[miningmx.com] — ROUGH diamond prices have now stabilised after falling
from the highs reached in June, Petra Diamonds said in an interim trading update on
Wednesday.
“Petra’s direct observation is that the market stabilised in December 2011 and, going
into 2012, the company expects this trend to continue,” said CEO Johan Dippenaar.
“This is demonstrated by the high level of interest in Petra’s first tender of the year –
which is currently underway – as well as anecdotal evidence and feedback from
Petra’s client base concerning current global demand for rough diamonds.
“In the short term, global economic conditions may continue to cause some volatility
in rough diamond pricing, but it should be noted that demand from Asia and other
emerging markets is continuing to grow strongly and is lessening reliance on the
major US market.
“The long-term fundamentals of the industry are compelling; whilst supply is forecast
to remain flat or may decline, demand for diamonds is expected to continue to rise in
both established and new markets as wealth and consumer spending increase.”
However, Numis Securities analyst Andy Davidson described the rough diamond
prices achieved on sales by Petra in the six months to end-December as
“disappointing” and well below the guidance initially given by the company.
He said the average prices of $128/carat for diamonds from Cullinan and $129/carat
from Finsch were also well below Numis’ own forecast of $150/carat.
“The long-term looks safe on production growth and strong diamond fundamentals
but the short-term outlook is of concern,” Davidson said.
“We are likely to reduce our near-term earnings forecast and target price on this
update but, with shares trading at around 0.4 times our current net asset value, we
retain our positive outlook.”
In reply to questions on an investor conference call, Dippenaar said he expected the
Chinese, Indian and Middle Eastern markets combined would match the current size
of the US market within three years.
He also said the successful integration of the Finsch mine meant that Petra was on
track to hit its production target for financial 2012 of more than two million carats,
and also remained on track to reach the stated production target of more than five
million carats by financial 2019.
