News

July 04, 2008

Vaaldiam Aims To Be South America’s Biggest Diamond Producer, But Investors Remain Resolutely Unimpressed

By Charles Wyatt

Nobody is going to fool themselves into thinking that the stockmarket is resilient at the moment, but even given that it’s strange to see that the share price of Vaaldiam, the Canadian-listed company that claims to be the biggest producer of diamonds in South America, has fallen by around 60 per cent to C31 cents over the past year. It was a year in which the company brought the Chapada and Duas Barras diamond mines into production, in March and September 2007 respectively. Chapada is producing at a rate of between 33,000 and 37,000 carats per year at an average value of US$400 per carat. The mine is profitable, as cash costs of production are US$290/carat. Duas Barras has a rather wider range of production, but it will produce at least 60,000 carats per year. These are smaller diamonds worth an average of only US$165 per carat, but cash costs of production are only US$65 per carat.

By May of this year the two mines had sold US$16.8 million worth of diamonds and both are debt free. Vaaldiam Resources is therefore producing positive cash flow and is spending its cash flow on kimberlite exploration and development with the aim of getting production up to 500,000 carats per year by 2011. Under current market conditions a fall of 25 per cent in the share price would be acceptable, but 60 per cent is ridiculous. So do investors have a problem with the company?

It’s...