Resource funds have had a tough run so far this year as panic selling hit the gold market in April and mining stocks tanked, but diamond miners have managed to emerge relatively unscathed, with many stocks surging this year, prompting investors to increase their exposure to the sector.
Neil Gregson, manager of JPMorgan's Natural Resource Fund said diamond mining stocks had managed to escape the "whipsaw" of gold equities and some exciting things were happening in the sector.
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"It is very hard to talk about benchmark price of diamonds, but on average rough stones prices fell by about 15 percent last year. So far this year– certainly a few months ago when we added they were trending up 5 percent or so," said Gregson.
"We have had less exposure to gold then we have had for eight or nine years. We reduced our gold equity holdings at the beginning of the year – before the sell-off in April, and were looking for areas to deploy that money and one of those areas was diamonds."
Gregson has added to his position in South African firm Lucara Diamond Corp. and Canadian miners Mountain Province and Dominion.
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Lucara's Toronto-listed stock is up 27 percent so far this year, while Mountain Province's shares are up 33 percent and Dominion is up 8 percent. Compare that to the major gold miners: Barrick gold's shares are down 36 percent and Newmont Mining's shares are down 25 percent.
Gregson said demand and prices for diamonds had held up well because of a recovery in the U.S. and long-term demand in China for engagement rings.