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Weekly Market Report

DIAMOND MARKET OVERVIEW
The shut down of India’s diamond sector for the Diwali holidays, coupled with high polished inventory levels in the main cutting centre India, has raised the level of caution in the wholesale market. Prices have been on a downward trend for some time.  Most in the trade are waiting for the end of year sales season in the US and China’s New Year festivities to clear the backlog in polished inventory and allow prices to rebound. Meanwhile, in the retail market, J.C. Penney Co. reported deeper losses, highlighting the troubles at US department stores battling with competition from online stores and the ability to keep up with fast changing consumer trends. Meanwhile, the polishedprices index ended the week down, opening at 116.41 on Friday, from Monday’s opening at 117.10

ROUGH MARKET
The main diamond producers have stepped in with measures in response to the weak market conditions in rough offering lower volumes and allowing clients to leave goods on the table. De Beers reportedly saw a number of deferrals. A few rough boxes were refused, according to some sighholders. This follows negative premiums on De Beers’ boxes traded in the secondary market. Alrosa has loosened the amount clients are required to purchase under their contractual arrangements. According to Bonas, a leading diamond industry consultancy firm, Alrosa last month requested their clients to take up to 55%, while during this month’s sale the Russian state company requested they take up to 70%. A lot of buyers are believed to have struggled to get to the 70% this month. Overall, diamond companies, large and small, have reported a squeeze in profitability for some time, which could backfire on producer sales in the next few months. In particular with the increased production of new mines, such as Mountain Province coming on to the market.
 

COPORATE AND EVENTS

The pressure on Petra Diamonds’ balance sheet was turned up a notch at the close of the first quarter after net debt came in at $613.8m – higher than expected owing to an absence of sales from Williamson, the firm’s Tanzania mine, miningmx.com reported. The Tanzanian government blocked the export of a parcel of diamonds because it thought Petra had undervalued the goods. Petra placed a value of $14.8m on the goods versus the government’s valuation of $29.5m. It was explained to the Tanzanian government that its Diamonds and Gemstones valuation agency was responsible for valuing the diamonds. Exports have since resumed but no sales were booked for the period, said the miningmx.com report. Petra said in a first quarter trading update that it was negotiating with the government to get release of the outstanding goods, the miningmx.com report said.

De Beers Group’s rough diamond production for Q3 2017 increased 46 per cent to 9.2 million carats in line with the higher production forecast for 2017, reflecting stable trading conditions as well as the contribution from the ramp-up of Gahcho Kué in Canada.

Namdeb, a 50/50 joint venture between the Namibian government and Anglo American’s diamond unit De Beers, plans to close four mines by 2022 in the southern African country, a Namibian newspaper quoted a union official on as saying, Reuters reported.

Indian resources conglomerates Adani and Vedanta are considering bidding for a $9 billion diamond project in the country that was abandoned by global miner Rio Tinto this year, according to multiple sources with knowledge of the matter, businessinsider.com reported. The central state of Madhya Pradesh was likely to invite bids in the first week of November to explore the deposit, which is estimated to hold around 32 million carats of diamonds, a senior state government official said, according to the businessinsider.com report.

De Beers Group announced that Gareth Mostyn, Executive Head of Strategy and Corporate Affairs, has decided to leave the business to join the Church of England as Chief Finance and Operations Officer. Gareth joined Anglo American in 2008 as Head of Corporate Finance before moving to De Beers in 2012 as Chief Financial Officer, joining both the Executive Committee and Board. In 2016 Gareth became Executive Head, Strategy and Corporate Affairs. Bruce Cleaver, CEO, De Beers Group, said: “Gareth has been a central part of De Beers’ success during the last six years, and a trusted partner to me. The Church is an important part of Gareth’s life, and I know he will be an important part of the Church’s future. We wish him every success and thank him for all he has done for De Beers.” Gareth will leave De Beers in early 2018. An announcement regarding his successor will be made in due course

The Namibian Sun quoted Mineworkers Union of Namibia Oranjemund branch chairperson Mbidhi Shavuka as saying that the union would talk to Namdeb to keep workers employed for as long as possible, the Reuters report said. The mines affected are Elizabeth Bay Mine, which will be shut down at the end of 2018, Daberas at the end of 2019, Sendelingsdrift in 2020 and the main one, Southern Coastal, in 2022, Shavuka said, according to the Reuters report.

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