London Private-Equity Firm Bets on 16 Sep 2015 14:59
Sept. 16 (Bloomberg) -- Private-equity manager Philip Manduca is so convinced of the inflation-beating value of diamonds that he shrugged off reports of an alleged army uprising to buy part of a mine in Lesotho.
“We want diamonds,” Manduca, chief executive officer of Titanium Capital, said in an interview in London. “And the way you get stones at the lowest value point is to go to source.”
Titanium last month announced it was investing about 2.65 million pounds ($4.3 million) for 29 percent of Paragon Diamonds Ltd., which is digging a mine in Lesotho. The southern African mountain kingdom is the home of the Letseng mine where Gem Diamonds Ltd. unearthed a 603-carat gem in 2006, the largest discovered this century.
Rough-diamond prices have climbed 75 percent in the past five years as the U.S. recovered from the financial crisis and Chinese demand increased, according to data compiled by WWW International Diamond Consultants Ltd. Manduca, who says he’s switched his focus from gold to diamonds, sees the gems as a hedge against a range of global economic scenarios.
“If there’s escalating inflation out there diamond prices will do well,” said Manduca. “If there’s continued monetary debasement out there, diamond prices do well. If there’s sustained or increased global conflagration, diamond prices do well. I’m not sure there are too many cases where diamonds do not do well.”
Seeking Investors
Manduca is seeking investors to help fund the development of the Lemphane mine, which is scheduled to start production next year. He isn’t concerned by an alleged army coup in Lesotho last month, which left the former British protectorate embroiled in a political crisis.
“There’s always going to be some political movement,” Manduca said. “There’s a shuffling of the deck, there’s no danger of civil war.”
Lesotho’s coalition partners have agreed to hold elections earlier than scheduled in 2017 in an attempt to ease the political crisis. Lesotho was also urged to lift its suspension of parliament, following a meeting of the region’s leaders in the South African capital, Pretoria, yesterday,
Gem prices have jumped about 14 percent in 2014, according to data compiled by WWW International, as production at some of the world’s biggest mines declines with the depletion of more accessible stones near the surface. De Beers’s output from Botswana, the location of its biggest mines Jwaneng and Orapa, dropped to 22.7 million carats last year from 33.6 million carats in 2007, according to the unit of Anglo American Plc.
Global Output
Global output of 128 million carats in 2012 was 27 percent lower than in 2006, according to Bain & Co., which projects rough diamond demand to climb to $26 billion by 2023 from about $15 billion in 2012.
Gem Diamonds has climbed more than 40 percent in London trading this year after
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