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De Beers Sales +53% in FY 2010, Turns Profit of $546M

DTC Prices Rise 27% During the Year

Feb 11, 2011 2:33 AM   By Avi Krawitz, Jeff Miller
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RAPAPORT... De Beers reported Friday that group sales grew 53 percent year on year to $5.88 billion in 2010 due to easy comparisons, higher rough prices and renewed demand throughout the diamond pipeline.

The diamond recovery gained steam in 2010 and helped boost net earnings for the year to $546 million compared with a net loss of $743 million in 2009. De Beers lowered its third party debt by 45 percent to $1.76 billion at year end 2010. Cash flow for the period rose to $937 million, compared with negative $70 million in 2009.

Sales of rough diamonds through the Diamond Trading Company (DTC) rose 57 percent to $5.08 billion with the average price of DTC goods up 27 percent through the year. 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.   

de beers minesDe Beers noted that rough prices surpassed levels reached before the financial downturn, but the group also warned that production and sales within the industry were still lagging while economic uncertainty prevails.

"While the directors remain cautious about the diamond market in 2011, continued positive growth is expected, albeit at a lower rate," the company stated. "The world is not yet back to where it was prior to the onset of the economic crisis, and risks to growth remain."

Group production increased 34 percent to 32.997 million carats but remained well below the 48 million carats mined in 2008. De Beers said it plans to ramp up production to 38 million carats in 2011 and that it would reach full capacity in 2012. The company has previously stated that full production will not return to pre-recession levels and will probably level off at around 40 million carats a year.

Rough operations in South Africa improved production 58 percent to 7.566 million carats, while production through Debswana jumped 25 percent to 22.218 million carats. Production at De Beers Canada rose 54 percent to 1.751 million carats. Namdeb production soared 58 percent to 1.472 million carats.

Debswana commenced the Cut-8 expansion project at Jwaneng mine. Cut-8 represents the largest ever investment 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.

De Beers continued to support the Kimberley Process and furthermore, the DTC offered guidance to its sightholders in 2010 on the identification of potentially illegal and unethical exports from Zimbabwe’s Marange region.

On the polished side of the pipeline, De Beers continued to expand its proprietary diamond brand, Forevermark, throughout Asia. Forevermark was available in 348 doors globally at the end of the year, representing an increase of 40 percent in two years.
Forevermark will continue to expand in China and India this year, and the brand has commenced an "exploratory phase" in the U.S., yielding positive early consumer research. The U.S. market will remain  under review for possible opportunities during 2011.

Cost of sales during the year for De Beers Group rose 42 percent to $4.98 billion. Underlying earnings were reported at $598 million compared with an underlying loss of $220 million. EBITDA rose from $654 million in 2009 to $1.43 billion in 2010. Shareholders' equity in De Beers rose 58 percent to $3.42 billion and shareholder loans rose 4 percent to $790 million.

De Beers did not announce a new chief executive officer (CEO) with its financial results. Former CEO Gareth Penny left the company during the second half of 2010.


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