Endiama Says Diamond Sector "Slowly Recovering"

Angola's diamond sector is slowly recovering but diamond prices still need to rise by around 15% this year to enable companies reinvest in it, the head of the state-owned diamond company Endiama said on Wednesday, Reuters reported.

 

Manuel Calado said the price of Angolan gems fell by around 70% in 2008 because of the global economic downturn and what he called "negative speculation" from dealers but added diamond prices were on an upward trend since the start of the year.

 

"I am not saying that we are satisfied with the current price. What I'm saying is that diamond prices have recovered since falling sharply in October and November," Calado said in an interview with Reuters.

 

Asked how much price recovery was needed to enable companies to start reinvesting in the sector, he replied: "I think prices still need to rise around 15%."

 

Diamonds have been among Angola's worst affected exports - along with crude oil -- due to a global collapse in demand for gems and luxury items.

 

The drop in diamond prices prompted BHP Billiton, the world's biggest miner, to abandon its exploration projects in Angola last year.

 

However, Calado said he expected Angola's diamond production to remain at around 10 million carats in 2009, the same as in 2008.

 

To prevent other diamond firms from leaving the southwestern African nation the Angolan government recently said it would buy diamonds from local producers at a fair price if these firms failed to sell them in the market.

 

The move, according to Calado, helped fight negative speculation from diamond dealers who were trying to buy diamonds from struggling local producers at unusually low prices.

 

"They stopped making such low bids for gems because they knew that the government would buy diamonds from producers at a fair price if they failed to sell them," said Calado.

 

The slight price recovery in diamond prices was already producing some positive results in terms of investment in the sector. The country has around 14 active diamond mines and 100 mines open for new investors, he said.

 

"Diamond companies are slowly reinvesting in the sector," said Calado, without providing details.