Petra sees diamond slump slowing

As biggest miners cut output.
The slump in rough diamond prices will probably slow as the world’s two biggest producers restrict supply, according to Petra Diamonds.
 
“We won’t be surprised if prices come off a bit” at Petra’s planned sale at the end of the month, Chief Executive Officer Johan Dippenaar said by phone Friday. “We expect things from January to June to be much more stable. The very compelling supply and demand fundamentals remain in place.”

Prices of rough diamonds that miners sell to cutters have fallen about 15% this year and are heading for a fifth straight quarterly decline, the longest streak in a least a decade, according to data from from UK-based WWW International Diamond Consultants. The slump has been caused by a credit squeeze for gem traders and slowing demand from China, the second-largest buyer.

De Beers, the biggest producer, and rival OAO Alrosa have responded by cutting supply and lowering prices. De Beers has twice reduced its 2015 production target and announced a marketing push aimed at shoring up demand in China and the US, the top consumer.

“These two producers have a long history of responsible behavior,” Dippenaar said. “We don’t have the same supply indiscipline problems you have in iron ore, copper and coal.”

Petra’s profit

Petra, which said its prices fell about 10% in its financial year through June, reported full-year income declined 12% to $59.6 million as sales declined 10%. It recovered fewer large diamonds this year as it mined lower-grade ore at its Cullinan mine.

The company, which produced 3.2 million carats last year, said output would rise to between 3.3 million and 3.4 million carats this year.

The shares lost 0.2% on Friday to trade near the lowest since November 2013. The stock is down 44% this year.

©2015 Bloomberg News

 

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