by  http://www.angonoticias.com.
Venda de diamantes de Angola aumenta 20 por cento em Junho
28-07-2014 | Fonte: Macauhub, citado em http://www.angonoticias.com.
A venda de diamantes em Angola durante o mês de Junho atingiu 117 milhões de dólares um aumento de 20 por cento em relação a Maio, segundo dados do Ministério da Geologia e Minas.
O ministério revelou que Angola vendeu “mais de 780 mil quilates” o que representa um aumento de 156 mil quilates em relação às vendas de Maio.
Ainda de acordo com o ministério angolano o aumento das vendas é consequência do aumento em 32 por cento da produção de diamantes da mina de Catoca, considerada uma das maiores do mundo.
O aumento da produção levou a uma quebra nos preços de venda que passou de 156 dólares por quilate em Maio para 150 dólares em Junho.
A produção angolana de diamantes está avaliada em cerca de 8,3 milhões de quilates por ano, correspondendo a uma receita bruta na ordem de 1,1 mil milhões de dólares.
O Governo de Angola pretende aumentar a produção de diamantes em 5 por cento ao ano até 2015.