Diamonds: A Glimmer of Contrarian Opportunity

Sitting quietly behind the curtain is a niche scientific consortium.

They’re a group called material scientists.

And remarkably, this poorly understood group is finding solutions to make today’s commodities in a lab!

That’s right, not mining, but growing them artificially in specialised manufacturing plants.

These scientists are modern-day alchemists.

And already they’re cracking the code on several important commodities.

Graphite, titanium, and magnesium are among the resources being artificially developed.

So, the first question you might ask is, do they present a risk to the miners?

For the moment, the cost curve for producing materials (artificially) versus mining them from the ground remains the main barrier to gaining greater market share.

Yet, over time, as science improves and costs decline, synthetic production for developing commodities may, in fact, become a risk to today’s miners.

Right now, one of the key barriers to synthetic production is energy costs, a critical hurdle that favours mining over lab-grown alternatives.

But over time, that could change.

So, what are the consequences?

As with any science sitting on the front edge, commercialisation tends to focus on the most profitable areas first.

Disruption has a cost.

Which is why the science of ‘artificial mineral development’ has already heavily woven itself into the most high-value product of all… diamonds.

Back in 2019, diamond miners laughed at the prospects of artificial diamond production replacing their business model.

At the time, lab-grown diamonds held a relatively minor share of the US engagement ring market, roughly 5%.

But today, almost half of all diamond rings are grown in a lab!

And that market share is likely to grow over the next few years.

In five years, lab-grown diamonds have breached the emotional moat that diamond miners, such as the industry giant De Beers, held around natural diamonds.

So, how did the synthetic market take market share away from diamond miners?

Simple…

It offered an identical product
for a fraction of the price.

Wholesale prices for a one-carat lab-grown stone have collapsed to somewhere between US$750 and US$1,000. That’s down another 14% year-on-year in early 2026.

The factories in China continue to build capacity.

The product keeps getting cheaper.

But given that the core appeal of diamonds lies in the mystique of rarity and scarcity, at some point, an abundance of lab-grown diamonds risks cannibalising itself.

Potentially flipping the appeal back towards ‘real’ diamonds.

But right now, the diamond mining industry is in shambles…

Anglo American is desperately trying to sell De Beers.

Anglo has already written down its stake in the company by roughly US$6.8 billion over three years.

Last year alone, De Beers posted an EBITDA loss approaching US$511 million. Production guidance for 2026 has been trimmed to 21-26 million carats.

Ready to snap up a bargain?

In a world where value is being placed on real things… hard assets…

Particularly those with tangible scarcity…

There’s a value angle here that could flip the bearish outlook on the diamond industry.

And that could start to take shape if a credible buyer steps forward for De Beers.

On the flip side, if the process of selling De Beers stalls or draws no serious interest, the diamond industry could be heading towards permanent demise.

Unlike other commodities, diamonds are a tough investment opportunity to crack. This is a niche market, with limited opportunities and a peculiar supply-and-demand dynamic.

Diamonds are not driven by typical economic conditions that affect more ‘normal’ commodities like copper or aluminium.

It’s driven by consumer emotion.

That kicked off way back in 1947, when De Beers launched one of the most iconic advertising campaigns ever; the legendary “A Diamond Is Forever” initiative.

Led by copywriter Frances Gerety, the campaign transformed diamonds into an ultimate symbol of everlasting love and an essential requirement for engagement rings.

But will that still be the case for natural diamonds in future? We’ll have to see.

Either way, the diamond market certainly hits the mark as a contrarian opportunity to watch.

When a sector looks finished and sits on its knees, that can be the best time to buy.

Until next time.