DIAMOND MARKET REVIEW
Polished trading activity slowed slightly over the past week as most suppliers moved their sellable goods to the Hong Kong International Jewellery Show (March 5- 9). Expectations for the show are high. Traders are reporting some testing of price levels by buyers in certain areas, mainly in high quality pointers and 4 grainers and larger, in almost the full range. Many traders however, believe the upward trend in polished is set to continue in the near future. Meanwhile, the main PolishedPrices index eased slightly over the past week as trading activity fell ahead of the Hong Kong trade fair. The overall PolishedPrices index opened 2.74 points lower at 114.91 on Friday, compared with Monday’s opening at 117.65.

ROUGH MARKET
Rough traders cited continued high prices for producer rough, which according to some traders are at April – May 2008 price levels. Rough on the secondary market however is selling at lower prices, as a result of sufficient supply in the open market, traders said. Some market players cited prices at 5 – 10% below the prices of producer goods. At the current prices of producer goods, manufacturing margins in certain areas, 3 grainers and up, are said to be thin to negative.  With liquidity still healthy, and polished prices gradually moving upwards, most traders are expecting continued strong demand for rough and a further strengthening in prices in the short term.

CORPORATE ANBD EVENTS
RBC Capital Markets gave an upbeat assessment of the diamond market and said Petra Diamonds was its favoured stock. In a research note to clients, RBC said the strength in the diamond market continued, though at a more muted pace than in the second half of 2009. “We expect rough price increases to be tempered somewhat in the near-term, though with De Beers and Alrosa showing restraint, we do not anticipate any major weakness to develop,” RBC said. “Our investment stance remains to focus on producing diamond miners or those close to production, it said, adding, its “favoured stock” is Petra Diamonds, which it has given an Outperform, Above Average Risk rating. With regard to prices, RBC said: “Despite some ambiguous economic data in the past month, rough diamond demand remains relatively strong and prices rose again in February. The trend in polished diamonds was also up with respected observers suggesting the trends will continue in the near term. “De Beers remains restrained in the total quantity of diamonds it is selling. Its February sight was around $530 million, which brings the year-to-date total to $1.1 billion, nearly three times the total for the same period in 2009. Sales are still well below the totals sold in 2008 and below all years going back to 1999, according to our records, RBC said.

An exercise underway to investigate the value of diamonds beneath the current Jwaneng mine pit, could add up to 20 years to the mine's lifespan, through the unlocking of hidden resources, Mmegi reported. The Jwaneng Resource Extension Project (JREP) intends to probe the value of diamonds below the current limit of 400 metres and will be the largest resource evaluation programme ever undertaken, said the report. the project encompasses and goes beyond the area being tapped into by the Cut 8 initiative, currently underway in Jwaneng, it said. China may soon displace India as the leading diamond processor in the world, thanks to its favourable government policies, vast pool of skilled technicians and robust domestic demand, China Daily reported. In 2004, China was ranked the second largest diamond processor in the world, and since then the industry has been making rapid growth strides, the report said. According to China Daily, China has around 80 diamond manufacturing companies located mainly in Guangdong, Zhejiang and Shandong provinces, together employing nearly 60,000 people. This compares with India, where nearly 1 million people are involved in the diamond industry, spread across thousands of factories in the country, it said. By 2015, China's share of the global diamond processing business could grow to 21.3%, while India may see its share fall to 49%, from the present 57%, said a recent report published by KPMG, according to China Daily.  The diamond trade in China got a major boost in 2006 when the government scrapped value added tax on imported roughs and reduced taxes on polished diamonds from 17 to 4%, said the report. According to the Shanghai Diamond Exchange, in 2007, China's polished diamond imports jumped 194% year-on-year, to $147 million and it is estimated to have reached $900 million in 2008, it said.

Sotheby's will auction next month a rare, large blue diamond that was once part of the legendary De Beers Millennium collection, with fierce bidding expected on the $4.6-$5.8 million estimate price, Reuters reported. The 5.16 carat, pear-shaped internally flawless Fancy Vivid Blue gem is the first diamond of its kind to appear at an auction from the collection that De Beers, presented in 2000 to celebrate the millennium, the report said. It is being put up for sale by a private collector and is the star lot at Sotheby's Hong Kong jewels and jadeite 2010 spring sale on April 7, it said. "The diamond's high and even saturation of brilliant sky-blue colour, internally flawless clarity and classic pear shape will undoubtedly spur intense bidding amongst discerning collectors from around the world," the auction house said in a statement.