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De Beers Sees ‘Moderate’ Diamond Demand Growth on China

Feb. 15 (Bloomberg) -- De Beers, the world’s biggest diamond producer, forecast a recovery in jewelery demand this year after profit tumbled 45 percent in 2012 as prices and output of the precious stones fell.

“De Beers expects moderate growth in diamond jewelery demand,” the company said today in a statement. “This will be supported primarily by a more positive picture emerging from China and India compared to 2012.”

Rough diamond prices fell 16 percent last year after three consecutive annual gains as Asian purchases slowed and the euro region debt crisis eroded consumption, according to PolishedPrices.com data. De Beers said in December that prices will be buoyed in 2013 as global production remained constrained. The company said today that 2013 production would be about the same as 2012.

“Some upside is possible in the U.S.” this year, according to the producer, which said trading in other developed markets is likely to be “challenging.”

Anglo American Plc, owner of De Beers, said in a separate statement that underlying operating profit at the unit fell to $815 million in 2012 from $1.49 billion a year earlier. Diamond production dropped 11 percent to 27.9 million carats, about 40 percent less than its pre-crisis output in 2008.

Venetia Expansion

Diamond producers have struggled to find new large mines to replace aging assets. Output at many of the biggest deposits is falling as supplies of more accessible gems near the surface are depleted. De Beers’s Orapa project in Botswana began output in 1971, while its Jwaneng diamond mine, the world’s largest by production value, and Rio Tinto Group’s Argyle started in 1982.

De Beers plans to invest $2.3 billion to build a mine beneath its Venetia open-pit operation in South Africa, it said yesterday. The company expects underground output to begin in 2021, yielding about 96 million carats during the mine’s life.

Output from its Debswana venture in Botswana fell 12 percent to 20.2 million carats. The company produced 4.4 million carats in South Africa, and a further 1.7 million carats and 1.6 million carats in Namibia and Canada respectively.

Anglo American bought the Oppenheimer family’s 40 percent in De Beers for $5.1 billion last year, increasing the company’s holding to 85 percent and ending the dynasty’s 80-year ownership. Botswana owns the rest of the business, which was formed by British mine operator and explorer Cecil John Rhodes more than 120 years ago.

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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