De Beers denies reports of scaling back production

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DTC plains to increase production by 30% in 2010 on 2009 levels.

De Beers has reacted to speculation that it is cutting back production and has told Professional Jeweller that while it might not be able to match historic sales of previous years, it will actually increase rough diamond production in 2010.

De Beers chief executive Gareth Penny said that the diamond mining company will increase production in 2010 to 31 million carats, up 30 percent on 2009 levels.

De Beers said that improved demand has increased in line with economic recovery and sales at its Diamond Trading Company have registered a three-fold year-on-year increase in the first quarter of 2010.

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De Beers spokesperson Lynette Gould said: “We are satisfied that our current production plan is appropriate for the market, and we’ll keep this under constant review moving forward. Sight 4 stared in April and, again, we’ve had strong applications for our goods.”

Reports of a scale-back in production at De Beers had led to speculation that the move could push up diamond prices up by 5 percent, and diamond jewellery prices as a result. De Beers said that while it is attempting to cut production costs, and succeeded in a 50 percent reduction in 2009, its diamond prices will be in line with mining costs.

Gould said: “Like any other commercial business in any other industry we have a responsibility to our shareholders and, in De Beers’ case, to our producer partners to deliver sustainable profit. Profit is determined by the cost it takes to mine the diamonds and the market price we can sell them for.

“Despite our success last year in eliminating a lot of costs from the business, we still face a number of challenges to our cost-base, including difficult exchange rates and rising fuel and power costs. The dollar-rand exchange rate, in particular, continues to put our operating margins under pressure and our focus has to be on ensuring these operations run in a sustainably profitable way.”

Penny had been quoted in the Financial Times as saying “do we want to ramp production back up to 48 million carats, given the lack of availability in the future?". De Beers admitted that it doesn’t have the capacity to repeat historic sales of years gone by, but stressed that its focus is on sustainable production across the group.

Gould said: “Mining in a better and more considered way will ensure we are maximising the value of the resource for all our stakeholders.”

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