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Weekly Market Report

* The next Market Report will be published on August 13th.

DIAMOND MARKET OVERVIEW

Overall trading levels in the diamond markets were subdued due to the summer lull. Sentiment in the polished market remains cautious. Supply of polished has outpaced demand, resulting in high cutting centre inventory and tight liquidity. The recent bankruptcy of sightholder company Exelco has added to the underlying cautious mood.  The main polishedprices index ended the week lower, opening at 117.59 on Friday, from Monday’s opening at 118.28.

ROUGH MARKET

De Beers reported higher production levels during the first half this past week. The production hike came during a period of strong demand in the rough market. However, the euphoria seen in the first half has evaporated, with traders reporting sluggish market conditions. “The market has softened for rough and polished, margins are under pressure, not only in the manufacturing sector,” one large trader said.  In its production outlook, De Beers said its full year production guidance remained unchanged at 31 - 33 million carats, subject to trading conditions.

COPORATE EVENTS

Dominion Diamond Corporation and The Washington Companies, a group of privately held North American mining, industrial and transportation businesses founded by industrialist and entrepreneur Dennis R. Washington, announced that they have entered into an arrangement agreement under which an entity affiliated with Washington will acquire all of Dominion's outstanding common shares for US$14.25 per share in cash or a total equity value of approximately US$1.2 billion. The transaction represents a 44 percent premium to Dominion's unaffected share price of US$9.92 on March 17, 2017. The transaction marks the result of Dominion's review of strategic alternatives as previously announced on March 27, 2017, Dominion said in a statement.

Diamond production increased 36 per cent to 8.7 million carats in line with higher production forecast for 2017, reflecting stable trading conditions as well as the contribution from the ramp-up of Gahcho Kué in Canada, De Beers announced in a production update published this past week. For H1 2017, consolidated sales volumes were 19.1 million carats (20.0 million carats on a total 100 per cent basis), compared with 17.2 million carats (18.3 million carats on a total 100 per cent basis) in H1 2016. The average realised price of $156/ct in H1 2017 was 12 per cent lower than in H1 2016. This reflected strong demand in Sight 1 2017 for lower value goods held in stock at 31 December 2016, following a recovery from the initial impact of India’s demonetisation programme in late 2016, the company said in statement. The lower value mix was partially offset by a higher average rough price index, up four per cent, it said. Full year production guidance remains unchanged at 31-33 million carats, subject to trading conditions, De Beers said.

Alrosa mined two large raw diamonds with the weight of almost 110 carats and over 75 carats at its fields in Yakutia, press service of the Russian diamond miner said, Tass.com reported.  "A particularly large crystal with the weight of almost 110 carats was mined at Mirninsky Mining and Concentration Plant of Alrosa. A raw diamond with the weight over 75 carats was mined two days earlier at Aikhalsky Mining and Concentration Plant," the company said, according to the Tass.com report.

An EU court on Thursday July 20 upheld the bloc's freeze on the funds of two companies charged with trafficking in conflict diamonds and supporting armed groups in the Central African Republic, Reuters reported. In 2015, the European Union decided to block the European assets of Badica, a large diamond trading firm in the Central African Republic, and its Belgian unit Kardiam, the Reuters report said. The companies argued that the freeze was not warranted saying it was not sufficiently proven that they had supported armed groups by trading natural resources. The court rejected this view, according to the Reuters report. "By continuing to purchase diamonds from collectors, Badica and Kardiam necessarily provided support to armed groups," the EU's General Court said in a statement, according to the Reuters report.

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