Rough diamond sales drop 16% at De Beers in 2012

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Mining group forecasts demand for diamond jewellery to grow in 2013.

Total sales fell 16% at De Beers in 2012 but the diamond company said it had generated strong cash flow, lowered debts and expanded its project base despite "challenging trading conditions" and is forecasting a rise in demand for diamond jewellery in 2013.

In the 12 months to December 31, total sales at De Beers fell to US$6.1 billion and its production decreased from 31.3 million carats in 2011 to 27.9 million in 2012. Over the period rough diamond prices fell 12%, which was in line with polished prices.

De Beers said that the decrease in sales of rough diamonds was caused by " diminished demand, changing product requirements from Sightholders, and reduced availability of some goods".

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Sales of rough diamonds through De Beers’ online platform also fell, fropping from US$405 million in 2011 to US$356 million in 2012, which it said was caused by "subdued buyer activity".

Over the period De Beers had a free cash flow of US$97 million, down from US$816 million in 2011, and net debt in 2012 was reduced to US$722 million, excluding shareholder loans, which was an improvement on 2011’s debt of US$1.17 billion.

De Beers said that migration of its London-based sales function to Botswana continued ahead of schedule with the company completing relocation of aggregation, quality assurance and Sight preparation activities in 2012.

In 2012 De Beers also completed the construction of the infrastructure of its Jwaneng Mine Cut-8 project in Botswana, which will provide access to 95 million carats of diamonds and extend the life of what has been the world’s richest diamond mine to date until 2028.

A new project for the mining group lies in Canada. De Beers said the environmental impact review documentation for the Gahcho Kué project there, in which De Beers has a 51% interest, has been submitted for review, with a decision expected this year.

During the financial year Anglo American completed its acquisition of a further 40% interest in De Beers. It now has an 85% shareholding.

A forward-looking statement from the De Beers Group said: "De Beers expects moderate growth in diamond jewellery demand in 2013. This will be supported primarily by a more positive picture emerging from China and India compared to 2012.

"Some upside is possible in the US, while trading conditions in other developed markets are likely to be challenging. The rough diamond manufacturing sector closed 2012 with high levels of inventory, particularly in the higher-end categories of diamonds, and faces continued pressure in terms of midstream liquidity. In the medium to long term, industry fundamentals are expected to strengthen as diamond production plateaus and demand continues to increase."

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