De Beers, the world’s leading diamond producer is to ramp up production in the next two years to catch-up with the demand under the global economic upturn while at the same time saying it is too early to talk about its possible listing next year.
The Financial Times said Monday that De Beers was planning to limit its production to 40 million carats per annum starting from┬á 2011 a move that will ensure that it derives a lot of value out of the supply-demand imbalances.
It also quoted a leading diamond analyst, Chaim Even-Zohar saying that on top of that the company is planning to list on London Stock Exchange and Johannesburg and┬á Botswana Stock Exchange next year.
De Beers de-listed from the three bourses in 2002 in what was then termed a move aimed at taking out the company from the most complicated cross shareholding exercise.
The company bought the minority shareholders┬á and┬á remained with Anglo American at 45 percent, Oppenheimer family at 40 and Botswana government at 15 percent.
De Beers Group’s head of Media Relations in London, Lynette Gould┬á told┬áThe Telegraph on Monday that her company is aiming to increase production in the coming two years contrary to┬á what┬á the London-based Financial Times said.
“De Beers is actually increasing production.┬á De Beers CEO, Gareth Penny, has said we expect to increase our production for 2010 to around 31 million carats (a 30 percent increase on 2009 levels) and then to increase to 40 million carats in 2011 (a 66 percent increase on 2009 levels).┬á┬á As the economic recovery continues, our production levels are increasing, enabling us to keep pace with growing demand from our customers,” Gould said in a statement.
In her statement to The Telegraph, Gould said De Beers is┬á currently experiencing an upsurge in the consumer demand for rough goods┬á compared to the same period last year.
“This improved demand has translated into a nearly three-fold increase in the DTC’s Q1 2010 sales versus the same period last year.┬á We are satisfied that our current production plan is appropriate for the market, and we’ll keep this under constant review moving forward. ┬áSight 4 starts today and, again, we’ve had strong applications for our goods,” she added.
However, she indicated that going forward it would not be possible for the company to reach some of the production levels that it did in the recent past years given that it has sold some of its mine assets.
“Our focus now is on┬áprofitable and sustainable production┬áacross the Group.┬á┬áLike any┬áother commercial business in any other industry we have a responsibility to our shareholders and, in De Beers’ case, to our producer partners to deliver┬ásustainable profit.┬á┬áProfit is determined by the cost it takes to mine the diamonds and the market price we can sell them for,” she added.
┬áSome of the premier mines of De Beers are reaching their maturityÔÇöin countries such as South Africa ÔÇô while┬á it is taking too long to discover mines endowed with same resources as them. In Botswana, which is the backbone of De Beers it is anticipated that the open cast life-span┬á of Jwaneng mine will be able to be extended to 2024 as DebswanaÔÇöthe operating company is┬á working on plans for cut 8.
“The market determines the price of the goods, therefore our focus is on what it costs to mine and market them.┬á
“ Despite our success last year in eliminating a lot of costs from the business (approximately 50% reduction in 2009)┬áwe still face a number of challenges to our cost-base, including a difficult┬áexchange rates and rising fuel and power costs.┬á┬áThe Dollar/Rand exchange rate, in particular,┬ácontinues to put our operating margins under pressure and our focus has to be on ensuring these operations run in a sustainably profitable way,” Gould said.