Bloomberg News

Gem Price Gains to Slow After Surging in First Half, Petra Says

July 19, 2011

July 19 (Bloomberg) -- Rough diamond price gains may slow in the second half of the year after surging in the first six months on rising demand from China and India, according to Johan Dippenaar, the chief executive officer of Petra Diamonds Ltd.

“We will probably see a six month period of consolidation while people take stock,” he said in a telephone interview today. “We’ve seen prices perform well and it’s on the back of real demand.”

Prices of rough, or unpolished, gems jumped more than 49 percent in the first six months, building on two straight annual gains of more than 30 percent, according to WWW International Diamond Consultants Ltd. Prices have advanced as mine operators struggle to meet Chinese and Indian demand after slashing output during the global financial crisis.

China has surpassed Japan as the second-largest buyer of diamonds, behind the U.S., which consumed about 38 percent of world output last year, according to De Beers, the biggest gem producer. China and Japan each represented 11 percent of diamond jewelry demand last year, with India at 10 percent, it said. U.S. demand grew 7 percent, while in India it expanded 31 percent and in China by 25 percent, De Beers said.

“Supply will remain tight and that in itself will underpin pricing,” Petra’s Dippenaar said.

Petra, based in Hamilton, Bermuda, said annual sales rose 24 percent as prices increased. Gross mine revenue climbed to $220.6 million in the 12 months through June from $177.7 million a year earlier, the company said in a statement.

Petra expects to complete the purchase of the Finsch diamond mine in South Africa from De Beers in the “coming weeks,” Dippenaar said. Buying the mine will help Petra more than double last year’s production of 1.1 million carats, he said.

--Editors: Alastair Reed, Amanda Jordan.

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net.

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net


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