De Beers back to its old tricks

[] — SO MUCH for the “new’ De Beers with its more open and transparent way of doing business. When push turned to shove, the current management showed itself to be true descendants of the old Cartel.

I am referring to the devious way in which the group handled the release of its financial results for 2008 and, in particular, the manner in which management did its best to minimise publicity on production cutbacks at the De Beers mines.

Despite being delisted, De Beers has traditionally published its results separately from those of parent Anglo American.

This year the De Beers results were put out as part of the overall Anglo American presentation on February 20. The official reason is that Anglo requested it to be done this way because it is the major shareholder.

The real reason? That’s straight out of the doctrines of one Niccolo Machiavelli and his advice to the Medici family, which ran the Italian city state of Florence in the 16th century.

In his famous work The Prince Machiavelli held that if there was a lot of dirty work to be done, it should be executed all at the same time to avoid drawing out any lingering negative reaction from the victims’ relatives and allies.

So, if you have a ton of bad news to deliver, combine it and swamp the news services. Who would be concerned about what’s going on at De Beers after Anglo has passed its dividend?

Then there was the refusal by De Beers MD Gareth Penny to elaborate on production cutbacks on the group’s mines.

The official comment in the documentation was that “De Beers has taken steps to significantly reduce production levels, costs and capital expenditure across all operations’.

Asked to be more specific at question time during the Anglo results conference, Penny replied he could not because this was still “work in progress’.

But phoning around that afternoon produced a statement from Debswana that all its mines had been placed on care and maintenance until further notice.

That was a huge piece of news because Debswana accounts for about 67% of De Beers’ total diamond production. In 2008 this amounted to 48.1 million carats, of which 32.3 million carats came from the Botswana mines.

According to De Beers, the reason for Penny’s reticence was that due process had not been completed with the unions and employees in Botswana.

“One cannot have employees read about their future before the agreements and understandings about mitigation steps and the actual process involved in reducing costs have been fully discussed by the directly affected parties,’ said a De Beers spokesman this week.

So the final nuts and bolts with the Botswanans were put in place in the two hours following the Anglo presentation?

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An alternative suggestion from a diamond industry source was to ponder whether the Botswana government – which is a 50-50 joint venture partner with De Beers in Debswana – had a different agenda and decided to be more forthcoming than Penny for its own reasons.

Getting information about the situation on De Beers’ South African mines turned out to be as hard as pulling teeth.

The first reaction from the De Beers spokesman was a refusal to provide information on a “mine-by-mine basis’. That was in response to a query whether Venetia – the largest De Beers producer in SA – had been shut down along with the Debswana mines.

Then came a follow-up email to clarify the situation, which stated:

“De Beers Consolidated Mines is operating all six mines in South Africa on mine plans appropriate to the demand for new production. This level might change in the course of this year and this possibility has been included in our planning.’

The general opinion in the diamond market is that there’s very little “demand for new production’ at the moment, so I published an article containing the speculation that Venetia had been shut down.

All of a sudden De Beers WAS prepared to provide information on specific mines. Miningmx received an immediate denial that Venetia had been closed and an accompanying statement which said:

“Venetia has not ceased production. Production continues on all De Beers mines in South Africa, and Venetia continues as our largest mine with three shifts operating five days a week mining and treating ore and recovering diamonds.”

So why could they not have said that in the first place? Does it have something to do with the fact that the Botswana government might not be too happy that its mines have been shut down but the SA mines remain in production?

Finally, neither the statement about Debswana nor a subsequent one about retrenchments at the Snap Lake mine in Canada had been placed on the De Beers group website as of midday on February 26.

They went up that afternoon, shortly after queries were emailed to the De Beers spokesman asking about Penny’s response and why the announcements were not on the website.

Up until that time, anyone visiting the site could have been forgiven for thinking all was just fine in the diamond business while reading about the Forever Precious mark collection and diamonds at the Oscars.