Monday, February 14, 2011

De Beers may raise output 21%

The De Beers Group ‒ the largest diamond miner in the world ‒ may raise its annual rate of output 21% to full capacity by the end of 2012, and is preparing a final study for a new mine in Canada to meet “extraordinary” demand from China and India.

Revealing this here, joint acting CEO Bruce Cleaver said the company might raise the pace of its production to an annual 38 million carats during this year and to 40 million in 2012, from 33 million in 2010.

De Beers ‒ 45% owned by Anglo American plc ‒ has reported record 2010 earnings before interest, tax, depreciation and amortization of US$1.4 billion, following a 57% surge in its trading arm’s sales to US$5.08 billion.

China and India delivered “extraordinary growth, well beyond our expectation at 25% and 31% respectively for the year,” Cleaver said on a conference call. “In America, the Christmas season also exceeded our expectations with an increase of approximately 7% for the full year. Growth will probably continue to perform in those markets,” he added.

De Beers and main rival ZAO Alrosa of Russia have benefited from restocking after the global credit crunch forced purchasers to cut inventories in 2009, and an average 27% recovery in prices.

“A blossoming diamond market and strong rebound in fundamentals is fueling gains in listed producers,” Liberum Capital Limited wrote in a note. “Namakwa Diamonds Limited is up 24% this year and Petra Diamonds Limited is up 29%.

“In anticipation of further demand growth, De Beers will in a few weeks submit the final feasibility study for the Gahcho Kue project in Canada, its third mine, which may yield 5 million carats a year,” said joint CEO Stuart Brown. It owns 51% of the venture with Mountain Province Diamonds Incorporated. De Beers also plans to spend US$3.6 billion expanding its Jwaneng mine in Botswana, and may build underground operations at Venetia in South Africa.

“De Beers isn’t distracted by speculation on whether Anglo American will increase or decrease its shareholding in the company,” Brown added.

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