THE outlook for world diamond prices in 2009 is ‘very poor’ with analysts forecasting the price could drop by up to 30 per cent and that it will not recover until 2010.
‘I wouldn’t be surprised if prices drop by more than 30 per cent,’ said Des Kilalea, an analyst at RBC Capital Markets, an international corporate and investment bank. ‘There will be no material recovery in 2009,’ he said this week.
In 2007, total diamond production worldwide was 160 million carats with an estimated value of US$14 billion. South Africa contributes 12 per cent of overall diamond production by value.
The US recession is a significant threat to the diamond market because that country accounts for half of the market. Diamond cutters are building up debt because there are no credit options available to them. This makes them reluctant to buy additional stock.
On the rough diamond supply side, miners have built up a surplus and are now cutting back on production. The Toronto and Johannesburg-listed diamond junior, BRC DiamondCore, is the latest mining company to announce it would scale back production. ‘I expect DiamondCore to close down its South African operations completely this year and focus on its prospects on the DRC,’ says Kilalea.
‘De Beers is going to be hurt the most, since it mines the most diamonds,’ says Kilalea.
‘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, says Kilalea. – Miningmx.com
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