Diamonds News

Gem Diamonds Unable to Predict U.S. Holiday Demand News

By Thomas Biesheuvel found at bloomberg.com

Aug. 26 (Bloomberg) -- Gem Diamonds Ltd., a miner of the precious stones in Lesotho and Australia, said it’s impossible to predict U.S. demand for Thanksgiving and Christmas holidays, the most significant sales periods for the industry.

It’s the “most important time of the year by a long shot and there is no visibility on how the U.S. consumer will behave,” Chief Executive Officer Clifford Elphick said in a phone interview today. There will only be a “clear view” of 2010 after seeing the results for Christmas, Elphick said.
Gem Diamonds closed all mines in February except Letseng in Lesotho and one so-called pipe at Ellendale in Australia as the world economic crisis hit luxury goods. The U.S., making up more than 40 percent of diamond demand, is “key” to a recovery, RBC Capital Markets analyst Des Kilalea said last week. Thanksgiving and Christmas deliver 30 percent of consumption, Elphick said.

De Beers, the world’s biggest diamond company, restarted operations in Namibia last month after cutting overall first- half output by 71 percent. ZAO Alrosa, the Russian state-run diamond monopoly, resumed sales in May as demand improved, and it will sell more than $196 million of the gems this month.

“De Beers and Alrosa are coming back into the market quite strongly,” Elphick said. “That’s why I don’t think we’ll see big price increases going forward.” Prices hadn’t recovered enough to restart Gem Diamonds’s mothballed mines, he added.

Diamonds News Profit Doubles

Values will also be held back by limited jewelry demand and inventories at diamond cutters, Gem Diamonds said.

“Demand for diamond jewelry at the retail level has continued to remain below 2007 levels in the U.S.,” the London- based company said in a statement. While diamond prices “firmed” in the second quarter, stockpiles and debt levels at cutting centers are “relatively high,” it said.

Gem Diamonds today reported first-half net income more than doubled to $3.29 million. Sales declined 29 percent to $117.8 million. Elphick said the company is in talks to sell alluvial assets in the Democratic Republic of Congo and Central African Republic.
The company rose 10 pence, or 3.9 percent, to 270 pence by 10:30 a.m. in London trading.
To contact the reporter on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net.

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