Saw This morning, No Fault of Namdeb, but this ain't looking good!
"Diamonds to plunge 30%
Jan 14 2009 19:00
David McKay
Johannesburg - The outlook for diamond prices in 2009 is "very poor" with analysts forecasting the price could drop by up to 30% and that it will not recover until 2010.
"I wouldn't be surprised if prices drop by more than 30%," says Des Kilalea, an analyst at RBC Capital Markets, an international corporate and investment bank. "There will be no material recovery in 2009," he says.
A Johannesburg analyst expects prices to fall between 15%-20%. "Prices aren't easy to predict, but I expect it to remain flattish throughout 2009," he says.
In 2007, total diamond production worldwide was 160m carats with an estimated value of $14bn. SA contributes 12% of overall production by value.
The US recession is a significant threat to the diamond market because that country accounts for half of the market. Diamond cutters are building up debt because there are no credit options available to them. This makes them reluctant to buy additional stock.
On the rough diamond supply side, miners have built up a surplus and are now cutting back on production.
The Toronto and Johannesburg-listed diamond junior, BRC DiamondCore,is the latest mining company to announce it would scale back production. "I expect DiamondCore to close down its SA operations completely this year and focus on its prospects on the DRC," says Kilalea.
De Beers 'to suffer most'
Rockwell Diamonds said it would extend its year-end shutdown by four more weeks in January owing to weak market conditions. Kilalea says Rockwell is likely to restart all its operations by the end of January, except its unprofitable Wouterspan mine.
"De Beers is going to be hurt the most, since it mines the most diamonds," says Kilalea.
It was, however, difficult to make blanket statements about alluvial juniors, which dig for diamonds in rivers, says Kilalea. Consolidation was possible.
"The juniors who are producing diamonds at the moment, such as Rockwell, Namakwa Diamonds and Petra Diamonds, are likely to survive the year.
"The ones that are still developing and exploring are just consuming cash without making any money." It is these juniors that are likely to merge with other mining operations in the year ahead, says Kilalea.
Although alluvial juniors mine some of the highest-quality diamonds, prices will be weak due to low demand, says Kilalea. "Quality diamonds are only used in jewellery, which is still a market driven by consumers."
Bill Champion, MD of Rio Tinto Diamonds, which is earning a 60% stake in BRC DiamondCore's Congo operation, was positive about diamond prices in the future, according to an RBC Capital Markets presentation.
"Long-term diamond industry fundamentals suggest that the aggregate level of diamond demand will exceed supply, resulting in sustained price growth over the next decade."
Not good at all....
Same thing happening to platinum & gold... share price drops... huge impact on market index figures.... image031
Like said its going to be an interesting ride ... I think we must remember that what goes up must come down and visa versa once the down is over maybe people will this time learn from mistakes ( maybe I'm being too hopefull here but yes maybe ) ... the sad thing is the casualties along the downward path ... I recall many years ago in the 80's when John and I suffered financially for many years after PW's rubicon speech ... the rand plummeted to the pound , dollar , DM etc ... his business was import indent agency for luxury goods from europe .. the market effectively dried up in SA ... his earnings plummeted ... no salary increases for years ...what kept the business ticking over was the Dingler tobacco business and local agencies ... wholesalers crashed , it was not nice ... I had to take on the extra load for many years .. incurring debt along the way ... that was just to keep things going .. a lot of personal plans were dashed ... but we pulled through ... I was schtum as to what the debt load was ... and managed it .. in fact my bankers were amazed at my cornered rat resilience .. and yes they stood by me ... it all slowly pulled together ... and yes things slowly changed for the better ... it also matters how one approaches things .. we never forgot to despite some financial hardship to be kind and generous to others in worse situation .. they say the wheel is round and yes it came back in good things ...
Hi everyone
Here in Aus they are laying off as well. Rio Tinto which has a major share in Argyle Diamond mines in northern Western Australia is laying off about 220 people from the mine and they are stopping production for 3 months as well.
The link is: http://www.theaustralian.news.com.au/story/0,25197,24913741-643,00.html
They are not laying off any of the "Indigenous workers".
Sound familiar?
Malcolm
Does that mean they laying off skills ?? what happens in upturn ?? have to hunt for skills again ??
I'll have a chat to that Mr Rudd person in Aus.
JA Sandy,
In 12 to 18 months time they will be raising sallarys and trying all they can to get back what expertees they can. ( SNAFU as usual)