De Beers holds sales volumes down

Brendan Ryan | Fri, 05 Mar 2010 12:14

[miningmx.com] -- DE BEERS increased some of its rough diamond prices during the latest sight held in mid-February, but the group is still holding back on sales volumes.

That’s according to RBC Capital Markets analyst Des Kilalea, who estimated the size of the February sight at about $530m. This brings the total for the year to date to $1.1bn.

De Beers markets diamonds to the trade at 10 sights held in London during the course of the year. The next sight is scheduled for between March 22 and 26.

Kilalea pointed out the $1.1bn total is much higher than for the comparable period of 2009. However, this “is still the second-lowest two-sight total in our records since 1999.

“This indicates De Beers’ approach to a still-fragile market, and also that it is running its mines at rates of output lower than two years ago.”

Kilalea said: “With stronger demand and improving liquidity in cutting centres, De Beers appeared to have increased some of its prices – mostly in the lower end, according to diamantaires.

“In addition, it seems the premiums at which the sight boxes (the name given to the boxes in which the rough is delivered) traded post sight were muted, compared with the January sale.

“The litmus test for the rough market will come in the next two to three sights, with Russian producer Alrosa claiming sales in January and February totalling around $700m and indicating that it will maintain a higher rate of sales than in 2009.

“At this stage we would expect De Beers to sell a similar amount at the next sight, with a first-half total in the region of $2.25bn and an annual total of about $4bn. “

Overall, Kilalea said the strength in the diamond market was continuing “though at a more muted pace than in the second half of 2009.

“We expect rough price increases to be tempered somewhat in the near term, though with De Beers and Alrosa showing restraint we do not anticipate any major weakness to develop.”