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After holding strong, diamond values collapse at end of 2008.

By Leia Michele Toovey- Exclusive to Diamond Investing News

As economic turmoil spread around the globe in ‘08, the diamond industry lost some of its brilliance.  The industry was doing well until about September, then diamond prices and sales went on a steep descent. Diamond prices are down about one-third since their high last August.

The diamond industry has been swift to announce production cutbacks, in an effort to stabilize prices.  Even two of the world's most profitable mines are onboard. Canadian based Ekati ^[2] and Diavik mines are among the most profitable in the world, they produce diamonds with average values of between $90 and $95 per carat, well above the worldwide average of $72 per carat.  Rio Tinto ^[3] and Harry Winston co-own the Diavik mine ^[4]; in a bid to reduce capital costs, the mine is delaying its move to underground production by about six months to the fall of 2009. A two-year-old cost reduction at BHP Billiton's Ekati mine has saved that facility from the worst impacts of the slowdown.

Most mining companies closed their operations for an extended holiday period in December in response to the drop in demand.  Some have closed their mines for as long as two months, many have committed to keep production below full capacity until the market picks up again.

Diamond producing countries around the world have reported declining exports and imports. Belgium's polished exports fell 22 percent to $689.15 million in December 2008. By volume, exports declined 19 percent to 580,318.62 carats. Belgium's polished imports for the month dropped 12 percent to $630.81 million, and net polished exports (polished exports less polished imports) fell 65 percent to $58.34 million. South Africa's diamond production fell 27.4 percent in November 2008 compared with one year earlier. The country's November diamond production fell 12.7 percent from the previous month.

The government of Sierra Leone reported on Friday that the export of diamonds dropped by 31 percent in 2008, mainly due to industrial strikes. Total diamond exports for 2008 were valued at nearly $98 million from the sale of 371,285 carats, compared with $141.5 million for the sale of 448,928 carats in 2007.

India's polished diamond exports fell 26 percent to $663.21 million in December. By volume, exports dropped 19 percent to 2.279 million carats. Polished imports for the month declined 15 percent to $469.50 million, as net polished exports, the excess of polished exports over imports, decreased 44 percent to $193.71 million.  India's rough diamond imports fell 91 percent to $85.8 million, Rough exports dropped 43 percent to $24.36 million, and net rough imports declined 94 percent to $61.44 million. For the 2008 calendar year, India's polished exports rose 10 percent to $14.48 billion. Polished imports grew 58 percent to $7.49 billion, and net polished exports were down 17 percent to $6.98 billion. 

Company news

Vancouver-based Peregrine Diamonds ^[5] (TSX: PGD) is attempting to raise CDN$ 3.5 million by offering rights to its shareholders.   On January 27, shareholders will receive one right for every common share held. Seven rights will entitle the holder to purchase one unit at a price of CDN $0.35 per unit, and each unit will comprise one common share and half a common share purchase warrant. Shareholders who fully exercise their rights are entitled to subscribe pro rata for additional units, if available.  Peregrine Diamonds will use the funds raised for exploration expenses and general working capital.

South African Namakwa Diamonds ^[6] (ASX:NDC) has opened a trading office in Israel as part of its new strategy of focusing on selling polished diamonds during the current rough market lull. As a result of the price crash of rough diamonds, the company has decided not to sell significant volumes of rough diamonds in the past three months, opting rather to cut and polish a "significant portion" of its inventory. Selling a higher proportion of its inventory as polished diamonds enables the company to realize higher prices and margins.