JOHANNESBURG (miningweekly.com) – Supply-side pressures would likely drive a surge in diamond prices in the second half of 2010 that would signal the start of a recovery for the diamond sector, leading to a positive recovery in 2011, LSE-listed Namakwa Diamonds said on Tuesday.

The junior miner noted in an interim management statement that it expected diamond prices to start increasing in early 2010, despite some caution remaining on whether retailers would be able to take on significant price increases from manufacturers in the next few months.

Namakwa noted that speculation in rough diamonds had continued between the beginning of September and the beginning of January, with no major additional product expected to come onto the market during this year.

Further, it highlighted that the diamond industry, globally, has been successful in reducing its debt, without distress sales, over the past year, while borrowing was down by about 30%.

The sector’s debt currently stood at about $11,5-billion.

Nevertheless, the long-term fundamentals of the industry were “very strong” again, the company emphasised.

Meanwhile, Namakwa reported a year-on-year increase in diamond production in excess of 50% for the first quarter of 2010. A total of 24 413 ct were produced in the three months ended November 30, 2009.

Trial mining in the Democratic Republic of Congo (DRC) had continued, resulting in the production of 12 871 ct during the quarter.

The diamond-miner has started incorporating the earthmoving equipment, as well as plant and machinery that it had acquired with its $5-million acquisition of Kasai Resource Mining (KRM), in December, into the group’s DRC operations.

The acquisition of KRM was expected to allow Namakwa to potentially raise its output in the DRC to beyond 160 000 ct this year, up from the previously expected 90 000 ct/y.

Namakwa now had an increased resource base near its current assets on the Kasai river, in the Tshikapa region, while it had also earned the rights to 41 alluvial and kimberlite concessions on the Mbelenge, Longatshimo and Lubembe rivers.

Its total indicated and inferred resource in the DRC has increased to about eight-million carats, but the final estimates were still subject to confirmation by mineral valuation firm Venmyn.

The production and development of the newly acquired DRC resources would start in the middle of this month, Namakwa noted.

The next phase of Namakwa’s ramp-up in the region would involve increasing its dense media separation plant capacity to 305 t/h, with a total head-feed capacity of 700 t/h.

In addition to the KRM acquisition, the company had also acquired mining rights to its first kimberlite project, the Kao project, in Lesotho.

"The period in review saw Namakwa Diamonds make a series of key strategic moves, which will reinforce the market position and potential of the company as we look ahead to 2010 and beyond,” CEO Nico Kruger said.

The diamond-miner earlier this month reported that the government of the Kingdom of Lesotho had transferred the mining lease to the Kao Kimberlite pipe to Namakwa Batla Diamonds, a joint venture between Namakwa Diamonds, Batla Minerals SA, Lesotho investors and the government of Lesotho.

Production from phase one of the project would start over the next six to 12 months, following the construction of the necessary plant and machinery.

Namakwa expected to invest between $20-million and $40-million a year on phase one over the next three to five years, saying that this would be funded from its internal resources.

The first phase was expected to deliver about 1,1-million carats, with ten-million tons of weathered kimberlite being processed to produce about 700 000 ct and 2,5-million tons of hard rock from a quarry being processed to produce a further 400 000 ct.

Phase two of the project was expected to increase production to five-million tons a year over the expected 40-year life-of-mine.

Planning and a feasibility study for this phase would likely be undertaken in the next two to three years, depending on diamond prices, the company stated.

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