Shares watch: Demand for diamonds grows

Petra found a 232 carat diamond in its Cullinan mine in South Africa

Petra found a 232 carat diamond in its Cullinan mine in South Africa

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WITH a growing number of Chinese citizens becoming wealthy enough to buy jewellery, demand for diamonds is growing.

This year leading diamond producer De Beers said it expects global demand for gems to rise by 4.5 per cent, fuelled by demand from emerging markets. Demand is also being helped by improved credit conditions in India, the world’s biggest diamond polishing market.

Against that backdrop, quoted producers Gem Diamonds and Petra Diamonds have both seen strong growth in their share prices.

This month Gem Diamonds announced the opening of the Ghaghoo diamond mine in Botswana, which will be the first underground diamond mine in the country, a move the company described as a significant milestone. Analysts at FinnCap have a buy rating on the shares with a 261p price while Panmure Gordon raised its target on the shares to 256p recently, compared to last week’s price of around 210p.

Shares in Petra Diamonds were also in demand last week after it announced a major find from its Cullinan mine in South Africa.

Petra said the 232 carat ­diamond is of “exceptional size and clarity”. Although the company did not provide an estimated sale price for the diamond, analysts at Westhouse believes it could be worth up to $15m.

The broker upped its recommendation for the shares from “add” to ‘buy’ after the announcement.

Westhouse has a 230p target price on the shares which were trading at around 200p at the end of last week.

Analysts at Numis, who place a similar valuation on the stone, were also bullish about the find. “The extra revenue would go straight to the bottom line,” they noted.

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