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Diamond prices firm as Dubai banks fill funding gap - Gem Diamonds
February 9, 2015 / 7:19 PM / 3 years ago

Diamond prices firm as Dubai banks fill funding gap - Gem Diamonds

CAPE TOWN (Reuters) - Miner Gem Diamonds (GEMD.L) expects firm prices this year after they rose at its first auction of 2015 last week as Dubai banks help fill a funding gap for manufacturers, Chief Executive Clifford Elphick said on Monday.

An employee checks diamonds at a jewellery factory in China's southern city of Shenzhen October 19, 2009. REUTERS/Tyrone Siu

Diamond prices weakened late last year, partly due to the closure of Antwerp Diamond Bank in October squeezing liquidity for manufacturers, who buy rough diamonds from companies such as Gem Diamond, Petra Diamonds (PDL.L) and bigger rival De Beers.

But banks in Dubai are helping to fill the funding gap, Elphick said. This is likely to support prices, according to the company, which has one producing mine, the Letšeng mine in Lesotho, and is developing the Ghaghoo mine in Botswana.

“Banks from Dubai in particular are stepping in and picking up a lot of the slack,” Elphick said. “Our customers are telling us that they are finding receptive ears when they go there and try to transfer their accounts.”

After a 4 to 5 percent decline in prices late last year, Gem Diamond’s prices for its larger diamonds rose by 4-5 percent at its first auction of 2015 last week, Elphick said.

“The small producers - that is Gem, Lucara (LUC.TO), Petra - all of us a saw price increases compared with what we had expected,” Elphick said in an interview on the sidelines of the Mining Indaba conference in Cape Town.

“The first sale this year has been very encouraging,” he added. “It’s too soon to say that the prices are rising again but we are seeing a firmer market than we had anticipated.”

He is more optimistic than he was last month, when the company said weakness in diamond prices could continue into early 2015. [ID:nL4N0V62OH]

“I think it takes a while for the liquidly situation to improve and diamond manufacturers are mostly family companies who require some time to switch bank,” Elphick said. “But this is resolving.”

Editing by Susan Thomas

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