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Kadiam

Diamond Market Report

Trading activity remains robust with dealers reporting solid trade volumes across all major markets. Rough diamond prices continuing to rise and reaching pre-crisis levels of 2008. There is evidence of speculative rough trading activity and we advise requisite caution  when dealing in rough. Polished market sentiment continues to improve supporting the upward movement in polished prices. Shortages of supply still continuing on high-end goods with very firm prices being attained. All eyes are now looking to all-important trade show in Las Vegas to be held next month to ascertain the depth of the recovery in trading activity.

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Diamond News

Namibian President: Time has Come for Diamond Aggregation in Botswana

Namibian President, Mr Hifikepunye Pohamba has said the time has come for aggregation to move from Diamond Trading Company (DTC) International in London to Botswana to make southern Africa a hub of diamond activity, according to PolishedPrices.

Speaking during a briefing at the Diamond Trading Company Botswana (DTCB), President Pohamba said the aggregation of diamonds would assist in the integration of the Southern African Development Community (SADC) economies, said the report.

Apparently, Pohamba said they have problems with their joint venture partner in Namdeb, De Beers, as only a small percentage of rough diamonds supplied to the local sight holders (diamond cutting and polishing companies) while the bulk is taken to London. He said he was given an impression that Botswana would do all the aggregation.

Permanent Secretary in the Ministry of Minerals, Energy and Water Resources, also chairman of the DTCB board of governors, Mr Gabaake Gabaake said the transfer of aggregation from London has not proceeded as they have hoped. Mr Gabaake said Botswana was negotiating with De Beers over a new sales agreement and aggregation is part of the negotiations. He said as it was the case in Namibia, a bulk of local diamonds was aggregated in London, continues PolishedPrices.

He said diamonds were a source of livelihood for Batswana, accounting for 33% of GDP, 80% of foreign earnings and 39% of public revenue.

Since independence in 1966, Botswanas GDP growth rate has averaged seven per cent, he said. Mr Gabaake said diamonds have transformed Botswana from one of the poorest countries to being one of the fastest growing economies in the world.

Revenues from the diamonds have helped in building roads, schools and hospitals. At independence, Botswana was one of the poorest countries in the world with GDP of around US$100 per capita. To date we are a middle income country with a GDP per capita in excess of US$6 000, he said.

DTCB is an equal joint venture operation between De Beers and the government and Mr Gabaake said the entity was established in line with the governments vision of moving from being a major producer to being both a major producer and one of the leading diamond centers in the world, continues PolishedPrices.

He said diamonds we believe can be a catalyst for diversification of our economy.

Africa produces most of the worlds gem quality diamonds in the world yet it is only recently that the continent has seen beneficiation activities taking place at an appreciable scale, he said.

The DTC board chairman said he hoped the creation of DTC Botswana and DTC Namibia will help sustain the diamond legacy in the two countries.

Mr Gabaake said the newly completed Sir Seretse Khama International Airport terminal has a security area for diamond storage to enable safe importing and exporting.


Israel, China Upgrade Export Treaty

Israel and China signed new financial protocols Thursday, meant to make it easier for Israeli manufacturers to export to China.

Finance Minister Yuval Steinitz and Chinese Deputy Finance Minister Li Yong signed the memorandum of understanding in a ceremony held in Tel Aviv Thursday night.

"This marks an important step to boost trade relations between Israel and China. The establishment of a stable financial framework for mutual investment is an essential condition for expanding trade activities between the two countries," Steinitz told the Jerusalem Post. "Over the next couple of months, the Treasury, together with other government ministries, will work out a plan to strengthen economic relations between the two countries."

The protocol signed between Israel and China is the third of its kind between the two countries. It allows for an extension of total credit of up to $400 million for transactions. The first protocol was signed in 1995 for a credit volume of $150 million, and was expanded in 2004 with a second bilateral agreement for an additional credit framework of $200 million.

The agreement comes amid an economic crisis developing in Europe that is threatening to have ramifications for Israeli exporters, since 30% of exports go to Europe.

Israeli exporters are also suffering from the sharp depreciation of the euro against the shekel in recent week.


Russia-Based Diamond Miner Alrosa Proposed Bond Rated 'B+'

Standard & Poor's Ratings Services says it has assigned an issue rating of 'B+' to the proposed 26 billion Russian ruble bond (US$865 million) to be issued by Russian diamond miner Alrosa Co. Ltd.

At the same time, we assigned a recovery rating of '4' to the proposed bond, indicating our expectation of average (30%-50%) recovery in the event of a payment default. The issue and recovery ratings on Alrosa's other debt facilities remain unchanged. We anticipate that the proceeds of the new issue will be used to refinance debt maturities due in 2010. This is in line with our existing assumptions regarding the near-term development of Alrosa's capital structure," says a statement from Standard & Poor's.

"Our recovery analysis is based on a stand-alone assessment of the value of Alrosa's business, but largely reflects our view that the government of the Russian Federation would not be willing to cede entire control of the company's core production assets. In our opinion, this could limit the value available to the bondholders, resulting in an exceptionally low valuation multiple at default. The recovery rating is based on a stressed enterprise valuation of about $1.8 billion, which we believe could be constrained by the possibility of government intervention in any sale process. Additional factors affecting recovery prospects include the unsecured nature of the debt and the risks inherent in Russian insolvency laws," concludes the statement.

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Kadiam Services

Valuation:
Provision of independent valuation services for: governments of diamond producing countries, mining companies, financial institutions and other interested parties.

Consultancy:
Provision of strategic advice to the highest levels of the diamond industry and governments with particular emphasis on the creation and enhancement of marketing channels.

Analysis:
Offers clients access to leading valuation analysis, statistics, and up to date market reports.

Marketing:
Assistance in the creation and management of diamond sales by tender or direct sales to trade and manufacturing centers. As an independent valuation company, Kadiam does not buy or sell diamonds or act as diamond brokers.

Training:
Provision of assortments and valuation training for advanced level candidates.

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