Bank of Montreal Conference

Transcription

1 Diamond Market Review and Forecast Bank of Montreal Conference Richard Wake-Walker Florida, February 2008 WWW Group of Companies

2 Diamond Pipeline 2007 ($bn) Mine Production Supply To Manu- facturers Equiva- lent Polished Available For Market Decreased Stocks Increased $0.8 Stocks $1.5 Stronger Prices 1.3% Value Vl of Diamonds Consumed in Jewellery Diamond Jewellery Retail Sales $ $ $ $ $14.7 $ $ $20.0 Increasing Stocks 2006 $ $1.6 Rising Prices $ $ $17.0 $ $ $ % %

3 2007 compared to 2006 and start t of 2008 Positive 2007 was generally a good year for the industry Rough prices up sharply (+/- 20 % increase or 10% average increase) Reduction in stocks Consumer demand held up Negative 2/3rds reduction in polishing margin to around 10% Success of 2007 for industry based on trading rough not cutting and polishing America? Minimal increase in polished prices ( %, %, %) 2008 Surge in Rough Prices (January +/-10%) Spectacular Rough / Polished Tender Prices New highs for Polished index (however briefly)

4 170 Rough and Polished Prices Jan 2003= WWW Overall Rough Index PolishedPrices Overall Index

5 140 Rough and Polished Prices (Currency Basket) Jan 2003= WWW Overall Rough Index Currency Basket PolishedPrices Overall Index Currency Basket

6 Rough and Polished Prices (Euros) Jan 2003=100 WWW Overall Rough Euro Index PolishedPrices Overall Euro Index

7 170 Rough and Polished Prices Jan 2003= WWW Overall Rough Index 100 PolishedPrices Overall Index

8 30% Rough and Polished Disparity 20% 10% 0% % -20% -30% % Difference betw een Rough and Polished Indices

9 Source PolishedPrices.com

10 From History to Forecasts

11 Key Inputs for Forecasts Segmented supply models Econometric models for 64 countries Models based on IMF World Economic Outlook (This presentation is based upon the January 29 th 2008 Update to the October 2007 Outlook ) Estimates are based on percentage of GDP spent on diamond jewellery PolishedPrices.com The only published polished diamond index based on actual transactions Current weekly average of transactions through Polished prices is +/-7,000 or about +/-$45m.

12 $22bn Supply and Demand in Rough Terms (at February 2008 values) $20bn Supply Demand $18bn $16bn $14bn $12bn

13 Some Immediate Uncertainties/Issues America 45% of the market Recession? China and India not the answer US Dollar (profitability, mining costs etc) Africa Power shortages impact on rough supplies? Impact of Beneficiation Corporate BHP / Rio Tinto Anglo / De Beers Alrosa Producer supplies

14 150 PolishedPrices Overall Index Jan 2008 Forecast Central Forecast Confidence Limits 120 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09

15 170.0 Rough and Polished Prices Jan 2003= WWW Overall Rough Index PolishedPrices Overall Index

16 2008 Forecast In this forecast Polished prices will rise this year by 14%, and on average 2008 prices will be 9% above 2007 Rough, on the other hand will on average in 2008 be 10% higher than 2007, however by the end of 2008 prices are 8% below current values This is an overall forecast, different segments rough and polished will perform very differently 2008 has started very well, almost too well..

17 World Diamond Production 2007 Botswana 22% Angola 6% Namibia 1% Others Botswana 22% Angola 6% Namibia 1% Others Botswana 25% D.R.Congo 7% Australia 3% Others 6% Botswana 25% D.R.Congo 7% Australia 3% Others 6% S.Africa 10% Others 3% 2007 S.Africa 10% Others 3% % Namibia 8% 7% % Namibia 8% 7% 2007 D.R.Congo 20% Canada 11% m cts D.R.Congo 20% Canada 11% m cts Russia Angola 11% 2007 $14.4bn Russia Angola 11% 2007 $14.4bn Russia Australia 13% Russia Australia 13% 17% S.Africa Canada 11% 17% S.Africa Canada 11% 14% 14% 12% 12%

18 De Beers Market Share (production + purchases) 70% 65% 60% 55% Argyle Orapa 3 Plant Gahcho Kue 50% Ekati 45% Diavik Snap Victor 40%

19 Share of Goods to Market, by Producer Balance Aber BHP Rio Tinto 2007 $14.4bn De Beers Angola Alrosa De Beers* * = Contracted Purchases De Beers excludes Diamdel open market purchases

20 Share of Retail Market: 2007 Gulf Other Asia RoW India Mainland China 2007 $78.04bn USA Europe Japan

21 Emerging g Markets: Retail Consumption 8,000 China 7,000 India Far East ,000 Russia 5,000 4,000 Eastern Europe South America 3,000 2,000 1,

22 WWW International Diamond Consultants Independent consultants to the diamond industry Formed January 1996 by Richard Wake- Walker and Charles Wyndham Neil Buxton joined in 1998 Over 100 years industry experience

23 WWW s Government Work DICAN - Federal Government of Canada (DIAND) Democratic Republic of Congo The Gokhran of Russia Almazjuvilirexport UK Foreign Office South African Diamond Board Royal Canadian Mounted Police Geological Survey of Finland

24 Clients including. Aber Diamonds AfriCan Mining Alexkor Alrosa ANZ Bank Archangel Diamond Corp. Ashton Bank of Montreal BM Diamond Corp. Brazilian Diamonds Canaccord CIBC Contact Diamonds Consolidated African Mines DiamonEx European Diamonds Falconbridge Franco Nevada Gem Diamonds Global Witness Kensington Resources Letseng Diamonds Mountain Province Namakwa Diamonds National Bank Financial Norton Rose Partnership Africa Canada Mine Gem MPH Consulting Peregrine Diamonds RBC Rhonda Rio Tinto Scotia Bank Severalmaz Shore Gold SLDC Southern Era Stornoway Tahera Teck Cominco Tiffany & Co Uralkali Winspear

25 WWW s Services Developments in the diamond world Supply / demand scenarios Price Forecasts Diamond valuation services Instruction and training in sorting and valuing diamonds Marketing consultants for rough and polished diamondsd Tender diamonds from Lesotho, Indonesia, CAR etc.

26 Valuation and Modeling of Bulk Samples Ashton Brazilian Diamonds Contact Diamonds DiamonEx Diavik Falconbridge Gem Diamonds Kensington Tahera Snap Lake Shore Gold Peregrine Diamonds Stornoway

27 Associated Companies WWW Diamond Forecasts Ltd. PolishedPrices.com WWW Diamond Tenders Ltd. Websites:

28 Diamond Market Review and Forecast Bank of Montreal Conference Richard Wake-Walker Florida, February 2008 WWW Group of Companies