De Beers ups profit on record sales

2012-02-10 10:22

Cape  Town - De Beers posted a 21% rise in 2011 earnings on the back of a record sales boom at the start of last year, but the diamond producer reported a dip in annual production and said it expected to continue to rein in output growth in 2012.

The diamond giant, 45% owned by miner Anglo American [JSE:AGL] said it expected jewellery demand to continue to grow thanks to improving US demand and growth in China, though at a lower pace after 2011 records, amid uncertain markets.

It also said it would continue to prioritise maintenance at its mines as it awaited improved demand, and did not expect to increase production in 2012.

In its first full set of earnings since Anglo American agreed in November to take majority control of the diamond miner by buying out the Oppenheimer family stake, De Beers said earnings before interest, tax, depreciation and amortisation (EBITDA) totalled $1.7bn.

Underlying earnings rose 62% to $968m.

The diamond miner, which controls more than a third of the global rough diamond market, said sales of rough diamonds by its Diamond Trading Company were up 27% at $6.5bn.

Prices for rough diamonds jumped by over a third in the first half to well above pre-crisis levels but fell sharply in the last five months of the year as investors fled luxury goods, prompting a drop despite a dearth of new mines, low inventories and rising Asian demand that have been lifting diamonds.

Over the full year, De Beers said DTC prices, which can outperform in a volatile market due to the nature of contracts, increased 29%.

Diamonds represented roughly 5% of Anglo’s earnings in 2010, but that could rise to as much as a fifth of earnings by 2013, according to some analysts’ estimates, as a result of shifts including the acquisition of the Oppenheimer stake.

Anglo said the contribution to its underlying earnings from its De Beers stake totalled $443m in 2011.

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 31.3 million carats, down from 33 million a year earlier, due to lower production in the second half as the producer preferred to carry out maintenance and reduce production in the light of world diamond prices.

  • Deborah - 2012-02-10 11:53

    Oppenheimers are smart for selling off their stake of De Beers to Anglo. The Diamond industry is taking a big dip without future top ratings for a long time coming.

  • DuToitCoetzee - 2012-02-10 12:08

    De Beers, go and fix Namaqwaland!!!! Years you made promises that you will restore nature and can be trust and NOW???? You sold of your responsibilities to a company that are know in Namaqwaland for not even being able to sustain it selves and their own promises.

  • Zion - 2012-02-11 11:15

    the tales and stories told of DeBeers has become rather irritating besides most of that information supplied is erroneous and in most cases ficticious. So much is said about De Beers and their operations in Namaqualand. De Beers had an operation at Kleinsee about 55km south of Port Nolloth. that operation was the last one and may have p[assed on to Anglo America. During 1993 I had the opportunity to do a tour of Alexcor at Alexander bay near the Orange river mouth. Even then the destruction to the environment was phenomenal and unbelievable. Alexcor employs, employed, contractors to mine diamonds for them on a contractual basis outside the precincts of Alexcor. Small contractors use small power boats to mine the diamonds from the sea. A drive on the coastal road to Alexander Bay will reveal huge areas where mining in the past had taken place yet deBeers is blamed for that. An even closer examination will indicate deep trenches dug from the sea levels mor just above for prospecting purposes. who is to blame for the lack of rehabilitation? No those trenches were dug in the earlier part of the 20th century. Not De Beers. Ok. Let us compare the diamond mining industry with the gold Mining industry say in Free state gold fields. the Gold Mining industry in the Free State only came into its own during the 1960's. Dozens of mining comp-anies have been through these mines and the industry:HARMONY,ANGLO AMERICAN,GOLD FIELDS,ANGLOVAAL, GENCOR(defunct) and many more. continued.

  • Zion - 2012-02-11 11:30

    continued: A drive through the Free State gold fields will indicate hug3e mine dumps that belong to nobody and huge waterlogged areas that have no owners. Traces of defunct mines stripped to the very roots for the bricks, Huge mine dumps that will stand there forever. Open mine shafts waiting for children to fall in: name of owners forgotten in the misty past. Why is nobody complaining or shifting the blame to others? Maybe we should get Andreas Spath to write an opinion. What I am implying here is De Beers is the scape goat in the diamond industry and vigorously pursued as such even though their hands have less blood on as Alexcor for example. While much of the rest of the country is experiencing even worse conditions imposed by mining operations. Google the Orange River near to0 the coast and behold the un- rehabilitated areas from diamond mining operations by Transhex. De Beers has never been there.

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