Gareth Penny, managing director, De Beers
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Diamond supply crunch
Allan Seccombe
Posted: Wed, 07 Feb 2007

[miningmx.com] -- THE diamond market is likely to slip into a major supply deficit within the next five years because of the lack of major new diamond field discoveries in recent years, De Beers managing director Gareth Penny said on Wednesday.

“Right now there are just no major new discoveries that are in the public domain. So if you look at the supply and demand relationship over the next five years, demand should outpace supply,” Penny told reporters on the sidelines of the Mining Indaba in Cape Town.

There is increasing demand from large markets in China and India and rising diamond purchases in Russia and South America, he said.
Demand is growing
“The fundamental supply and demand equation in the diamond business is a good one. Demand is growing,” he said.

Retail demand has been reasonable in the United States, Penny said, warning that he was restricted in what he could say because the company is releasing results for the period up to end December on 9 February.

It takes years from the discovery of a viable deposit to bringing it into production.

De Beers is focussing its attention of exploring for diamonds in the Democratic Republic of Congo and Angola. It is spending millions of dollars on exploring these highly prospective regions.

De Beers entered a joint venture agreement with the DRC’s state-owned diamond company Miba last year and had some 65,000 square kilometres of land to explore. It has whittled this down to 52,000 square kilometres, handing back land that did not show viable deposits.

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“We spent $20m last year exploring in the DRC and we will stay at those levels or move higher in the foreseeable future,” a De Beers official said at a breakfast for companies operating in the DRC.

“We are turning ground over as fast as possible,” he said. “Our primary objective is to put a diamond mine on the table as fast as possible.”

Angola’s state-owned diamond company Endiama, which takes a majority stake in every diamond project in the country and compels companies to sell their output to their marketing arm at below market prices, is investigating possible changes to diamond regulations, Penny said.

“We are aware they are reconsidering the way they regulate the industry, but at this stage we don’t have any further information. I think they are involved in an internal process,” he said.

Asked if mining companies had been approached for input, he said: “I think they will in due course, but I’m not aware that we’ve been asked for particular input.”