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Rough diamond market sound - De Beers
Allan Seccombe
Posted: Tue, 14 Oct 2008

[miningmx.com] -- DE BEERS, the world’s largest supplier of rough diamonds, believes the prospects for that market are sound, despite calls from the World Federation of Diamond Bourses that producers limit the amount of rough they put onto the market.

“We are firmly of the opinion that rough diamond prospects are sound, despite the economic downturn,” De Beers said in an e-mail, responding to queries about it reaction to the WFDB call.

“We have seen healthy demand for DTC diamonds throughout the first half of 2008, which has supported sustainable price growth; we anticipate closing this year with prices above those of 2007,” said De Beers, which is 45% owned by Anglo American.

RBC Capital Markets analyst Des Kilalea said in a recently published research report that “after two years of strongly-rising prices, the party is over for diamonds – at least for the next year or two.”

Kilalea reported, following a visit to the key diamond cutting and trading centre of Antwerp, that “boxes” of diamonds bought at De Beers’ September sight were trading at discounts of 5% to 7%.

“This is possibly the first time in 10 sights that the boxes have traded at discounts as, in a rising price environment, the boxes have been trading at premiums,” he said.

Kilalea quoted Antwerp diamantaires predicting falls in the prices of better quality and investment category diamonds of between 20% and 30%.

WFDB president Avi Paz said diamond producers should curtail the number of rough diamonds they are selling in this time of global economic turmoil.

"The quantity of rough diamonds that is marketed worldwide greatly affects the stability of the industry, and in particular the industry's global bank debt,” Paz said.

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“The mining companies can enhance stability at this point in time by reducing the volume of rough diamonds they are supplying to the market,’ he said.

“Such action is imperative and necessary not only for the diamond industry, but also the rough producing countries, the global banking system and the diamond mining companies themselves."

Petra Diamonds, which appears to be firmly on track to top its target of one million carats in 2009, plans to increase output to two million carats in just four years. Petra has acquired or is finalising the acquisition of four operations owned by De Beers but deemed non-core by that company.

“Set against an annual global supply of some 168 million carats (source Kimberley Process Certification Scheme), Petra is targeting production of over 1 million carats in the year to June 2009 and has no plans to reduce this output,” Petra said.

Another diamond producer, who declined to be named, called the WFDB statement "preposterous", suggesting its members better control their debt levels.

De Beers said it was making its decisions on supply and pricing based on the needs of its sightholders.

“Any decisions we make on sales and pricing are informed by the needs of both our sightholders and our producer partners and, in this highly competitive market, we will continue to carefully balance these interests going forward in light of prevailing markets conditions,” it said.