As its new financial year starts this month, the State Diamond Trader (SDT) seeks to ensure that it accesses as much of South Africa's diamond production as it can, to reach its goal of buying 10% of local rough production for sale to local cutters and polishers.

SDT acting CEO Futhi Zikalala says that, at the end of 2008, the trader was buying about 3% of the country's rough production from De Beers. However, market conditions have changed substantially, in a relatively short time, and the global economic crisis weighs heavily on the diamond industry.

"Right now, we are down below that 3%, so the board has taken it upon itself to ensure we access all the diamonds we can in that 10% ambit. It is one of those things that has just got to happen, and we must ensure it does in the new financial year," reiterates Zikalala.

This is despite the fact that many South African miners have lowered production, owing to the decreased demand for both rough diamonds, and polished gems, in South Africa, as well as abroad. De Beers was also said to have reduced its production cycles from ten last year, to five this year.

Zikalala confirms that whether the target is shifting or not, the SDT is determined to ensure compliance with the legislation and the regulation, "go the full way to the 10%".

"Things are improving in terms of getting more producers on board, because we are no longer looking at De Beers only - like we were doing for the first part of last year, but we are looking at every other company that is coming through," says Zikalala.

She says that a number of smaller producers in South Africa have been showing stock to the SDT since August last year. "Petra Diamonds show us, Trans Hex, Rockwell, and Lonrho have been showing us their goods".

Petra Diamonds marketing manager Greg Stevenson confirms that the company sold 10% of its stock to the SDT in February. This was the first time, since showing goods to the SDT from October 2008, that the trader bought anything from Petra.

Rockwell Diamonds CEO John Bristow tells Mining Weekly that the company has been showing diamonds to the SDT, however, the trader has not actually bought anything from the company.

The Zurel Bros cutting and polishing facility in Polokwane, which was established with the intention of procuring rough stones from the SDT, is not currently buying stock from the trader.

Zurel Bros SA GM Norman Landman tells Mining Weekly that the prices for polished diamonds have dropped so significantly that the company is not cutting and polishing at the moment. The company continues to run training programmes, using industrial diamonds, but fears that retrenchments could be required, if there is no turnaround in the market soon.

"My turnaround time at the moment, as the trader, is not the way that the board and the trader as an institution wants," admits Zikalala, adding that potential buyers are looking for lower prices.

"When I avail diamonds to them [cutter and polishers], they want to then undercut me by up to 40%, and I cannot afford to do that. From the trader's side, and also from who I am buying from, I cannot buy at 40% less, or at any percentage less, I just have to get it at fair market value and then onwards sell it at that level," she adds.

The SDT was established, and launched in February 2008, to boost the development of a diamond beneficiation processing industry in South Africa, by making at least 10% of the country's precious stones available to local cutters and polishers, who previously struggled to get access to diamond tenders.

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