DIAMOND MARKET OVERVIEW
The polished market in India is strong for off colour and other ranges. Healthy demand is also being reported for 3 carats and below in commercial colours, with steady demand for better colours. Traders said larger goods of 5 carats and larger were seeing strong price resistance, as rough in this range has shot up causing a squeeze on manufacturing margins. Whilst brisk trading is being reported in India, outside India, polished dealers are becoming more cautious. Some are holding off buying goods at higher prices amid concerns about speculative trading in the rough market. Reports of a bankruptcy filing in Hong Kong by an Indian diamond wholesaler later in the week also added to more cautious sentiment. Meanwhile, the main PolishedPrices index opened slightly higher on Friday at 115.45 points, compared 114.62 at Monday’s opening.

ROUGH MARKET
There were no signs of the rough market slowing down over the past week, as frenzy buying continued. Traders reported a surge in premiums on DTC boxes during the January sight. DTC reportedly raised prices by around 3 - 5% on average, considerably lower than expectations. Some traders quoted premiums of over 40% on certain boxes in the secondary market, other boxes carried premiums of 10 - 20%. Premiums on Russian boxes were quoted in the area of 5 – 10%. The frenzied trading in rough, exemplified by the fact that apparently most of the DTC sight was sold for profit by phone prior to the sight, is said to be mainly driven by speculation and there is a growing concern that the rough market is heading for a seemingly inevitable correction. Traders pointed at “manipulation”, during the previous week’s BHP Billiton spot tender, claiming prices were pushed up in speculation of a large price rise from DTC. This didn't happen, with overall a decidedly modest DTC increase and no change in the better qualities.  As a result, there is a large amount of expensive goods in the market, as prices have been based on the BHP hike. The DTC sight was said to be in the area of $500 million, but this is excluding goods sold outside the regular allocation, or ‘ex plan’. There are assumptions that the level of Russian goods coming on to the secondary market will be substantially higher than previous months.

CORPORATE AND EVENTS
BHP Billiton said diamond production was higher than the December 2008 half year and quarter due to an increase in ore processed and the full ramp up of the Koala Underground (Canada) mine which contains a larger proportion of higher value carats. Half year 2009 production at its Canadian operations totalled 1,540,000 carats, a 13% increase on the December 2008 half year. Output for the December 2009 quarter was up 28%, compared to the December 2008 quarter at 760,000 carats. "Production continues to be influenced by variability of ore sources due to the mix of open pitand underground mining," BHP Billiton said in a production update.

Gem Diamonds, which shut its Indonesia mine and part of its Australian operations as diamonds prices slumped, said in a trading update as the market has rebounded, Reuters reported. “The recovery in sentiment in the rough diamond market and resultant recovery in rough diamond prices through 2009 has been impressive, even though prices are still below the 2008 highs,” CE Clifford Elphick said. Analyst Louise Collinge at Evolution Securities said the firm showed solid operational performance. “We believe that Gem offers low risk exposure to the diamond market, and we retain our buy recommendation and our 301 pence target price,” she said in a note. The average price per carat for rough at its flagship Letseng mine in Lesotho doubled to $2070 in December from $1017 in the first quarter of last year, the report said. At its Ellendale mine in Australia, the company slashed output of lower quality gems and sold 312,450 carats last year, down 42%, but managed to boost the sales price per carat by 25% to $232, it said. Last month, Gem Diamonds signed a long-term deal to supply fancy yellow diamonds from Ellendale to a subsidiary of high-end jeweller Tiffany & Co. The company said it had $113 milion in cash and no debt, so was well placed to take advantage of improved market conditions.
“Gem is also continuing to assess ways of further enhancing the performance of its producing assets and of assessing other opportunities in light of the improvement of the rough diamond market,” Elphick said.

Tahera Diamond Corp has put its Jericho diamond mine and related assets in Canada's Nunavut territory up for sale, miningweekly.com reported. The company has set up a website for interested parties, and will be conducting site tours next month, it said in a statement. Proposals should be submitted by March 1 and the final settlement of a purchase-and-sale agreement will likely take place in early March. The company is targeting a closing date of March 30. Jericho was Canada's third diamond mine and the first to be built in Nunavut. Tahera opened the mine in 2006, but the company struggled to turn a profit, hampered by a stronger Canadian dollar versus the US dollar, rising input costs and ongoing operational and production setbacks, the report said. The company sought bankruptcy protection in January 2008 and the mine was put into care-and-maintenance in June that year. Before it closed, the Jericho mine produced 786,00 ct of gem-quality diamonds, including more than 1,100 stones greater than 10 ct, said the report.
A new economic assessment study was completed this month, and is available on the website.The sale also includes Tahera's 50% joint venture (JV) with De Beers on lands overlying the diamondiferous Muskox kimberlite complex and 75% of a JV with Kennecott on lands encompassing the diamondiferous Anuri kimberlite complex. Both prospects are also in Nunavut, said the miningweekly report.