Petra Diamonds CEO Johann Dippenaar.

(IDEX Online News) – The decline of the Indian rupee against the US dollar, and the subsequent rise in prices of rough goods for Indian diamantaires, has not reduced demand for rough diamonds in India, said Petra Diamonds CEO Johan Dippenaar.

 

The rupee, which dropped to a record low of 60.76 to the dollar last week, has declined by more than 10 percent since the start of May.

 

"We haven’t seen any effect," Dippenaar said last week in comments cited by Reuters. "Indian companies are still strong buyers, but I don’t want to for one moment say ‘no’ it will certainly have no effect."

 

Petra Diamonds held its last auction of the financial year in Johannesburg last week. "We have not noticed an impact (from the weak rupee) on the number of Indian clients attending," said spokeswoman Cathy Malins.

 

India imported 31 million carats of rough diamonds in April-May, up more than 25 percent from the same period last year.

 

Meanwhile, Dippenaar said the weaker rand would lead to rising costs at its mines which are mostly in South Africa, though it would be good for earnings. "Materials that we use are based on an international price, like explosives and diesel; that’s all linked to the oil price. [The weak rand] obviously drives up those costs so it’s a bit of a double-edged sword," he said.

 

He added that he was more concerned about markets overreacting to last week’s comments by the US Federal Reserve which hinted that it would start slowing the pace of its bond-buying stimulus program later this year.

 

"When you see the type of reaction that we’ve seen in the market it obviously creates concern that people’s confidence and mood will be somewhat subdued," he said. "But we haven’t made any sale since those announcements so we will monitor what happens in the market.

 

"We remain confident that in the medium term, and especially in the medium to longer term, our market should remain robust because of the supply to market," Dippenaar said. "Effectively no new ore bodies have been found, so it all points to one thing: tight supply to the market."

 

Petra Diamonds, which produced 2.2 million carats in fiscal 2012 ended June 30, plans to more than double production to 5 million carats by fiscal 2019. De Beers produced 27.9 million carats last year and said it expects the same this year.

 

Dippenaar said the company’s cash flow would grow significantly by fiscal 2016 as its mines go deeper, giving it access to higher grades.