Rough Diamond Sources and the Bumpy Road Ahead

A small rise in rough diamond prices means a great increase in producer profits, according to Stornoway CEO Eira Thomas, speaking on the second day of the Third Rough Diamond Conference taking place in Tel Aviv.

According to Dr. Jan Ketelar, a diamond mining consultant to Sierra Leone, mining profitably in the country is possible, as is polishing. Ketelar detailed the involved tax and royalty costs, put beyond the dry details, and he has in fact expressed an invitation to take part in building Sierra Leone’s diamond industry.

As the average price of the country’s goods has risen from $118.60 per carat (p/c) in 2002 to $234 p/c in 2007 and artisinal alluvial mining is declining, small polishing businesses are feasible – but only if connected to other businesses  such as jewelry manufacturing or tourism.

George Read, who told IDEX Online that his company, Shore Gold, believes there is at least one more world-class mining potential in Canada, told the listeners that his company does not have any marketing commitments for their rough production yet.

Official representatives of African producer countries Sierra Leone, Liberia, Botswana and Namibia discussed the opportunities their respective countries offer during the second session of the day.

DTC Managing Director Varda Shine drew particular interest, discussing scarcity in the market. She defined it as the difference between production and demand at the retail level. With gadgets such as Nintendo Wii and iPods posing a competition to diamond jewelry, Shine found fault in discounted diamond jewelry that costs the same, diminishing what she called the intrinsic value of diamonds. She pointed out that those who have kept prices high, have seen greater margins.

Shine urged market players to use service, marketing and understanding of clients’ needs as essential tools for improving business.

As for opportunities, Shine noted that Latin America, not just India and China, is an important and growing market.

Contrary to recent press reports, marketing spend, she contended, was not decreased in the U.S. but rather shifted to different strategy – focused more on men as buyers and calls to action.

Charles Wyndham, principal of Polished Prices and WWW Valuators, noted growing volatility in polished prices, starting since DTC’s Supplier of Choice was introduced in 2003.

He forecasted a 14 percent rise in average prices of polished diamonds in 2008 and a 10 percent rise in rough prices, with a dip near the end of year.