DIAMOND MARKET OVERVIEW
Dealers are reporting healthy movement in polished with a firming in prices in many areas, in particular ranges up to SI-quality. The healthy demand situation being reported in the dealer market is however not reflected in the retail market where wholesalers say overall demand in the main US market remains slow. Meanwhile, traders will be looking for indications on diamond jewellery spending in mainland China during the New Year vacation which started on February 12. The main PolishedPrices index ended the week higher at 116.10 points, compared to Monday’s opening at 114.86.

ROUGH MARKET
According to some traders the rough market appears to be losing some steam, with the rate at which prices have been increasing slowing down. “Prices are not moving as fast,” said one trader in Antwerp. BHP Billiton saw another increase in prices at the February sale, though the increase was less than last month, with traders citing an average rise of 2 – 4%. One factor that could somewhat dent the sharp upward movement and cause premiums to soften are the quantities of rough currently on the market. According to some market players, there are still “serious” quantities of rough on the market ahead of the DTC February sight next week, and the Russian February sale later in the month.

CORPORATE AND EVENTS
De Beers moved to an underlying loss of $220 million in 2009 after underlying net profit of $515 million in 2008 while rough diamond sales tumbled 46% to $3.2 billion, Reuters reported. "The underlying results themselves are poor... but are better than we expected with EBITDA coming in at $654 million, 30% ahead of our estimates," said Liberum Capital in a note. Production slid 49% to 24.6 million carats and Penny said 2010 output was likely to rise to the "30s" of millions, according to the report. Anglo said it would report an underlying loss of $90 million from its holding in De Beers. De Beers contributes about 5% of Anglo's operating profit in the past two years, the Reuters report said.

De Beers’s ownership by Anglo American, the Oppenheimer family and the Botswana government will remain unchanged after its $1bn rights issue, Business Day reported. The news silenced speculation since the capital raising was first announced late last year that Anglo American could use the rights issue as an opportunity to raise its 45% stake in De Beers. The Oppenheimer family owns 40% and the Botswana government the remaining 15%, the report said. The rights issue is shareholders’ second recent contribution to support De Beers, which was battered in the first half of last year by a sharp downturn in demand for diamonds. In the first half of last year they lent De Beers $500 million, which the group said yesterday it had not yet used in full, it said. The new funds will enable De Beers to repay $1 billion of the $3,1 billion debt it owes to a syndicate of 22 banks. Half of that debt is due next month, but De Beers has negotiated to roll over $2 billion to 2012-13, Gareth Penny said.

BHP Billiton’s Diamonds and Specialty Products division reported an increase of 115.2% in underlying earnings (before interest and tax), to US$170 million for the half year ended December 31 2009, compared with the corresponding period. The earnings jump was mainly due to higher realised diamond prices and continued improvement in cost, BHP Billiton said in a statement. “Efficiencies at EKATI (Canada), lower exploration expenditure reflecting reduced diamonds exploration activities, also helped increased earnings, it said.

Rio Tinto’s diamond operations posted a loss of $68 million in 2009, compared with earnings of $137 million in 2008, mainly as a result of lower prices and lower volumes caused by the global economic slowdown, the mining conglomerate announced. Sales revenues from its diamond operations fell 46% to $450 million in 2009. Rio Tinto introduced shutdowns at its Argyle mine in Australia and Diavik in Canada during the period. It said following a recovery in market conditions, a scheduled six week shutdown at Diavik was cancelled. Rio Tinto’s diamond operations produced 14,026,000 carats in 2009, a 33% drop compared to 2008. Underlying earnings were up 69% at $800 million in 2009, and included a $797 million post-tax gain from the sale of the undeveloped potash assets in Argentina and Canada.
 
Botswana, the world’s biggest diamond producer, will probably see its economy rebound this year as the diamond industry recovers from the effects of the global economic crisis, Finance Minister Kenneth Matambo said, Bloomberg reported. Growth will expand about 5% in the fiscal year through March 2011 after stagnating in the current year, Matambo said in his annual budget speech in the capital, Gaborone. Gem production is expected to take another two years to recover to pre-recession levels, he told lawmakers. “We are projecting a gradual recovery of the world diamond market,” Matambo said. “The dollar value of Debswana’s diamond sales is gradually expected to return to levels achieved in 2007-08 by 2012-13.” Debswana Diamond Co., the joint venture between De Beers and Botswana’s government, shut its mines for about two months last year as demand for the gems slumped amid the global economic crisis. The mines account for 70% of Botswana’s exports and a fifth of global diamond output, the report said. Diamond revenue fell to 6.9 billion pula in 2009-10 from 10.8 billion pula a year earlier, Matambo. In order to increase overall revenue in the year ahead, Matambo proposed a two percentage point increase in the value- added tax rate to 12%. Total revenue for the year is forecast at 27.1 billion pula ($3.91 billion), he said, without providing a figure for the previous year. Botswana’s budget deficit is expected to narrow to 12.2 billion pula, or 12.2% of gross domestic product, in the fiscal year through March 2011, from 15.1% in the same period a year earlier, as spending is reduced by 5% to 39.2 billion pula. “The deficit will be financed by a combination of drawing down on government’s cash balances which were accumulated in surplus years, and by borrowing, largely on the domestic capital market,” Matambo said.

Botswana is seeking training from India in the cutting and polishing of rough diamonds, The Economic Times reported. "We are looking for increasing the number of slots for Botswana nationals to come for training courses here, especially in the diamond polishing and cutting sector," Botswana's High Commissioner Dorcas Ana Kgosietsile told IANS in an interview, the report said. In recent years, there has been the emergence of a nascent diamond polishing industry in Botswana. "I know that Indians can cut any shape or size, even if it is the size of a grain," she reportedly said. The Botswana envoy was also keen to increase awareness in Botswana about India as a market for diamonds. "It is the third largest consumer of diamonds after the United States and Japan. With global recession, the US and Japanese markets had gone down, but India has been relatively resilient. I have been telling people in Botswana that they should be looking at India seriously," she said, according to the The Economic Times.
 
Former managing director of the Botswana mining giant Debswana Louis Nchindo was found dead in a bush near Kasane town in the northern part of the country on Wednesday night, Business Report reported, citing Independent Foreign Service (IFS). Mmegi Online also reported Nchindo was dead and that his body had been found. According to the report on South Africa's Business Report, his family reported him missing on Tuesday after he left home in Botswana's capital Gaborone last Thursday heading for Kasane in a Toyota double cab. The police confirmed that he was missing but his vehicle was found locked in the bush in the area before his body was found, the report said. The report said Nchindo's death came at a time when he was facing over 30 criminal charges for fraud, theft and corruption. He recently revealed how the De Beers company has funded the Botswana Democratic Party and its leadership since the 1980s, it said. He was a friend of former President Festus Mogae until they fell out when the charges were laid against Nchindo just a few months before Mogae stepped down, said the report.

IMPORTS AND EXPORTS
Antwerp’s imports and exports of both polished and rough diamonds showed sharp increases in January, according to data published by the Antwerp World Diamond Centre (AWDC). Rough diamond exports last month soared by 124.9% from January 2009 to 10.4 million carats, representing a jump of 168.4% by value to $817.0 million. Rough imports totalled 11.0 million carats in January up 29.4% on last year. By value rough imports were 66% higher at $764.4 million. Polished exports in January rose 10.8% by volume to 521,996 carats and 16.1% by value to $647.8 million.

Polished imports were up 4.9% at 646,521 carats in January 2010, compared to the same month last year. By value, imports rose 12.2% to $736.6 million. The US posted a 34.7% rise in imports of polished diamonds from Antwerp during January 66,185 carats. By value, the US imported 33.4% more polished at $196.6 million. Overall, however, the US accounted for just 12.7% of Belgium's polished exports in carat terms. Hong Kong was the second-largest importer of Belgian polished last month, accounting for 19.9% in carats. Israel was the third-largest importer of Belgian polished, followed by the UAE, India, Switzerland, the UK, China, Italy and France, AWDC said.