Rising demand for diamonds and falling supply have boosted prices to within a few percentage points of their pre-recession peak, according to Harry Winston Diamond Corp chairman and co-CEO Robert Gannicott.
The firm owns 40 percent of the Diavik diamond mine in Canada’s Northwest Territories with mining giant Rio Tinto owning the rest.

“Up until the crash, everybody was really pushing their production hard because of the strong demand, because you could,” Gannicott said in aninterview with The Canadian Press. “But having done that, you almost over-deepened pits and over-stretched production, so it now has to be less than itwas before, at least until some new ore bodies are found and developed.”He was speaking following the announcement by the Diavik mine operator of the official start of underground mining at the site.

Underground mining is more costly than open pit and, at Diavik, will lead to lower-grade ore. Gannicott said production at the mine peaked at 11 millioncarats but has since declined to eight million, which he said will be the normal rate of production in the future.Gannicott said diamond prices are back to within 2-3 percent of their peak in August 2008, and he believes that rise will continue over the next 5-10years.

“We’re pretty bullish on it because of the shortage of supply and continuing strong sales in the Far East and India, and then America, which traditionallywas the biggest diamond market in the world, actually starting to get back on its feet again,” Gannicott said. “So we think demand will outstrip supplyand that will push prices.”Gannicott warned, however, that U.S. demand could take some years to return to pre-recession levels. “U.S. sales have started to recover, but it’s not
a rush back to health in a period of six months or something,” he said. “I personally think it’s going to be two, perhaps three years, before America isreally in a spending mood again in a big way.”Harry Winston Diamond Corp last week reported a loss of $3.4 million in the fourth quarter, compared with a loss of $73 million a year earlier. Sales totalled $133.7 million, up from $118.4 million. Rough diamond production was 1.6 million carats in the period, a decrease from 2.6 million carats in thesame quarter last year.

“Production during the quarter was significantly lower than the comparable period last year due to the planned reduction of mining activity to reflect thesoftness in the rough diamond market earlier in the year,” Gannicott said.

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