South African Diamond Output Will Fall, Frost Says

By Ron Derby

May 25 (Bloomberg) -- Diamond production in South Africa will continue to decline until at least 2011 amid an “unprecedented” drop in demand, research company Frost & Sullivan said.

Jewelry sales are plunging as the global economic slowdown forces even the wealthiest consumers to curb spending on luxury goods. The price of polished gems dropped by an average of 31 percent since an August peak, according to diamond data company PolishedPrices.com.

South African output will fall to 12 million carats in 2011, from 15.8 million carats last year, Wonder Nyanjowa, a mining analyst at Frost’s Cape Town office, said in an e-mailed report today.

There are “no sharp rebounds expected in the demand for commodities in the near to medium term,” he said. “The decline in the global demand for diamonds has been unprecedented.”

BRC Diamondcore Ltd., the Toronto-based gem producer, said May 20 that production at its South African operations were still suspended because of the slump in gem prices. De Beers, the world’s largest diamond company, said May 6 its six South African mines were producing at reduced levels.

De Beers accounts for 90 percent of South Africa’s new mine supply for rough diamonds, Nyanjowa said.

To contact the reporter on this story: Ron Derby in Johannesburg at rderby1@bloomberg.net