HomeDiamonds & GemstonesEarnings rise and growth continues

Earnings rise and growth continues

“Peace in Africa” –
the first deep-sea
marine diamond
vessel mining in
South African waters
Johannesburg, South Africa — MININGREVIEW.COM — 8 February, 2008 – Diamond giant the De Beers Group – the largest diamond mining company in the world – showed a 14% increase in earnings from US$425 million (almost R3.2 billion) to US$483 million (more than R3.6 billion) in 2007. International production reached 51.1 million carats, maintaining the record level achieved in 2006.

Releasing its results for the year ended 31 December 2007 today, the group underlined its strong confidence in the long-term fundamentals of the diamond market, confirming that it had invested US$1.12 billion (R8.4 billion) in expansion capital during the year. The money was spent principally on construction at the Voorspoed mine and the South Africa Sea Areas (SASA) offshore mining vessel in South Africa, as well as the Snap Lake and Victor mines in Canada.

Debswana – the joint venture between De Beers and the Government of Botswana – remained the Group’s major producer last year, contributing 33.6 million carats. In South Africa, De Beers Consolidated Mines (DBCM) increased production to 15 million carats, mainly due to improvements in the diamond recovery process at Venetia mine, where carats recovered increased by nine percent.

Production from off-shore operations in Namibia also increased, resulting in Namdeb – the joint venture with the Namibian Government – raising production by four percent to 2.2 million carats.

Turning to future production prospects, the results report noted various prospects, several of them in Central and Southern Africa. These are:

  • The mining vessel “Peace in Africa” which began operations off the South African Atlantic coastline last year, and is expected to produce approximately 200 000 carats pa.
  • The Voorspoed mine in the Free State, which is scheduled to commence production in Q4 of 2008. Voorspoed is scheduled to produce 700 000 carats pa.
  • Boteti Exploration Company – the joint venture between De Beers, African Diamonds Plc and Wati Ventures – which has filed for a mining licence for AK06, a kimberlite in the Orapa region of Botswana. AK06 has an estimated reserve of 11.1 million carats.
  • Extensive exploration costing US$126 million (R950 million) in the Democratic Republic of Congo, and advanced programmes in Angola, Botswana South Africa. De Beers identified 45 new kimberlites in 2007, and the group’s 2008 drilling and evaluation programme will focus on these high potential targets.
  • Venetia mine in South Africa, which has been granted a new order mining right by the South African Department of Minerals and Energy (DME), to be executed in March.

The outlook for 2008 is tempered by a high level of uncertainty over world market conditions. The economic conditions in the US could continue to impact consumer diamond jewellery sales through the first half, particularly at the lower end. Nevertheless, the Group expecs strong demand from China, India and the Middle East to sustain pricing for larger and better quality diamonds.

As far as future production is concerned, the results report points out that while the Group has budgeted to produce at similar levels to 2007, energy issues in southern Africa could present operational challenges.

“Southern African management is focused firstly on accelerating the ongoing energy conservation programmes against which DBCM has been making good progress toward a target of a 15 percent reduction by 2012,” says the report. “In addition, management is putting in place contingency plans that will make the most effective use of the available energy between the different operations. Early indications are that even if the power supply is maintained at 90% levels, there will be an impact on the overall group,” it adds.

“This environment will require a continued focus on cost containment on the mines and cost reduction, in general,” the report emphasises.