Diamond demand delights De Beers

JOHANNESBURG - De Beers, the world's biggest diamond producer, expects full-year sales to rise to a record of at least US$6.4 billion ($9.4 billion) after it increased prices and gem demand expanded.

It said diamond sales rose 8 per cent to US$3.2 billion in the first half and would "at least" match that in the second half. Full-year sales last year were US$5.7 billion.

US consulting company Rapaport Research said prices in the US$8.2 billion market for uncut diamonds had jumped more than a third since 2003 as discoveries failed to keep pace with demand. Rising jewellery sales in China are adding to demand in traditional markets such as the US. De Beers, which sells three out of five uncut diamonds, has raised prices twice this year.

First-half net income for the company fell 0.6 per cent to US$339 million after it made provisions for unearned profits on stockpiles last year. Second-half sales will boost profit for the rest of the year, forecasting a 6 per cent rise in global demand for diamond jewellery measured in the currencies of the countries where the jewellery is sold.

Rapaport Research said annual demand for diamonds might outstrip supply by as much as US$7 billion by 2012. Supplies might be further squeezed in coming years should Rio Tinto Group decide not to start mining underground at its Argyle operation in Australia, the world's largest diamond mine by output.

Anglo American owns 45 per cent of De Beers. De Beers controls almost all output in Botswana, the world's biggest diamond-producing nation, through a venture with the Government, and also mines in Namibia, where the best-quality diamonds are found on the seabed.

It also mines in South Africa and buys diamonds from Russia's ZAO Alrosa.

De Beers faces challenges in South Africa, where it was founded 117 years ago.

Jonathan Oppenheimer, head of the company's mines in the country, said the rand's 81 per cent gain against the US dollar since the end of the 2001 had made five out of its seven mines in the country unprofitable.

-BLOOMBERG