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Jun 28, 2010
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De Beers sees some recovery, still cautious

By
Reuters
Published
Jun 28, 2010

CAPE TOWN, June 27 (Reuters) - De Beers, the world's top diamond producer, had a strong first half but remains cautious about further recovery due to global economic risks, a top executive told Reuters on Sunday.

De Beers
Valley of diamonds by De Beers


The group, 45 percent owned by Anglo American (AAL.L), has seen a recovery in sales and rough diamond prices after being battered during the global financial downturn and now has a "much healthier balance sheet", Jonathan Oppenheimer, executive director of the De Beers Group, said.

"The diamond market in late 2009, 2010 has been strong," Oppenheimer said on the sidelines of the Fortune Global Forum in Cape Town.

"Sales are picking up, we will soon release our first-half results (to end June), and those numbers will please. It's no secret the first half of this year has been very positive."

De Beers, which controls around 40 percent of the rough diamond market, was hit particularly hard during the downturn as consumers shied away from luxury goods. This experience meant the company was still treading cautiously.

"We have seen a very good performance but we are all a bit cautious. There is a relief that all is going well and it is certainly looking positive but there is also an apprehension that we are very vulnerable to the success or failure of the global economy so we are holding our breath a little."

The diamond group earlier this year concluded a refinancing of debt facilities and a $1 billion rights issue to boost its balance sheet. It used all the proceeds from the rights issue plus $250 million of its own cash to pay off debt.

The group posted an underlying loss of $220 million in 2009 after making an underlying net profit of $515 million in 2008, while rough diamond sales tumbled 46 percent to $3.2 billion. [nLDE61921P]

Oppenheimer said the group was in much better shape than at the time when it was struck by the global financial crisis.

"Our balance sheet is looking much healthier than it did in 2009, we are better prepared than in 2008 and if there is a challenge to the global economy like the one we had, I believe the industry will survive that a bit better," he said.

He said the United States was showing good signs of recovery, while China and India were becoming key markets.

"China and India remain very robust and very attractive and are the faster growing part of our market," he said.

Oppenheimer said he could not pre-empt the results release, but said production would rise as well in the first half. De Beers has said production slid 49 percent to 24.6 million carats in 2009, but 2010 output was likely to rise to the "30s" of millions.

(Editing by Greg Mahlich)

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