Publications
Partners
Johannesburg - Diamond giant De Beers has frozen diamond exploration in the Democratic Republic of the Congo (DRC) as an extension of its slowdown on the African continent in response to slowing global diamond demand.
De Beers' announcement on Friday of its plans to downscale in the DRC comes just days after it announced a production interruption of three months from its Namibian operations, and about a month after it announced a temporary shutdown of its operations in Botswana.
While its businesses in Namibia and Botswana are already producing operations, its activities in the DRC were primarily exploration.
"Globally, De Beers Exploration is ensuring that its resources are more efficiently and effectively deployed by undertaking exploration activities that have more immediate potential and that will help ensure future growth enabling De Beers to maintain its leadership position in an increasingly competitive industry," De Beers said in a statement.
The group said in its global portfolio, exploration would consolidate its focus in those areas that it believes have the highest potential for potential new economic discoveries.
"For De Beers, the DRC remains highly prospective, but we cannot ignore the current global economic crisis," said Marie-Chantal Kaninda, head of administration for De Beers in the DRC.
"When economic conditions improve, De Beers will assess new opportunities for accessing prospective ground-holdings in this country," Kaninda said.
Conserving cash and saving jobs
De Beers has in the meantime, instituted a three-month production interruption at Namdeb, which is equally held by De Beers and the government of Namibia.
Starting at the beginning of April, the production interruption was "deemed as an effective way to preserve cash" as the company grappled with the impact of the world economic downturn on the diamond industry.
"The economic challenge has deteriorated to such an extent that further immediate action is required in order to ensure the future sustainability of the company," Namdeb said last month.
Namdeb is renowned for supplying more than 85% of the entire diamond production of the nation of Namibia.
In Botswana, Debswana in February unveiled plans to temporarily shutdown its operations between February 25 and April 14 and to suspend production at Damtshaa Mine and Orapa No 2 Plants for the remainder of 2009.
Debswana, a joint venture between De Beers and the government of Botswana, said these actions were being taken to mitigate the effects of the global slowdown by reducing production during 2009 to align with demand, conserve cash for the company and protect employment.
As early as January, De Beers confirmed it has started consultations with trade unions over job cuts at six of its South African operations.
While De Beers, which employs 3 500 people in South Africa, said it would only know how many people would be affected by the job cuts once formal consultations got under way at each site, reports suggested that it was planning to cut 1 415 positions or about 40% of its workforce.
"We have taken account of the world's economic situation and its effect on the general economy and the luxury product market in particular, which will not be immune from the effect of the downturn in the short term," De Beers said at the time.
De Beers said it had revised its mining plans for 2009 in line with client demand.
These plans included capacity changes that allow the diamond producer to be more flexible in an evolving market, but the diamond giant has yet to reveal the extent to which these capacity changes will impact on its total carat production in
Given Anglo American's (AGL) 45% stake in De Beers, the production scale-backs will undoubtedly also have implications for the global resources giant's full year earnings.
- I-Net Bridge
