Industry News
Namakwa Diamonds Opens Trading Office in Israel
15/01/2009
Shifts selling focus to polished goods as rough demand declines
By Avi Krawitz
Namakwa Diamonds, which has diamond mining and polishing operations in South Africa, has opened a trading office in Israel as part of its new strategy of focusing on selling polished diamonds during the current rough market lull. The company released a management report on Thursday explaining that the “disproportionate decrease in rough diamond prices relative to polished prices” has caused it to amend its diamond selling and beneficiation strategy.
As a result, it decided not to sell significant volumes of rough diamonds in the past three months, opting rather to cut and polish a “significant portion” of its inventory at its own facilities in Johannesburg, or through contractor polishers when appropriate. “Selling a higher proportion of its inventory as polished diamonds enables the company to realize higher prices and margins,” Namakwa noted in its report, explaining that the opening of the Israel office in December was in line with this initiative.
Namakwa reported that during the period from September 1, 2008, through January 12, 2009, prices on normal-run-of-mine rough diamonds under 5 carats produced at its mines fell by 20 to 30 percent, while “prices for its premium quality larger diamonds suffered more in relative terms.” In contrast, the company said it believes wholesale polished prices decreased by 10 to 15 percent during the period.
The decline in rough prices has affected the company’s mining operations, and forced it to conduct a strategic review of its operations in South Africa’s North West province. Following the review, Namakwa said it will likely place certain operations on care and maintenance while others "may be significantly reduced."
Namakwa has diamond development projects in South Africa, Angola, the Democratic Republic of the Congo (DRC) and Namibia, as well as a rough trading business and a cutting and polishing unit in South Africa. Its DRC project will be ready to start mining in the second quarter of 2009, but Namakwa said it will withhold launching the operation there until there is more certainty about diamond price levels.
The company reported that it produced 12,207 carats in its first fiscal quarter ending January 12, 2009, and that its beneficiation business sold 11,102 carats of rough diamonds in the period. As a result of its decision to withhold its rough diamonds, the company increased its rough inventory by $5.8 million to $55 million worth of diamonds.
In addition, Namakwa said it formed a joint venture with Swiss Gold DMCC, a gold bullion trading house in the Middle East and supplier of gold jewelry to there. The joint venture company will be called Swiss Diamonds and will be based in the ALMAZ Towers in Dubai. Swiss Diamonds will subcontract the manufacture of jewelry using Namakwa’s diamonds and sell it to the wholesale and retail markets. Swiss Diamonds will also sell individual diamonds and parcels of diamonds sourced from Namakwa.
Namakwa shares were trading up 2.56 percent at GBP 40 a share in afternoon trade on the London Stock Exchange (LSE). The company listed in December 2007 at GBP 184 a share.
Download the PDF document here (51 Kb PDF)
Email news alerts
Sign up HERE
This service provides you with all the latest important news, straight to your email.
Subscribe to 