Stronger diamond market sets the scene for a potential re-rating of smaller miners like Karelian, BlueRock, Gem and Lucara

(proactiveinvestors.co.uk) - Around one-third of the world’s diamonds are produced by Russian mining behemoth Alrosa. In particular, Alrosa specialises in the small stones that go around a larger one in the centre of a ring. The world’s foremost diamond producer, De Beers, doesn’t produce much in the way of these smaller stones, and according to data cited recently by Bloomberg, prices of these have gone up by around 20% this year. In the old days, in times of market imbalance, De Beers would just have released more stones from its fabled stockpile and a correction would have occurred forthwith. But after the collapse of the Soviet Union and in the face of Alrosa’s rise to prominence, De Beers recognised that it could no longer control the diamond market in the way it used to, and that tying up capital in a stockpile was no longer a good use of shareholders’ funds. Or at least, that’s what they said at the time. Now, though, even with De Beers mines producing at full tilt, there’s no chance that the company will be able to make up the shortfall caused by the ostracising of Alrosa from world markets.