The Price For Natural Diamonds Grows Again

It seems the world is slowly overcoming the economical crisis with some countries still fight it. Yet luxurious sport cars, pieces of art and of course diamonds are still in high demand despite unstable economic climate. Before this the diamonds were already in the list of out-of-the pocket expenses for most of the customers, but after the recent increase in prices natural diamonds look like an unattainable dream for mere mortals. This is a kind of a rule on jewelry market: the growing demand cause the increase in price. But to what extend it will rise? Nobody knows, but below there is the analysis of prices for diamonds for the previous years and prospects for 2012:

Global economic uncertainty is still likely to cause volatility in the rough diamond market in the first half of 2012, but prices should improve in the second half, the chairperson of London-listed Gem Diamonds said on Tuesday.

Roger Davis said overall prices for rough diamonds ended last year about 16% stronger than 2010, after the market began to stabilise in the fourth quarter, resulting in a marginal strengthening of rough diamond prices in November and December.

He said some manufacturing centres restocked at the beginning of 2012, following increased demand for diamond jewellery during the Thanksgiving and Christmas retail season in the US. This was reflected in the continued strengthening of prices at the company’s Letšeng mine, in Lesotho, and Ellendale diamond mine, in Australia.

Davis stressed that the longer-term prospects for diamonds remained “excellent”, as demand for rough and polished diamonds would begin to outpace supply, with limited new diamond mines coming on stream and global jewellery demand picking up.

“We have maintained our focus on exploiting key opportunities for growth. In line with this, we advanced two major development projects during the year that will see us unlock considerable value from our asset portfolio,” he stated.

In November, the Gem Diamonds board approved a $280-million production expansion plan, Project Kholo, at the Letšeng mine, that would lead to a virtual doubling of the mine’s mining and treatment capacity when the project is completed at the end of 2013.

CEO Clifford Elphick said through the successful implementation of Project Kholo the company aimed to increase the carats produced at Letšeng to between 180 000 ct/y to 200 000 ct/y by July 2014. This was expected to result in yearly revenue for Letšeng exceeding $500-million.

Gem Diamonds’ Ghaghoo mine, in Botswana, was currently being developed and Phase 1 of construction of the underground mine was progressing well. It is anticipated that Phase 1 would be completed on time and on budget with the first production expected in 2013.

The company’s full-year results ended December showed that Letšeng had an operational record year of production with carats recovered up by 23.6% to 112 367 ct and the recovered grade up by 35.0% to 1.62 carats per hundred tons from 2010. Included in the mine’s 2011 recovery was the 550 ct Letšeng Star, sold in October into a partnership arrangement for $16.5-million in the rough, with expected further upside in due course.

At the miner’s Ellendale operation, the first half of 2011 was operationally challenging owing largely to an unusually protracted rainy season. However, the last quarter of 2011 saw a significant improvement in performance. Elphick said the increase in carats mined at Ellendale was also a strategic priority for the company.

In line with the company’s improved sales strategies, it increased its participation in downstream cutting and polishing for own and partnered goods, where a total of 1 624 ct of Letšeng’s rough diamonds at a market value of $68.6-million were extracted for the full year 2011.

“This initiative remains at the early stage of its implementation and we believe this strategy can add significantly to the returns achieved for shareholders in the coming years,” Davis said.

Set against a backdrop of continued strong and growing diamond demand from the US, China and India and constrained supply, particularly at the high-quality end of the market, Davis believed Gem Diamonds was wellpositioned for growth and he was confident that the company’s strategy would deliver favourable returns for shareholders in coming years.


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