Charlotte Mathews
24 July 2008
Johannesburg — DIAMOND giant De Beers expects demand for diamonds at the top end of the market will remain firm for the rest of the year, but declined to say whether any more price increases were likely.
"It is too early to tell what will happen to diamond prices through the balance of the year," MD Gareth Penny said yesterday. "We will continue to monitor demand and make decisions as we go along."
The US mortgage crisis has been reflected in lower sales of diamonds to the main US consumer market, but other markets such as China, India, Russia and the Middle East have remained resilient.
The upper end of the market in the US, which buys diamonds of 0,5 carats and upwards, has continued to show strong demand. Penny said this was the same market for artworks, luxury yachts and similar items and it included a large number of new high-net-worth individuals. There was also an increasingly affluent market in the Middle East, with petrodollars, and in the developing Indian and Chinese markets.
Traditionally, the fourth quarter of the year is the strongest for diamond sales.
De Beers' trading arm, the Diamond Trading Company (DTC), has raised prices twice this year, 8,5% in April and 5% this month . In the six months to June, the DTC sold 10% more diamonds worth $3,3bn compared to the same period last year.
The group reported earnings before interest, tax, depreciation and amortisation rose 31% to $831m because of new production and control of costs. Cash flow from operations fell because of the timing of production and increased finance charges. De Beers' net debt was $4,1bn at the end of June, but as capital expansion projects were close to completion, the figure would decline in the second half, chairman Nicky Oppenheimer said.
Group production fell slightly to 24,2-million carats from 25,3-million last year. About a million fewer carats were produced by De Beers Consolidated Mines in SA as a result of power outages in the first quarter and the closure or downscaling in preparation for sale of some of the local mines. This was partly offset by new production from Canada.
De Beers will shortly open three new mines: Victor and Salt Lake in Canada, and Voorspoed in SA. Victor and Salt Lake will more than replace the $400m of diamonds that De Beers would have bought from Russian producer Alrosa this year, Penny said.
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