DIAMOND MARKET OVERVIEW
Polished appears to be continuing its gradual upward trend. The rising prices in rough, healthy demand from retailers in the Indian and South East Asian markets and less manufacturing capacity are said to be the main reason for the strengthening in prices in many areas of goods, in particular smaller Indian type goods and fine quality polished. There is testing of prices at these higher levels, but many traders believe the soaring price of rough will translate in further polished increases. Meanwhile, polished traders in Antwerp reported a relatively busy week with strong buying interest in the dealer market for stars and full cuts. Pointers and four grainers (1 crt) were moving, but demand was slightly weaker, traders said. At the Antwerp trade fair, traders reported a large availability of bigger sizes (20 crt+), highlighting that demand for these stones in the trade has not translated into the demand hoped for at retail. The main PolishedPrices index ended the week slightly lower, opening at 116.75 on Friday, after Monday’s opening at 118.4 points.

ROUGH MARKET
DTC reportedly raised prices by around 10% overall at its February sight, and is said to  have assured clients that this will be last increase for a reasonable period of time. The largest DTC increases were in the Indian goods. Premiums on these boxes softened in the secondary market during the week, with traders citing difficulties to pass on the prices in polished as the main reason. Meanwhile, rough buying interest remains strong, especially from the producers. “Some players seem to want seriously hedge themselves for future shortages,” said a trader.

CORPORATE AND EVENTS
Zimbabwe President Robert Mugabe threatened to defy the Kimberley Process to sell diamonds from a field where the global regulator accuses the military of forced labour and other abuses, AFP reported. The Kimberley Process (KP) has given Zimbabwe until June to rectify abuses of civilians by its army at the eastern Marange diamond fields, but Mugabe threatened to sell the diamonds without clearance from the watchdog, the report said. "We are trying to play it their own way, that is following the KP, but we can do it otherwise," Mugabe told reporters in Harare, it said. "We can sell our own diamonds elsewhere," he said. Major diamond bourses already refuse to sell diamonds from Marange, and an auction of 300,000 carats in Harare last month was cancelled at the last minute because the sale had not won Kimberley approval, said the report. Selling diamonds outside the scheme would essentially mean turning to the black market, it said. Mines minister Obert Mpofu says Zimbabwe has already met key Kimberley requirements by withdrawing the police and army from Marange. The government says two South African firms now run Marange.
 
Zimbabwe's Supreme Court ordered two government mining firms to stop operations on British-owned diamond mining fields plagued by human rights abuses, state newspapers reported, AFP reported. The case was brought to the court by British-based African Consolidated Resources (ACR) in a bid to win back its mining rights which were suspended in 2006. The government is appealing a court ruling returning the fields to ACR, the report said. Chief Justice Godfrey Chidyausiku said Zimbabwe Mining Development Corporation and Minerals Marketing Corporation "must cease all mining activities," in his judgement quoted by the state-run Herald. "Allowing the applicants to continue mining has the potential of causing irreparable damage to the respondents (ACR) should the (government) appeal fail," Chidyausiku said. The Supreme Court has already ordered that the central bank keep 129,400 carats of diamonds, seized from ACR in 2007, until the courts make a final determination on the case, according to AFP.

RBC Capital Markets has upgraded its rating for Shore Gold, saying it expected the Toronto-listed company to attract attention from companies wanting to expand in diamonds. RBC upgraded Shore Gold to Outperform with a target price of C$2.00 per share. “A 20-year project based on the combined Star/Orion South kimberlites rather than Star alone greatly boosts the project's after-tax NPV (7%) to C$786m using Shore Gold assumptions. The economics of the larger project in an industry facing a shortage of rough diamonds could attract potential development partners and spur Shore Gold's share price,” it said. According to RBC, the major risks in the low-grade Star/FALC project revolve around low grades and the need to contain costs, as well as rough price trends. “Shore Gold's strategy to address this is several major cost-saving measures and large scale mining and processing rates. In terms of rough price trends, it said Shore's valuation is based on a diamond price starting at weighted average US$192/ct. The trend in prices between now and 2015 when production would begin is critical. “In view of the prospects of a larger project and potential corporate or JV attention we are upgrading our recommendation on Shore Gold to outperform with a target price of C$2.00/share,” RBC said.