The Observer has reported the diamond industry has been deeply affected by the recession. No company has felt the pain more deeply than South Africa-based De Beers.,’ says Richard Wachman who commented its prices are down by as much as a third over the past year and ‘analysts estimate that its production will fall by around 50% after a collapse in sales in 2009, amid a slump more severe than most people can remember.’
The world’s single biggest diamond producer closed all four of its mines in Botswana earlier in the year and reduced its workforce by 23%. Its profits have fallen 99% to $3m (£1.8m) in the first half, with borrowings of $3.5bn.
De Beers needs to, Wachman says, ‘refinance $1.5bn of debt by 10 March 2010, but lenders are understood to be demanding punishing interest rates as the price of a restructuring deal.’
However the company’s biggest investors – mining group Anglo American, the diamond-entrepeneur Oppenheimer family and the government of Botswana, have agreed to raising much-needed cash to cut the group’s debt.
90% of the diamond industry
‘For years, De Beers was the diamond industry, speaking for 90% of world production’ says Wachman. ‘But new players from Russia, Canada and Australia have entered the market, reducing its dominance. Competition authorities in the EU and the US have also clamped down on the company’s ability to control prices and supply by restricting its rights to sell on behalf of other diamond producers.’
De Beers has now launched a global campaign to convince investors that diamonds are an alternative to gold as a safe investment. It reported recently that rough diamond prices were heading up and sale trends at its marketing arm were improving.
A spokesman noted: “We’ve seen strong demand for rough diamonds since the half year which has meant we’ve cancelled planned Christmas shutdowns at our operations in Canada and reopened one of the mines in Botswana earlier than planned.”
A spokesman for the Antwerp World Diamond Centre told The Observer: “A diamond is a luxury product, and that’s what people tend to skip from their list. With the recession easing, we’re hopeful the festive season could prove a turning point.”
