De Beers earnings up 55% on bumper price rise

LONDON – De Beers, one of the world’s largest diamond producers, posted a 55 per cent jump in first-half earnings on the back of record sales and an unprecedented jump in prices, driven by China, India and unexpectedly strong demand from the United States.

De Beers, 45 per cent owned by miner Anglo American, said yesterday earnings before interest, tax, depreciation and amortisation (Ebitda) totalled US$1,2 billion.The diamond miner, which controls around 40 percent of the rough diamond market, said sales of rough diamonds by the Diamond Trading Company were up 33 per cent at US$3,5 billion, the highest ever sales figure recorded for the first half.Prices for diamonds are now well above their 2008 pre-crisis levels, having been one of the best performing commodities this year. Rough diamond prices have been boosted by a dearth of new mines, low inventories at cutting centres and increasing demand.’Not only have we seen continued growth in rough diamond prices, but we have seen [the strongest] growth in polished prices in the six month period in the last 30 years, which is very healthy for us,’ Bruce Cleaver, chief operating officer, told reporters on a conference call.De Beers did not give a forecast for price growth for the second half, but said it expected prices to continue growing, with the all-important Christmas season in the United States, the world’s largest jewellery market, and Indian Diwali celebrations expected to produce strong demand.It expects US demand growth over the year to be in line with 2010 at around seven per cent, almost double previous forecasts.Anglo American, which controls De Beers alongside the Oppenheimer family, said it would report underlying earnings of US$299 million for the first half from its investment in De Beers, and the numbers helped lift its shares in early London trade. De Beers, which vies for the spot of the world’s largest diamond producer in carat terms with Russian state-owned miner Alrosa, said it recovered 15,5 million carats over the six months, broadly in line with the previous year, despite plans to boost output.The miner said plans to increase production were hampered by heavy rainfall in South Africa and skills shortages at the artisanal level, which delay repairs.’We are busy addressing this and production in the second quarter and the second half of the year will be much improved,’ chief financial officer Stuart Brown said.De Beers said its production in South Africa had not yet been affected by strikes over wage negotiations – which are currently hitting the country’s entire mining sector – thanks to the group’s advance planning and stockpiling. – Nampa-Reuters