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US fears, blackouts trouble De Beers Posted: Fri, 08 Feb 2008 [miningmx.com] -- DE BEERS is the latest South African mining company to warn of tumbling mineral production if Eskom, the country's power utility, fails to meet its 90% power quota. "Below this level [90% power supply], the impact on production will be significant and could be in excess of 10%," said the company. Reporting its full-year results, De Beers said diamond sales dropped to $5.9bn last year from $6.15bn the year earlier as the group's Diamond Trading Company (DTC) struggled to source all the diamonds it needed. It posted a net loss of $521m after recording a profit of $730m last year. Annual production was kept flat at 51.1 million carats produced in 2006. De Beers said it aimed to maintain production at this level this year with new production of over 1.5 million carats due from the group's Canadian mines. This production would offset the impact of the sale of the group's operations at Cullinan and Kimberley in South Africa, it said. De Beers warned energy issues in southern Africa could present "operational challenges" and said it was introducing contingency plans to make effective use of the available energy between the different operations. "Early indications are that even if the power supply is maintained at 90% levels, there will be an impact on the overall group," said De Beers. In addition to the possible cuts in expected production, De Beers said uncertainty over world market conditions, in particular in the US, which is its largest jewellery market, may dent sales. De Beers Consolidated Mines (DBCM), De Beers South African business, lifted production by 15 million carats last year even as the company sold a number of mines in South Africa including the Cullinan diamond mine. The increase in production was "mainly due to improvements made to the diamond recovery process at Venetia mine where carats recovered increased by nine percent," said De Beers. The Voorspoed mine in the Free State in South Africa is scheduled to start production in Q4 2008. Voorspoed is expected to produce 0.7 million carats annually. Production in Botswana through Debswana, the joint venture between De Beers and the government of Botswana, was the largest contributor, mining 33.6 million carats. Namdeb, the joint venture with the Namibian Government, also increased production, rising four percent to 2.2 million carats. The company made an impairment charge of $965m as costs in developing its Snap Lake project in Canada escalated. "With the significant increase in the values of the Canadian Dollar vs the US Dollar, fuel, labour and capital costs due to construction challenges at Snap Lake, the directors believe that it is prudent to make an impairment against the value of the Group's Canadian assets of $965m," said De Beers. Click Here to subscribe to our daily newsletter
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