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By Avi Krawitz
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Posted: 05/15/08 11:56
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RAPAPORT... RBC Capital Markets hosted its annual diamond conference in London on Thursday and cautioned that diamond prices would continue to rise as demand outpaces supply.
“While the short-term outlook for consumer demand for diamonds is somewhat depressed, the longer-term outlook for purchases of diamond jewelry is good,” RBC global mining research analyst, Des Kilalea, said at the conference opening. “Newly emerging economies such as India and China, as well as the Gulf States, will augment strong potential off-take in the U.S.”
“However, the supply of newly-mined diamonds will not be able to keep up with this growing demand, which means the price of diamonds must rise, and in particular, prices of better quality diamonds,” he added.
Robert Gannicott, chairman and chief executive officer of Harry Winston Diamond Corporation, said he recognized the changing wealth trends in his company’s sales.
Gannicott recognized the same movements in wealth, and noted that the diamond market was free of stockpiles for the first time since the late 19th century, thus adding to the supply shortage.
He said Harry Winston was always looking for new sources of production but tended to stay away from politically vulnerable areas.
Rio Tinto Diamonds managing director, Bill Champion, negated the assertion that Rio may be looking to divest from the diamond sector, adding that the company was showing strong margins from the diamond unit, despite the decline in production at its three mines, Argyle in Australia, Diavik in Canada, and Murowa in Zimbabwe.
Champion said Rio was seeking new diamond mining opportunities in Africa where “greater politically predictability” was making it easier to look, and that it was investing in exploration in India, which should bear fruit by around 2013.
Other speakers included De Beers Group chief financial officer, Stuart Brown, as well as representatives from Kopane Diamond Developments plc, African Diamonds plc, BRC DiamondCore Ltd, Pangea Diamond Fields plc, Rockwell Diamonds Inc, Petra Diamonds Ltd, Stornoway Diamond Corporation, Vaaldiam Resources Ltd, Shore Gold Inc, Namakwa Diamonds Ltd and Firestone Diamonds plc.
The synthetic or ‘cultured’ market was also represented at the conference which Kilalea said offers a partial solution to rising demand in certain categories.
“With the supply of rough gems likely to fall short of forecast demand in the next five to seven years, synthetic diamonds represent an emerging and exciting new component of the diamond industry,” he said. “But they are no substitute for high-quality natural diamonds.”
“Synthetics cannot compete with natural stones in terms of emotional and intrinsic value. However they overcome the traditional challenges facing traditional mining such as locating new sources, long lead times to production, finite life of a mine, environmental and political risks,” he added.
Bryant Linares, president of Apollo Diamond Gemstone Corporation said he was confident synthetics would find its place in the market.
“I see Apollo as being akin to the California wine makers,” Linares said. At first, some would only drink Bordeaux but, in the end, California expanded the market for wine. I suspect the same will happen with man-made diamonds.”
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