De Beers upbeat on consumer demand

[miningmx.com] — CONSUMER demand for polished diamonds rebounded during 2010, according to De Beers, which on Friday released results showing a welcome return to profitability for the year to end-December.

The increase in retail diamond demand is extremely good news for the overall diamond industry.

During the past 12 months diamond analysts had been concerned that, while prices and demand for rough diamonds had recovered well, there had been minimal follow through on the retail side of the business.

De Beers said in its annual results statement that, “while restocking picked up throughout the year, it was also clear that consumer demand rebounded as evidenced by the extraordinary growth in China and India and the better-than-expected retail performance in the US during the Christmas buying period.’

Sales of rough diamonds by De Beers’ marketing arm – the Diamond Trading Company (DTC) – jumped 57% to $5.1bn (2009 – $3.23bn) and De Beers reported net earnings of $546m for the year after losing $743m in 2009.

According to De Beers, the group moved rapidly from stabilisation to strong recovery during the year as it increased production and sales and completed a “complex refinancing of all its international and South African debt on satisfactory terms.’

But the group cautioned, “notwithstanding this, the industry is not back to pre-recessionary levels in terms of production or sales and a high degree of global uncertainty remains.’

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

“For the foreseeable future, continued recovery in global economic outlook and strong retail confidence are expected to underpin positive growth in consumer demand for diamond jewellery in 2011.

“After a better-than-expected Christmas retail season the US market is expected to continue its recovery and the exceptional growth seen in China and India is expected to be sustained.

“Global economic expansion and retailer sentiment are supportive of further DTC sales growth in 2011, during which time global total production for the De Beers family of companies is expected to reach 38m carats, approaching full production which will, as planned, be achieved in 2012.’

De Beers increased production in 2010 by 34% to 33m carats (24.6m carats). During the year the group also started the Cut-8 expansion project at the Jwaneng mine in Botswana which is expected to yield 100m carats worth some $15bn over the life of the mine which will be extended at least until 2025.