Industry News
Analysts Give Poor 2009 Outlook for Rough Diamond Prices
18/01/2009
The outlook for diamond prices in 2009 is "very poor" with analysts forecasting the price could drop by up to 30% and that it will not recover until 2010, miningmx.com reported.
"I wouldn't be surprised if prices drop by more than 30%," Des Kilalea, an analyst at RBC Capital Markets told miningmx.com. "There will be no material recovery in 2009," he says.
A Johannesburg analyst said he expects diamond prices to fall between 15%-20%. "Prices aren't easy to predict, but I expect it to remain flattish throughout 2009," he said, according to the report.
In 2007, total diamond production worldwide was 160 million carats with an estimated value of $14 billion. South Africa currently contributes 12% of overall production by value, the report said.
The Toronto- and Johannesburg-listed diamond junior, BRC DiamondCore,is the latest mining company to announce it would scale back diamond production. "I expect DiamondCore to close down its South African operations completely this year and focus on its prospects on the DRC," said Kilalea.
Rockwell Diamonds said it would extend its year-end shutdown by four more weeks in January owing to weak market conditions. Kilalea says Rockwell is likely to restart all its operations by the end of the month except its unprofitable Wouterspan diamond mine.
"De Beers is going to be hurt the most, since it mines the most diamonds," Kilalea said.
It was, however, difficult to make blanket statements about alluvial juniors, which dig for diamonds in rivers, said Kilalea. Consolidation was possible.
"The juniors who are producing diamonds at the moment, such as Rockwell, Namakwa Diamonds and Petra Diamonds are likely to survive the year.
"The ones that are still developing and exploring are just consuming cash without making any money." It is these juniors that are likely to merge with other mining operations in the year ahead, Kilalea told miningmx.com.
Although alluvial juniors mine some of the highest-quality diamonds, prices will be weak due to low demand, says Kilalea. "Quality diamonds are only used in jewelry which is still a market driven by consumers."
Bill Champion, MD of Rio Tinto Diamonds, which is earning a 60% stake in BRC DiamondCore's Congo prospects, was positive about diamond prices in the future, according to an RBC Capital Markets presentation.
"Long-term diamond industry fundamentals suggest that the aggregate level of diamond demand will exceed supply, resulting in sustained price growth over the next decade.”
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