DIAM Diamond Cap

TIDMDIAM

RNS Number : 3166R

Diamond Circle Capital Plc

16 November 2012

INTERIM MANAGEMENT STATEMENT

MARKET COMMENT

The diamond market has been in a clearly bearish mode since the end of the first semester.

After good initial resistance in the first part of the year, especially in relative terms, the combination of a swath of negative developments eventually proved too much for the market to bear. From a macroeconomic perspective, the absence of substantial job creation in the US, the weak spot in Chinese growth, and seemingly endless worries over fiscal imbalances in the eurozone resulted in overall risk aversion from diamond investors and dealers alike.

This risk aversion was further compounded by the fact that rough prices at miners' level remained for an extended period of time stubbornly out of sync with prices witnessed on the polished side. Last but not least, the inability of the Indian rupee to bounce back durably from all-time lows mechanically weighed on final demand.

As a result, the PolishedPrices Diamond Overall index decreased over the period by a steep 8.4% (as at the beginning of November) while the Composite Rough Diamond Index resisted comparatively better, with a consolidation limited to 5.3% (but after having retreated by close to 40% from August 2011 highs...).

As is usually the case in bearish markets, price falls affected all categories of diamonds. RAPI indices for 0.30, 1.50, 1.00 and 3.00 carat were down respectively 8.4, 10.8, 11.9 and 11.3% year to date, while coloured diamonds outperformed whites overall.

The duration and breadth of the consolidation lead some commentators to say that a rebound may soon occur but, in this regard, it should be underscored that share prices of leading diamond producers continue to creep downwards (Gem Diamonds' market capitalization has been halved since March while Petra Diamonds seems just unable to recover from its 3-year lows), which should certainly inspire further cautiousness down the road.

FUND ACTIVITY

Following the acquisition by Mr Chatila of 62.29% of the voting of the Company in June, shareholders decided at an Extraordinary General Meeting held on 12 July that "the Company will now be managed with a view to realising its existing portfolio of diamonds in an orderly and timely manner and returning the net proceeds of sale to shareholders at such times and in such manner as the Board may in its absolute discretion determine."

In accordance with this revised investment objective and policy, the entire collection of diamonds (11 stones) held by the Company has now been realised. Net aggregate proceeds after all selling commission and costs amount to $ 36.4 million, compared to a carrying value of $44.0 million.

Now that the entire portfolio has been realised the Board has instructed its advisers to prepare the necessary documentation to liquidate the company.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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