Tuesday, March 15, 2011

Rough Diamond Prices May Gain 25% This Year on ‘Voracious’ China, Gem Says

Rough diamond prices may surge more than 25 percent this year driven by “almost insatiable” demand from China, India and the U.S., Gem Diamonds Ltd. (GEMD) said.

“Most people in the industry continue to be surprised by the voracious appetite from the Chinese consumer for diamonds,” Chief Executive Officer Clifford Elphick said in an interview. “I would be surprised if we don’t achieve plus 25 percent.”

De Beers, the largest diamond miner by sales, said last month it may raise output by 21 percent to full capacity by the end of 2012 to meet “extraordinary” demand from China and India. Global prices of rough, or unpolished, diamonds gained 26 percent last year, surpassing pre-recession highs, according to data compiled by WWW International Diamond Consultants Ltd.

The U.S. remains the biggest market for diamond jewelry, buying about 38 percent of the total last year, De Beers said.

“Prices have continued to rise substantially,” Elphick said by phone. “Demand is almost insatiable. The American consumer is coming back with much greater confidence, Chinese demand is extremely strong and India demand is very strong.”

Price gains are also underpinned by a long-term decline in output as the world’s largest mines are exhausted.

Gem, based in London and operating in southern Africa and Australia, said in a statement today full-year net income rose to $20.2 million, from $15.5 million as prices increased. It estimates output of 300,000 carats this year, up from 257,641 carats last year, and 500,000 carats by 2013 on expansion of Lesotho’s Letseng mine and development of a new Botswana mine.

De Beers said last month demand from China and India gained by 25 percent and 31 percent respectively in 2010, and forecast that by 2015 China, Hong Kong, Taiwan, India and the Gulf would account for almost 40 percent of global demand.

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