Industry endures weakening demand for gems

Johannesburg – The diamond industry is emerging from its weakest period of the year amid low demand for the commodity, exacerbated by the Indian de-monetisation programme.

Trading has been quiet due to Jewish and Indian holidays.

Last November, India announced the biggest-ever demonetisation exercise by abruptly withdrawing Rs500 (about $8) and Rs1,000 notes from public use in a bid to clamp down on fake currency, terror funding and corruption.

This resulted in a cash crunch.

Firestone Diamonds, which operates a majority stake in the Liqhobong Mine in Lesotho, this week reported that this and the overall market environment had seen a combination of oversupply and the previously reported de-monetisation programme in India, a major buyer of diamonds.

“In addition, the summer months are traditionally the quietest time in the rough selling season,” the company stated.

It however expected market conditions to improve in the medium term.

Nonetheless, the United Kingdom-based company reported that production for the quarter had been stable as it ended the quarter slightly above all its anticipated production targets.

A total of 195,330 carats were sold in the quarter including Liqhobong’s second $1 million stone, a 45-carat clean white stone.

The sales this quarter achieved an average value of $69 per carat, yielding proceeds of $13,5 million.

Since commencement of production in the last quarter of 2016, Firestone has sold all 505,706 carats recovered, for $41,3 million, at an average value of $82 per carat.

“While the previously announced average value per carat was somewhat disappointing this is reflective of the combination of the lower than expected occurrence of better quality diamonds recovered during the (last) quarter, the widely reported current market conditions where sales are weaker in the finer sizes and weaker demand due to the time of the year,” said Stuart Brown, Chief Executive Officer.

Another diamond miner, De Beers, announced the value of rough diamond sales at $370 million dollars for cycle 8, 2017 (provisional). This is down from $507 million from cycle 7 and from $494 million in the eighth cycle in 2016.

Bruce Cleaver, CEO of the De Beers Group, said the company offered fewer rough diamonds for sale in Cycle 8, reflecting the concurrent timing this year of the sight sale with the closure of polishing factories in India and Israel for the observance of religious holidays.

“Sales were in line with expectations, at what is a seasonally slower time for rough diamond demand,” Cleaver said.

De Beers is the world’s largest diamond producer by value, with mining operations in Botswana, Canada, Namibia and South Africa.

In its latest trade update, covering July 1 to October 20, 2017 Petra Diamonds Limited, announced revenue fell 17 percent to $78,7 million.

Petra noted seasonal weakness in the diamond market due to a number of religious holidays that many clients in the midstream were observing.

In addition, production during the quarter declined 4 percent year on year to 1,05 million carats, mainly due to a planned reduction in output from two of its mines in South Africa, the company said.

Labor disruptions in September, which have since been resolved, impacted run-of-mine production by approximately 60,000 carats.

The United Kingdom miner reported rough-diamond prices fell 3 percent on a like-for-like basis during the quarter, and by a further 2 percent.

There were no sales from Williamson in Tanzania due to a parcel of diamonds from the mine being detained by the government. They were seized in August over a valuation disagreement.

Petra has since received authorisation from the government to resume diamond exports and sales.

“Petra continues to engage with the government in order to reach a satisfactory solution with regards to the first parcel of diamonds,” it stated. – CAJ News

October 2017
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