Diamonds: becoming rarer

Diamond miners who protest at being bunched together with other precious metal and resources mining houses have a point. Sparkler demand relies almost entirely on rich consumers, while demand for less eye-catching commodities - even gold - depends on many end-users and investors.

Alrosa of Russia is the world's biggest producer by volume, but De Beers is the biggest by value. Former Anglo American chief executive Cynthia Carroll's decision in 2011 to lift Anglo's stake in De Beers to 85 per cent has paid off handsomely. De Beers' $1.4bn of earnings before interest and tax in 2014 made it Anglo's second-biggest contributor after iron ore/manganese, which flagged on weaker industrial demand.

Diamonds are much less prone to the supply shocks that have hit iron ore or copper prices. Nor does massive production come on stream when prices rise, as it has for those commodities. New projects tend to be small. There have been no big new diamond finds in the past 15 years. If anything, output is predicted to decline gently. Even so, diamond prices have slipped recently.

While industry barriers to entry are high, low valuations in the listed sector (in De Beers' case, Anglo) have made it attractive for investors. But enthusiasts have to believe that consumers in the US and the emerging middle classes of China and India will sustain demand. About half the couples who marry in China's big cities buy rings with diamonds. It is down to the producers to convince them that the rocks are a rare joy that will only become rarer.

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