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RBC Diamond Conference Reflects Strong Industry Fundamentals

May 25, 2011 6:30 PM   By Rapaport News
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RBC Capital Markets  hosted its 4th Annual Diamond Conference at The Savoy in London on May 24. The conference, taking place against a background of growing rough and polished diamond demand and tightening rough supply conditions, brought together senior executives from leading diamond mining and marketing companies, including De Beers, Harry Winston Diamond Corporation and Petra Diamonds.

Opening the conference, Patrick Meier, head of European investment banking at RBC Capital Markets said: “RBC retains a positive stance on the longer term fundamentals for rough diamond prices. While the production growth is expected to be slow or flat, diamond jewelry demand from emerging economies such as China and India is showing strong signs of growth. This will benefit the industry as a whole and, in particular, companies that are in production or close to production.”

Des Kilalea, analyst in global mining research at RBC Capital Markets, added: “Rising rough diamond prices will benefit producers, but producers must also be vigilant on increasing costs arising from higher diesel, power and labour prices. While there could be a measure of diamond price consolidation over the summer, we expect the trend in prices will reassert itself, particularly as prices of polished diamonds are moving upwards. In the medium term, we do not see any major threats to the upward trend in diamond prices.”

Speaking at the conference, Bob Gannicott, chairman of Harry Winston Diamond Corporation, said: "Last week we announced our exclusive relationship with Diamond Asset Advisors, who are in the process of establishing a polished diamond investment fund. The fund represents an innovative and efficient way for us to support our luxury brand growth objectives by enabling us to source up to $250 million of polished diamonds without making additional demands on our working capital. With a 40 percent ownership in the diamond reserves of the Diavik Mine we are happy to defer the diamond price exposure in our retail inventory to investors in return for the extra diamond supply that they provide us.”

Johan Dippenaar, chief executive of Petra Diamonds, commented: “At a time when the industry is witnessing the emergence of a significant supply / demand deficit in the rough diamond market, Petra Diamonds offers an exceptional growth profile for investors wishing to gain exposure to this positive outlook. With the acquisition of the Finsch mine expected to close in the near future, Petra’s portfolio will soon comprise eight producing diamond mines and we have a core objective to grow annual production from around one million carats to over five million carats by 2019.  We are now preparing to take the company to the next level with our anticipated move from AIM to the main board of the LSE later this year."

Stephen Lussier, chief executive of Forevermark and executive director for De Beers Group, added: “By the end of the decade, we believe China and India will represent a market that is equal in size to the U.S. The key though will be effective marketing.  To fulfill its potential, Chinese demand must move from the concept of owning one diamond to the multi-owning diamond consumer that drives sales in the mature markets today.  That takes new marketing initiatives, at a time when investment by the competitive luxury goods sector is accelerating.  In India, we need to strengthen the emotional brand platform for diamonds to ensure that, as the global luxury goods players enter India, jewelry and diamonds have a clear point of difference and consumer attachment, so we don’t lose market share.”

Other companies sharing insights at the conference included Firestone Diamonds, Gem Diamonds Limited, Lucara Diamond Corp, Namakwa Diamonds Limited, Shore Gold Inc. and Stornoway Diamond Corporation.

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