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Diamond & Specialty Minerals Summary for January 20, 2023

by Will Purcell

The diamond and specialty minerals stocks box score on Friday was an upbeat 131-69-110 as the TSX Venture Exchange rose seven points to 623. Not so fast, Mr. Pessimist: Just when it looked like rough diamond prices would continue to fall, Paul Zimnisky's global rough diamond price index rallied 0.6 per cent, ending a two-week, 1-per-cent slide.

Nevertheless, prices remain 12.5 per cent lower than the high they reached in mid-February of 2022. The good news is that the 1.5 per-cent-per-month decline last spring and summer has flattened to half that rate since early October. Current rough diamond prices are 19 per cent higher than in mid-January of 2018 and are 15 per cent higher than 10 years ago -- percentages that highlight the bleak years between 2013 and 2018, when rough diamond prices relentlessly edged lower despite never-ending optimism that better days were just ahead.

Rosy price predictions continue to flourish. Vladimir Putin's not so special military operation triggered massive Western sanctions against most things Russian, including Alrosa, the country's state-controlled diamond miner. That was supposed to send rough prices soaring, but with Mr. Putin's three-day war now nearing its first anniversary, with over a thousand of Russia's tanks having popped their tops like a jack-in-the-box and with Russia's casualties now greater than the size of its invading army, there is no end to the war in sight -- or, therefore, to the inflation that has caused rough prices to decline.

Worse, much of Alrosa's rough diamond production is still leaking out of Russia into friendly hands -- or at least into hands wanting to make a quick buck. Further, production of synthetic diamonds continues to grow, with manmade tinkling merrily into gaps in the available supply of traditional, mined diamonds.

Jay Grdina's Arizona-based, Nasdaq-listed Adamas One Corp. (JEWL), down eight U.S. cents to $2.42 (U.S.) on 166,000 shares, touts itself as "a high-tech company that leverages proprietary technology to produce high-quality, single-crystal, lab-grown diamonds for jewelry, and diamond materials for industrial uses." Last week Adamas, which uses its own chemical vapor deposition methodology and equipment to produce lab-grown diamonds, moved to protect and expand its current intellectual property portfolio.

Adamas, a new public company, began trading barely a month ago after closing a 2.45-million-share initial public offering at $4.50 (U.S.) each. The eager new shareholders have lost ground since then, but Adamas's nearly 20 million shares carry a market value of almost $50-million (U.S.), suggesting investors are warming to the notion of synthetic diamonds.

Mr. Grdina, Adamas's chairman, president and chief executive officer -- and a fellow with a most interesting past -- says that his company will be busy this year expanding its production facility, conducting further research and development, and pushing its sales and marketing efforts ahead. First up, he cheers, will be "opening our current facility, which houses 12 diamond growing machines, to full capacity." Once at full capacity, the facility will be capable of producing about 3,000 carats of rough diamonds per month, he says.

Adamas applauds Mr. Grdina as having "spent most of his prior career in various aspects of manufacturing, production, distribution and marketing of multiple products and categories" -- a dollop of vagueness that dances around Mr. Grdina's past work as a pornographic actor under the pseudonym Justin Sterling. Through much of the 1990s, Mr. Grdina invested in, wrote, directed and starred in a series of adult films and by the early 2000s, he was living in a Scottsdale mansion with his porn-star wife, Jenna Jameson.

They divorced in 2006, and Mr. Grdina then gradually transformed into a businessman and stock promoter. In the early 2010s he popped up as the CEO of NOHO Inc., a publicly-traded "lifestyle beverage company." The lifestyle in question involved alcohol excess, as NOHO's best-known beverage was a marketed as a hangover prevention drink. Unfortunately, while NOHO is still around, its once $3 stock now can be had for two-100ths of a U.S. cent.

Adamas's stock may be lagging as well, but Mr. Grdina may be making headway in the synthetic diamond market -- assuming he and his crew can get their dozen diamond growing machines running full tilt. The company had no revenue until last year, but in 2022 it sold $1.79-million (U.S.) of diamonds. Unfortunately, while it cost barely $600,000 (U.S.) to make those gems, Adamas's ledger was drowned in a gusher of red ink stemming from nearly $10-million (U.S.) of selling, marketing, administrative and salary expenses.

Stephen Barley's African Energy Metals Inc. (CUCO) was up one cent to eight cents on 567,000 shares before a Wednesday halt, called so the company could reveal it is acquiring the Falea uranium project in Mali from Govind Friedland and Daniel Major's GoviEx Uranium Inc. (GXU). GoviEx will get $5.5-million for Falea: $500,000 in cash and $2-million in stock, followed by another $3-million when and if a licence covering Falea is renewed.

The key part of the project is the Falea permit, one of three permits that make up the project. (The two others are Bala and Madini.) Falea hosts a seven-year-old resource estimate listing 6.88 million tonnes indicated at 1.15 per cent uranium oxide and another 8.78 million tonnes inferred at 0.69 per cent, good for a total of over 30 million pounds or uranium oxide. GoviEx, originally called Govi High-Power Exploration Inc., also applauded the resource as containing worthwhile amounts of copper and silver -- and there have been hints of gold as well.

GoviEx, up two cents to 22.5 cents on 580,000 shares today, was pleased. Mr. Major, its CEO, applauded the "strategic deal" as one that allows his shareholders to maintain a significant interest in Falea while his company pursues other projects. Meanwhile, Mr. Friedland, executive chairman, was mum about the deal.

Yes, Mr. Friedland is the son of Robert Friedland, who went from stock promoter to billionaire a quarter century ago, selling his Voisey's Bay nickel strike in Labrador to Inco. The younger Mr. Friedland had been CEO of then private GoviEx from 2006 until 2012 and has been executive chairman since then.

He has been focused on the company and West African uranium, so he might appear to be more of a one-trick pony than his father. Not entirely so, however, as since 2016 he has also been a director of Cordoba Minerals Corp. (CDB: $0.495), which is pursuing Colombian copper and gold, and since 2018 of Sama Resources Inc. (SMA: $0.78), which is chasing nickel and copper in Ivory Coast.

GoviEx has been holding its own since it went public in 2014. Its stock got as high as 60 cents in the fall of 2021, thanks in part to word of modest gold assays from Falea, but it has been on a downswing since then.

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