Gareth Penny, managing director, De Beers
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De Beers flags 10% output boost
Allan Seccombe
Posted: Thu, 09 Feb 2006

[miningmx.com] -- DE BEERS, the world’s largest supplier of diamonds, would grow production 10% in five years, said Gareth Penny.

Penny, who takes over from Gary Ralfe at the month end, wants to stamp his mark on the company despite being satisfied with the legacy left by Ralfe, the wry, eloquent voice of De Beers.

“When somebody comes into a company at the helm, they look to change it and change it for the better. De Beers is a good company and the question now is how to make it a great company,” Penny told Miningmx at the Indaba mining conference in Cape Town.

Apart from the obvious focus on growing supplies of rough diamonds and stimulating demand, Penny said positioning the company to cope with its vast geographical spread was a priority.

“Some of the key areas I’m most focused on are people and organisation effectiveness," he said. "Growing into the different regions as we are is going to test us. Can we manage an organisation across so many new parts of the world let alone all our existing ones?” he said.
We see production rising by something like 10%
De Beers is 45% owned by resources group Anglo American. It expects to finalise the sale of 26% of its shares to a black economic empowerment consortium before June. Funding and paperwork were the remaining hurdles. The sale of the shares, valued at R3.8bn, was announced in November.

De Beers has 65 joint ventures across the globe as it hunts down new sources of diamonds. It plans to spend $100m on exploration this year. De Beers produced 49 million carats this year.

“We see that rising by something like 10% over the next five years to around 55 million carats. Most of it is from existing operations in this time period,” Penny said.

“In 2009, we see significant contributions from our two Canadian mines, Snap Lake and Victory. The biggest element of the increase will come from those two mines.”

Developing the two mines and controlling costs is proving challenging amid rising fuel prices and a boom in mining and exploration as companies scurry to ride the wave of the commodity price surge. The increased levels of activity in the general mining industry has led to some difficulties in securing supplies.

De Beers has recently entered diamond-rich Angola after years of impasse with the government there.

“We haven’t got anything specific to point at. But I think the relationships are bedding down. It’s good to see all the historic and legacy issues are out of the way. We are in partnership with the government and we’re on some interesting ground,” Penny said.

De Beers has a top exploration team in the country to investigate the 3,000 square kilometres to which it has access.

Demand for De Beers’ diamonds is seen rising by “mid-single digits” in 2006, broadly matching the increase seen in 2005.

“If we can sustain that level of growth it means we have a good business,” Penny said.

Prices of rough and polished diamonds are flat at the moment, he said. “We think they will pull through. We would hope to see prices rise again.”

“If you can get demand to grow five or six percent, it’s going to pull prices with it because new supply is limited,” he said.