DIAMOND MARKET OVERVIEW
Polished traders reported steady movement in polished over the past week. Many were optimistic about this coming week’s Lunar New Year holiday when Chinese consumers spend lavishly on gifts. "The trade is waiting for the Chinese New Year to kick start trade in a big way,” said an Antwerp trader. With Valentine’s Day falling during the Chinese festival period, some analysts expect a boost in purchases. Barclays analyst Candy Huang told Bloomberg the gold and jewellery sectors may be among the gainers. China’s retail sales for January and February may rise 15.4 percent, the fastest pace in 13 months, according to nine economists surveyed by Bloomberg. Ken Grant, Shanghai-based director of luxury consultancy FDKG Insight told Bloomberg: “Business will be better than last year,” referring to the coming holiday that celebrates the beginning of the year of the snake. “With the population getting more wealthy, it’s a time of mass spending,” he said. Meanwhile, in the broader market, the overall PolishedPrices index ended the week mostly flat, opening at 138.09 on Friday, from Monday’s opening at 138.38 points.

ROUGH MARKET
Traders reported healthy movement in rough on the secondary market. The recent spur in activity is mainly driven by expectations that prices will continue to rise given shrinking world production and growing demand, in particular in China. Although some traders cautioned that the spike in activity may not be sustainable, amid concerns about tightening liquidity. “Liquidity is still the driver,” said one trader. There were unconfirmed reports that the case between ABN AMRO bank and Arjav Diamonds, a DTC sightholder, had been settled, with industry sources saying ABN AMRO took a considerable write down. The case has been watched closely by sightholders who fear the dispute may prompt banks to reduce their exposure to the diamond industry for fear of big write-downs.

CORPORATE AND EVENTS
Botswana’s budget surplus will probably narrow next year as economic growth in the world’s biggest producer of diamonds slows, Finance Minister Kenneth Matambo said, Bloomberg Businessweek reported. The southern African nation will have a surplus of 779 million pula ($97.4 million), or 0.6 percent of gross domestic product, in the year through March 2014, Matambo said in a speech to parliament today in Gaborone, the capital. That compares with 835 million pula this fiscal year, he said. “It remains crucial to exercise restraint in government spending, focusing only on national priority areas and replenishing our reserves to levels that can sustain unforeseeable future shocks,” Matambo said. “It is, however, unlikely that in the next few years the economy will reach the pre-financial and economic crisis real growth rates of nearly 9 percent.” The economy of Botswana, which has the highest credit rating in Africa, will probably expand 5.9 percent this year, down from 6.1 percent in 2012, the minister said. The government decided against buying a stake in De Beers, the world’s largest holder of diamond reserves, in July to help meet its target for a budget surplus. Botswana owns 15 percent of De Beers through Debswana Diamond Co. Ltd., the state-owned diamond miner. Economic growth slowed in the third quarter to 5.7 percent as diamond output dropped 39 percent, the statistics agency said on Jan. 3. The nation gets about 40 percent of its revenue from diamonds, the report said. The government has curbed spending by cutting wages for state employees. It will also sell 49 percent of state-owned Botswana Telecommunications Corp. and retain the remaining 51 percent of the company, Matambo said. The country has 28.7 billion pula of debt, amounting to about 23 percent of GDP. Botswana has an A2 credit rating at Moody’s Investors Service, with a stable outlook, according to Bloomberg Businessweek.

Petra Diamonds Ltd. is focused on developing its portfolio of diamond mines in Africa rather than pursuing acquisitions but keeps a close eye on opportunities given the scarcity of large diamond deposits globally, the company's chief executive said, Dow Jones Newswires reported. Diamond producers Rio Tinto PLC and BHP Billiton Ltd. said last year they wanted to quit the diamond business, in part because it has become harder to find large new deposits that can be mined on a large scale, the report said. BHP is selling its remaining diamond operations in Canada to Harry Winston Diamond Corp. while Rio Tinto is looking for a buyer for its portfolio of diamond assets, which includes stakes in Canada's Diavik mine, Australia's Argyle mine, and Zimbabwe's Murowa mine as well as the Bunder diamond project in India, it said. When asked whether Petra Diamonds would be interested in Rio Tinto's assets, Johan Dippenaar said: "Because there are such few mines, you always look to see what's available...[but] We are Africa-based and it's much easier to do things here. We are focused on our current portfolio of assets." Mr. Dippenaar was speaking to Dow Jones Newswires on the sidelines of this week's Mining Indaba conference in Cape Town. Petra Diamonds has five key operating mines in South Africa, a sixth mine in Tanzania and an exploration program in Botswana. More than 90% of the world's diamonds come from 30 mines, he said, and global diamond production has been falling steadily since peaking at 177 million carats in 2005. Global rough diamond output in 2012 is expected to be similar to the 124 million carats produced in 2011, according to Bain & Co. Mr. Dippenaar said he expects diamond prices will continue to rise given the limited supply and growing demand from China and India. Bain & Co estimates that supply will grow by an average of 2.7% a year until 2020 while demand will grow at an average 5.9%. Petra Diamonds is aiming to spend about $546 million to grow its rough diamond production to an estimated 5 million carats in 2019 from an estimated 2.6 million carats in 2013, according to Dow Jones Newswires.