[miningmx.com] — DIAMOND producer De Beers has recorded its highest interim sales figures to date, buoyed by strong retail demand from the Indian and Chinese consumer markets and stronger than expected demand in America.
Reporting financials for the six months to end-June on Tuesday, De Beers said the sales of rough diamonds by the Diamond Trading Company (DTC) totalled $3.5bn – a 33% increase compared with 2010 – driven by price growth of approximately 35%.
Total sales amounted to $3.9bn. The approximately $400m difference between DTC and total sales is accounted for by industrial diamond arm Element Six.
Production was on par with that of 2010’s – 15.53 million carats compared to 15.43m.
“De Beers has continued to focus on efficiency improvements and on maintaining a lower sustainable level of overhead bases, which has resulted in a favourable impact on the bottom line,’ read a company statement.
Underlying earnings for the interim period were up 120% to $666m, already more than 2010’s $598 for the full financial year. Underlying earnings comprises net earnings attributable to shareholders, adjusted for the effect of any once-off or special items and re-measurements, less any tax and minority interests.
In downstream activities, the group’s Forevermark brand continued its expansion drive into core retail markets of China, Hong Kong and Japan, and has recently launched in India, Singapore and the Caribbean. It is also now available at a small number of stores in the USA, with further expansion targeted for this year.
The group would also continue to expand its De Beers Diamond Jewellers brand, a joint venture with LVMH, into China. It already owns stores in Beijing, Kazakhstan in Almaty as well as Dubai.
The group said Element Six recorded a good first half performance in respect of both sales and profitability, with robust demand across its product ranges. “(Element Six’s) performance was impacted by operating challenges and a weak US dollar, but is well positioned for the remainder of the year,’ read the statement.
On the production side, De Beers said the extension project at Debswana’s Jwaneng was progressing on schedule and budget. De Beers Canada recently completed a six months optimisation study on the Snap Lake Mine to more economically extract the complicated ore body that has a forecast life-of-mine of 20 years.
As for De Beers Consolidated Mines (DBCM), the group’s South African operations, the sale of Finsch (to Petra Diamonds) and Namaqualand (to Trans Hex) would mark the end of its asset disposal programme.
As for the remainder of 2011, De Beers said that despite the ongoing turmoil in the global economy, the growth in retail markets in India and Asia would continue to drive demand for diamonds.
“Reports from the recent JCK trade show indicate that the all-important Christmas season in the US, and Diwali, are set to be strong,’ De Beers said.
STRIKE ONGOING
Spokesperson Tom Tweedy said production at DBCM has not yet been interrupted by striking employees of the National Union of Mineworkers.
He said around 70% of the workforce has not turned up for work since Friday, but that the group had contingency plans in place.
De Beers has offered workers a 7.0% wage increase and a once-off payment of R2,500. The unions are holding out for a 15% increase, after settling on between 9.5% and 10% in 2010.
“It is the first time we have a strike at De Beers since 1992 so this is very regrettable,’ Tweedy said. “But our packages are already very competitive, and we need to keep a check on our costs.’
