Understanding Diamond Juniors: Part Two Of A Series
Investors interested in the diamond junior sector should set out with an awareness of three key facts: the process of taking a mine from exploration to production is long, expensive and has an extremely low success rate. But those who select the right companies at the right times can reap rewards that are worth the risks. Making such selections is best done with an understanding of exploration, a diamond junior's first step on the path to production.
The journey from prospecting to production can take six to 10 years, according to a diamond industry report from Bain & Company. For a greenfields exploration project, the probability of finding a commercially viable diamond deposit is about 1 to 3 percent, the report also states.
Few companies set out with the aim of making new discoveries. Those that do are the riskiest plays. It is more common to find diamond juniors pursuing projects in areas that have already been identified as likely to have diamonds. Some companies employ a strategy of exploring near-existing mines, but even that is not a fail-proof plan.Diamond exploration process Most diamonds are produced from kimberlites. The initial exploration process begins with a company trying to identify drill targets that will reveal an economic pipe. That is when geophysical work, such as soil sampling, till sampling, airborne electromagnetic surveys and gravity surveying, comes in. Once a prospective target is found, there is always the risk that what lies below the surface is not a kimberlite. There is also the risk that the kimberlite may be barren. In either case, there is no hope of a reward and the company would need to pursue another target.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV