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https://www.bloomberg.com/apps/news?pid=20601116&sid=aFPQdpyiWVN0&refer=africa
De Beers Diamond Sales Advance, Remain Below Normal (Update2)
By Thomas Biesheuvel and Carli Lourens
April 9 (Bloomberg) -- De Beers, the world’s largest diamond producer, said sales are rising this year after demand plunged in 2008 because of the worldwide economic slowdown.
“While still at lower-than-normal levels, sales have been steadily increasing since the end of last year,” spokeswoman Lynette Gould said in an e-mailed statement, dated yesterday. Cash flow was positive in March, and the Johannesburg-based company is “optimistic” about meeting annual goals, she said.
De Beers suspended mining in February at a joint venture in Botswana that produces a fifth of global diamond supply and said it would borrow $500 million from shareholders. Rio Tinto Group and other mining companies have cut production and jobs after the worst recession since World War II hurt jewelry demand.
Shutting mines and cutting jobs may help De Beers, 45 percent-owned by Anglo American Plc, to remain profitable even at “significantly lower level of sales,” Gould said. De Beers may save more than $1.5 billion of planned expenditure this year, she said. Diamond mines in Botswana probably will return to operation next week, the statement shows.
The producer’s sales may halve in 2009 after diamond prices fell at least 30 percent during the past year, the Financial Times reported today.
Less Spending
The newspaper reported one of several scenarios considered and not necessarily the most likely one, Gould said. Spending was cut to the extent that the company would remain profitable even if sales were to fall by 50 percent, she said.
De Beers said Jan. 20 it would reduce the amount of rough gems, or diamonds that aren’t cut or polished, offered to clients by about half until April.
Diamond prices fell 7 percent in the first quarter after slumping 9.2 percent in 2008, according to a PolishedPrices.com index. Tiffany & Co., the world’s second-largest luxury-jewelry retailer, reported a 76 percent plunge in fourth-quarter profit last month after even the wealthiest shoppers spent less.
Rough diamonds don’t trade on commodity exchanges. Instead, De Beers -- which sells about 60 percent of the world’s uncut gems -- holds 10 annual sales, known as sights, to selected customers from Belgium, Israel and other countries known for diamond-cutting.
The Debswana venture, which is 50 percent-owned by Botswana’s government, is expected to resume production at its Jwaneng, Orapa and Letlhakane mines on April 15, Gould said. The venture produced 32.3 million carats in 2008.
To contact the reporters on this story: Thomas Biesheuvel in London tbiesheuvel@bloomberg.net; Carli Lourens in Johannesburg at clourens@bloomberg.net.
Last Updated: April 9, 2009 11:18 EDT