De Beers sees reduced supply

JOHANNESBURG – The world’s biggest diamond producer De Beers has told clients it expects a reduced supply of rough diamonds to distribute during the first half of next year as it curtails marketing of Russian gems under an EU deal.

The Diamond Trading Company (DTC), the De Beers marketing arm, has set out intended amounts of diamonds it will offer to its so-called sightholders, or specially selected clients, De Beers told Reuters. “In some instances the level…has been lower than anticipated by DTC sightholders, because the DTC anticipates a lower availability of rough diamonds to sell in H1 2007,” De Beers said.De Beers said part of the reason for the reduced supply was a deal agreed last year with the European Commission to phase out marketing of rough diamonds from Russia’s Alrosa to settle a long-running monopoly abuse case.Under the agreement, De Beers’ purchases of Alrosa rough diamonds will fall from US$600 million in 2006 to US$500 million in 2007, US$400 million in 2008 and to zero in 2009.In addition, lower production is forecast from Botswana, which accounts for the bulk of De Beers mining output.Canadian production will not yet be available in the first half of 2007, De Beers added.The group said last month that it expected its new Snap Lake Arctic mine to start producing in October 2007 with output of 1,5 million carats when it hit full production.Another issue reducing supply to international clients is that De Beers has pledged to southern African diamond producing countries to provide gems directly to local cutting and polishing operations to boost employment and economic growth.De Beers is 45 per cent owned by the world’s third biggest mining group Anglo American Plc, 40 per cent by South Africa’s Oppenheimer family and 15 per cent by the government of Botswana.Nampa-Reuters”In some instances the level…has been lower than anticipated by DTC sightholders, because the DTC anticipates a lower availability of rough diamonds to sell in H1 2007,” De Beers said.De Beers said part of the reason for the reduced supply was a deal agreed last year with the European Commission to phase out marketing of rough diamonds from Russia’s Alrosa to settle a long-running monopoly abuse case.Under the agreement, De Beers’ purchases of Alrosa rough diamonds will fall from US$600 million in 2006 to US$500 million in 2007, US$400 million in 2008 and to zero in 2009.In addition, lower production is forecast from Botswana, which accounts for the bulk of De Beers mining output.Canadian production will not yet be available in the first half of 2007, De Beers added.The group said last month that it expected its new Snap Lake Arctic mine to start producing in October 2007 with output of 1,5 million carats when it hit full production.Another issue reducing supply to international clients is that De Beers has pledged to southern African diamond producing countries to provide gems directly to local cutting and polishing operations to boost employment and economic growth.De Beers is 45 per cent owned by the world’s third biggest mining group Anglo American Plc, 40 per cent by South Africa’s Oppenheimer family and 15 per cent by the government of Botswana.Nampa-Reuters