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Diamond prices down but 2016 could bring improvement, says Zimnisky

by Greg Klein | November 6, 2015

While weak sales, high inventories and lagging prices hit the diamond industry this year, production cutbacks and the possibility of a strong holiday season might reverse the decline next year, according to Paul Zimnisky. The independent consultant and diamond authority’s latest report notes relatively healthy demand growth in the U.S., still the world’s largest diamond market. But growth in China and elsewhere fell short of anticipation.

Diamond prices down but 2016 could bring improvement, says Zimnisky

Despite this year’s price slump, ALROSA increased rough inventory
20% YTD as of September. (Photo: ALROSA website)

Miners responded in different ways, Zimnisky reported. While De Beers and Rio Tinto NYE:RIO cut production, ALROSA expects a 5% increase in carats over last year. Like De Beers, the Russian company lowered prices but ALROSA has been building inventory too.

Although Rio plans to suspend operations at its Argyle mine in Western Australia in Q4, its Diavik joint venture in the Northwest Territories has seen this year’s guidance increased from 6.7 million carats to 6.8 million.

In the same Lac de Gras region, Rio’s JV partner Dominion Diamond TSX:DDC also holds the Ekati mine, making Dominion the world’s fourth-largest diamond seller. De Beers, ALROSA, Rio and Dominion produce well over 75% of the world’s rough diamonds, according to RoughPrices.com.

As for the fifth-largest producer, Petra Diamonds continues ramping up output despite this year’s disappointing sales, Zimnisky pointed out. The company plans to produce three million carats in 2015, up from two million in 2012, and expects five million by 2019.

Badly battered as the major miners’ stocks have been, Quebec producer-to-be Stornoway Diamond TSX:SWY stood out with a 26% YTD improvement.

In the short term, the industry looks hopefully to Diwali in November, then Christmas and, in February, the Chinese New Year. “A stronger than expected holiday season could clear out lighter than usual inventories, making for more aggressive buying in spring/summer of 2016 which, coinciding with less rough coming to market via De Beers, ALROSA and Rio, could mark a trajectory shift in prices,” Zimnisky stated.

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