Middle East – De Beers Saviour

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De Beers, the world’s largest diamond miner, announced record first-half sales and a remarkable turnaround only two years after diamond prices collapsed. It was forced to seek a $US1 billion ($912 million) bailout from its shareholders, which include Anglo American.

De Beers said yesterday Tuesday that its sales in the first six months of the year had risen by 30 per cent to $US3.9bn, while pre-tax profits rose 55 per cent to $US1.2bn.

“Sales during the period have been exceptional, driven mainly by continued growth in the Middle East, Indian and Asian retail markets, and their impact on rough price growth,” it said.

The market is being driven in part by a supply-shortage, as significant diamond discoveries have been scarce for more than a decade. Meanwhile, there has been a steadily growing appetite from the newly affluent in markets such as India and China to own the gems. This has more than offset sluggish demand from Europe and the US.

De Beers argued yesterday that trade shows had indicated strong demand before Christmas and the Indian festival of Diwali: “Despite the ongoing turmoil with the global economy, we are encouraged by the continued strong growth in price and demand during the first six months of 2011. De Beers is confident that the exceptional growth in retail markets in India and Asia will continue to drive demand for diamonds.”

Kieron Hodgson, an analyst at Charles Stanley, said in a recent research note that prices could stabilize over the next few months: “We expect a pause for breath over the (northern) summer as global macro headwinds and increasing supply temporarily reduce price tension.”

?Our cost base is growing rapidly in South Africa, and indeed Southern Africa?,? Chief Financial Officer Stuart Brown?said. ?Rampant wage inflation significantly above the?consumer price index?is a threat to the long-term sustainability of our operations in South Africa.?

South African diamonds accounted for 7.6 million carats of the 33 million carats that De Beers mined last year. The company also mines the gems in Botswana, Canada and?Namibia.

Expansion

De Beers SA plans to expand its operations in China this year as it expects the country, as well as India and the Middle East, to outpace US demand by 2015.

De Beers announced it will open a second store in Hong Kong and more stores in mainland China. During the first half of the year, De Beers Diamond Jewellers, a joint venture with LVMH Moet Hennessy Louis Vuitton, opened its first stores in Beijing and Almaty, Kazakhstan and a new store in Dubai, according to Dow Jones.

Although the company is expanding its retail business, it sold some mining assets in South Africa and established a new 50-50 joint venture holding company with the government of Namibia to give it a larger stake in operations in that country.

New office in Dubai

Recently, Diamdel, the arm of De Beers? that holds rough diamond auctions online, announced it is opening its first office here.

According to De Beers, Diamdel Dubai will have an office on the 47th floor of the Almas Tower, the building dedicated to diamond, gemstone and jewelry companies in Dubai. Almas Tower also is home to the Dubai Diamond Exchange (DDE), one of the largest diamond bourses in the world.

The office is slated to open in August. It will provide registered businesses, from large-scale diamond dealers and manufacturers to small- and mid-sized specialists, access to rough diamonds via its online auction format.

De Beers said demand is expected to increase following the launch of the office in Dubai.

?The opening of Diamdel Dubai will mark an important milestone in the ongoing transformation of the business. We anticipate that this expansion to our global network will offer improved access to the buying opportunities that Diamdel provides, especially to businesses based in India, Dubai and the surrounding markets,? Diamdel Chief Executive Officer Neil Ventura said.

In Dubai, diamond trading reached record volumes of 268.7 million carats valued at $35.1 billion in 2010, making diamonds the second most valuable commodity traded in the emirate.

The emirate?s rough diamond trade stood at 105 million carats valued at $7.1 billion, increases of 7 percent and 82 percent, respectively.

Sources: theaustralian, Bloomberg, wantchinatimes, ja-newyork

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