The one commodity that you can rely on: Diamonds
Dear Reader
It’s the most dangerous game you can play as an investor. You can be a novice. Or a trader in the pit of the Chicago Mercantile Exchange. And the story will be the same: If you are investing in commodities, at some point you are going to get burnt. Why?
Because you just can’t predict the price of a commodity. Every day the prices of animals, crops and minerals fluctuate on the market, sometimes wildly. It is a terrifyingly unpredictable market. And one that is regularly overtaken by manic speculation. But there is, in my view, one exception.
Diamonds. I think the future price of diamonds is in fact quite easy to predict. You see, while demands for diamonds is reasonably constant, supply is falling fast. At their current rate of production the world’s existing diamond mines can only satisfy the market for another twenty years. And the chance that major new mines can be found is miniscule.
That is why the Red Hot portfolio includes two diamond miners.......
The overlooked UK firm “perched on the pay-tap” of a multi-billion dollar industry…
(This article first appeared in Penny Sleuth on 6 August 2010. Penny Sleuth is an unregulated free e-letter written by Tom Bulford and published by MoneyWeek Limited)
One small, low-key British company could be about to use the “scarcity effect” to its great financial advantage.
What exactly are they up to?
Well, they’ve secured themselves two brilliant opportunities to cash-in on the rocketing diamond market.
One of the most in-demand materials on the planet.
According to the Diamond Price Index, the value of high-end diamonds has risen 59% since January 2006.
This is the “scarcity effect” all over again…
As the FT pointed out in April of this year, no major diamond discoveries have been made for about 20 years… and in the next 2 decades, a number of the world’s major diamond mines will be closing as their reserves run “dry”.
And in the coming years, demand for high end diamonds in countries like China and India could spike by as much as 50%.
That’d be like thousands of people desperately trying to squeeze through a doorway that keeps getting smaller and smaller.
According to De Beers, the world’s largest diamond producer, post-recession demand is way up, with India, USA and China driving a great surge in consumption.
Can you see the raw profit potential here? This little company could be on the verge of cracking open a brand new, glittering deposit.
One that could land them a mammoth income in the years ahead.
And today, you can buy into them before any of that potential has been realised.
Tapping the “scarcity effect” could earn this company tens of millions of dollars…
In my view, they’re sitting in a really great position…
For starters, they’ve bagged a very high-potential mine at the “throbbing vein” of the diamond industry – Botswana… where more than a quarter of the world’s diamonds come from.
If the deposit is as large as they expect, my early calculations suggest that – based on current prices – this one mine could earn them around $16m a year.
Think about it… if they could deliver a fresh deposit to an industry gagging for an influx of new material… and prices stay at current levels… it puts them in a potentially very lucrative position.
And on that basis alone, I was ready to take a punt...
But when I dug a little deeper, the story got even better!
You see, they have an ace up their sleeve…
They’ve very recently penned a deal to take on 300m tonnes of “tailings”.
Now, tailings are basically waste from industrial drilling that could contain “overlooked” diamonds.
And I predict that, in the longer-term, this second project could deliver earnings of $3-4m!
In my book, all that brimming potential makes this stock an irresistible buy.
Any investor who likes to get their hands dirty on risky, but potentially highly lucrative plays, should get clued-up on this right now.
Of course, you should remember that penny shares carry a bit of extra heat.
The prices can be volatile and because fewer shares are traded, they can sometimes be hard to sell. Mining firms, in particular, are pretty wild.
They could find less diamonds than they hope for, in both projects. And diamond prices could fall – that’s the nature of the markets.
But if you don’t mind the taste of danger, and can spare a little cash, this could be perfect for you.
So, what kind of profits could this sparkling little UK firm deliver?
Bearing in mind all the built-in potential of tapping a mega-rich sector…
I firmly believe this clever little firm could deliver early investors returns of more than 350% over the next year.
But should they uncover diamonds of the quality and quantity they hope, who can really tell what the biggest upside will be?
My advice? Don’t waste your time speculating about the exact figure.
See for yourself what a great opportunity this is.
Remember, I’m predicting a very satisfying payout for investors who get in early.
And I want you to be one of them.
Good investing,
Tom Bulford
For The Penny Sleuth
P.S . Make no mistake, this is one of the most exciting, high-potential stocks in my portfolio right now. And it’s in good company. Because I’m sitting on two more red hot, undervalued firms you can get in on right now…
- The up-and-coming eco-builder which could be poised to tap Europe’s infrastructure boom – yours now for just pennies!
- The dirt-cheap “robot” tech-firm that could be about to transform the global healthcare system!
I want you to be fully in-the-know before you make a move on any of these stocks. Just click on the below link to get access to all the important details!
(This article first appeared in Penny Sleuth on 6 August 2010. Penny Sleuth is an unregulated free e-letter written by Tom Bulford and published by MoneyWeek Limited)
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