De Beers reported that its group sales grew 53 percent year on year to $5.88 billion during 2010, with the diamond industry’s recovery helping to boost its net earnings for the year to $546 million versus the net loss of $743 million posted for 2009. Rough diamond sales conducted through the Diamond Trading Company (DTC), De Beers marketing and sales arm, rose 57 percent to $5.08 billion and the average price of DTC goods gained by 27 percent through the year.
Group production increased 34 percent to approximately 33 million carats, but remained well below the 48 million carats mined in 2008. De Beers said it plans to ramp up to 38 million carats in 2011 and that it would reach full capacity in 2012. Production at De Beers Canada rose 54 percent to 1.751 million carats and Namdeb production soared 58 percent to about 1.5 million carats. Rough operations in South Africa improved production by 58 percent to approximately 7.6 million carats, while miner Debswana’s production jumped 25 percent to 22.2 million carats.
In 2010, Debswana, a joint venture between the government of Botswana and De Beers, initiated the Cut-8 expansion project at its Jwaneng mine. Cut-8 represents the largest investment ever made in Botswana and is expected to yield 100 million carats worth approximately $15 billion over the life of the mine, which will be extended until at least 2025.
The company generated additional revenue from its Diamdel unit, which sells rough to the secondary market, its De Beers Diamond Jewellery retail partnership and its Element 6 industrial diamond business.
“We had an enormously successful 2010, but we don’t foresee a repeat this year,’’ Bruce Cleaver, De Beers chief commercial officer and acting joint chief executive officer (CEO), told Rapaport News. “We expect industry growth to be in line with economic growth, maybe a bit more given the markets in China and India, but there is still reason for caution.”
Cleaver stated that the main risk factors causing lingering uncertainty in the diamond markets were political instability in Egypt and Tunisia, general economic conditions and the high level of bank lending to the industry that still prevails.
In related news, the DTC raised prices by an average of 7 percent at its February sight. Sources at the sight indicated that the increase impacted all categories of rough and was in line with expectations. The sight achieved an estimated value of approximately $600 million.
De Beers spokesperson Lynette Gould confirmed that there have been increases on some boxes that amounted to an average of mid- to high-single digit hikes. “These reflect the data DTC have been collecting from the multiple reference sources the company uses to inform its pricing,” she explained.
Botswana Diamonds on AIM
Botswana Diamonds was admitted to London’s Alternative Investment Market (AIM) under the ticker “BOD.” The exploration firm, formed following Lucara Diamonds’ takeover of African Diamonds, holds three exploration licenses in Botswana, two for AK8 and AK9, situated between the Orapa and Letlhakane mines, and one for BK5, located near Damtshaa. Botswana Diamonds reported that it has $2 million in cash to fund exploration in 2011 and is planning to pursue opportunities in Zimbabwe and Cameroon.
The company recently appointed Andre Fourie, a veteran of Anglo American and De Beers, as its new technical director.
BRC, Rio Tinto Partner
BRC DiamondCore has entered into a joint venture agreement with Rio Tinto in the Democratic Republic of the Congo (DRC). Under the agreement, Rio Tinto will fund the proposed exploration program for the DRC North Project and BRC will hold a 30 percent interest, establishing funding in proportion to equity.
BRC’s reconnaissance stream sampling program was delayed due to heavy rains, but will be completed by this May. BRC also announced that it will resume diamond exploration in the Province Orientale in northeastern DRC, where 285 stream samples were collected, with each sample containing 30 liters of screened material.
Namdeb Halts Production After Second Fatality
All production has been stopped at Namdeb’s Oranjemund mine after an accident claimed the life of employee Theophilus Makili, who died on February 18, according to The Namibian. The 24-year-old operator was killed instantly when the truck he was driving overturned on the gravel road between Oranjemund’s gate and Chameis Road.
Questions are now being raised about safety at the mine, as this is the second employee fatality this year. Karas Police Commissioner Josephat Abel said there are old roads in the area, many of which are closed, but no signs warning workers not to use them.
“It was a freak accident and very tragic,” he stated. “The deceased did not, nor could have, seen that the road ended in the sea.”
Namdeb’s brand manager, Pauline Thomas, said investigations into the accident have not been concluded, but it is suspected that Makili lost control of the truck. She added that all mine operations have been suspended to enable Namdeb to “reassess all its safety systems.”
Article from the Rapaport Magazine - March 2011. To subscribe click here.