Anglo American Plc, owner of the world’s second-biggest diamond producer, will keep on investing in new South African projects for as long as operations remain profitable, Chief Executive Officer Mark Cutifani said.
“We will continue to support South Africa, but at the same time we have to remain profitable,” he told reporters at the Venetia diamond mine owned by Anglo’s De Beers unit. “Sometimes we have to make tough decisions and make sure we get that balance right.” De Beers yesterday started the $2 billion expansion of the open-pit operation to include an underground mine, extending the life of the asset beyond 2040.
Anglo’s underlying earnings fell 54 percent to $2.84 billion in 2012 following a decline in commodity prices and an increase in costs. Its Anglo American Platinum Ltd. unit, which is the world’s biggest producer of the metal and has most of its operations in South Africa, is consolidating five mines with nine shaft systems into three operating mines to reduce output and help return to annual profit.
Anglo, based in London, may report underlying earnings of $2.1 billion this year, according to the average estimate of 20 analysts surveyed by Bloomberg.
“The most important thing is that we manage within our means and when prices pull back we have to be very careful where we spend our money and we have to make sure we have the right margins. We have to work both sides.”
Underground output at Venetia is forecast to start in 2021 and the below-surface operation will replace the open pit as South Africa’s biggest diamond mine, De Beers said in an e-mailed statement. The operation, which contains an estimated 96 million carats of the gems, will support more than 8,000 direct jobs.
The global market in polished diamonds may reach $31 billion by 2016, De Beers forecast last year. OAO Alrosa produced 34.4 million carats of diamonds last year, surpassing De Beers’s 27.9 million carats output to become the world’s largest producer of the gems.
South Africa must “provide the right environment for growth,” President Jacob Zuma told reporters yesterday at the Venetia mine near Musina, about 600 kilometers (372 miles) north of Johannesburg. “This includes the implementation of transformation measures and also to promote labor-market stability in the sector.”
Inter-union rivalry has fueled tension at South African platinum mines, where the National Union of Mineworkers has lost its status as the most powerful workers’ body to the Association of Mineworkers and Construction Union. At least four union members have died this year as the organizations compete for membership.
Strikes shaved 0.5 percentage point off economic growth in 2012 and an estimated 0.3 percentage point this year, Zuma said in June.