Photo: Paragon Diamonds

Photo: Paragon Diamonds

Philip Manduca: Money-Printing, Diamonds & Gold

Issue 125, May 2015

If large diamonds were looking for a vocal proponent, they have one in Philip Manduca. Europe's economy is acting like a heroin addict, he says, gold has lost its purpose and an investment in big stones is an “incontrovertible runaway trade.”

Philip Falzon Sant Manduca, who sold his hedge fund in 2007, has built a 21 per cent stake in London-listed Paragon Diamonds and the company made a dash for the big diamond market this week, paying $8.5m for the mothballed Mothae project in Lesotho, where trial mining was halted 2 years ago.

With the exception of Firestone Diamonds' Liqhobong project, Lesotho's diamond pipes battle low grades, rendering them uneconomic, were it not for a smattering of very large stones, but Manduca says X-ray technology has transformed the industry, allowing miners to isolate the most valuable rock, pushing less material through smaller plants.

He plans to have Mothae and Paragon's nearby Lemphane deposit up-and-running within 4 to 5 months, incrementally expanding production and pulling 80 per cent of revenue from less than 20 per cent of carats mined.

On the ground, he has Dr. Stephen Grimmer (a former Beny Steinmetz lieutenant), but Manduca's own interest in diamonds is top-down, as a new currency for politically-affiliated money and as a rebellion against both money-printing and gold.

“One of the biggest instruments out there, which should be protecting people from paper debasement is gold and unfortunately, because of gold's density-to-value, it's become non-portable. Gold has effectively become an electronic banking instrument, you can only move it through the banking system and as a consequence of that, it's not fit-for-purpose.”

Even a small move from the $70 trillion gold market into diamonds, where output is limited to around $15bn per annum, will cause a “seismic increase” in prices, he says. “If this was a foreign exchange market you'd buy the currency all day long.”

Backed by equity and loan notes from a Dubai-based group, International Triangle General Trading, Paragon does indeed plan to buy more. When assets become available, “we will buy them,” Manduca says, dismissing diamond mergers.

“There are hospital cases out there, but companies that are weak are generally weak for a good reason. When Sony and Ericsson put their mobile phone businesses together, just because you join them together, doesn't turn them around, so I don't think mergers are the way to go. We're acquisitive.”

“There are hospital cases out there, but companies that are weak are generally weak for a good reason.”

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