De Beers powers ahead with three new diamond mines

Diamond miner De Beers is opening a record three new diamond mines this year and is set to produce higher quality gems from these.

JOHANNESBURG  - 

Diamond miner De Beers is opening a "record" three new diamond mines this year, two in Canada and one in South Africa, to replace production from mines it has sold off in South Africa and declining Russian production.

The Group believes high quality production from the Victor mine in Canada will contribute significantly to its bottom-line as demand continues to be strong at the high end of the market, while demand in the mass retail jewellery market has fallen off.

Managing director Gareth Penny said today the Victor mine was a very high quality producer when high quality gems were clearly very attractive and sought-after. Snap Lake mine would produce attractive, above average value gems that would also make an important contribution to the company.

De Beers is expecting to produce about 50m carats this year, more or less flat on its total production of 51.1m carats last year. Current strong demand for high quality gems contrasts with the decline in demand for diamond jewellery from the mass retail market caused by economic hardship in the United States (US).

The company will open the Snap Lake and Victor Mines in Canada next week and the Voorspoed mine towards the end of the year. Snap Lake mine will produce 24.6m carats over 20 years, Victor is expected to deliver 6.2m carats over twelve years and Voorspoed will produce 8.3m carats over 13 years.

Chairman of De Beers, Nicky Oppenheimer, said the company expected the new diamond mines to generate cash in the second half of the year and the company's debt of $4.1bn to decline at the same time.

All three projects which have developed into mines are starting production ahead of schedule, with Voorspoed nine months ahead of its planned opening.

Penny said the company would also speed up its exploration projects as there has been a decline in carat production from its competitors which made the company bullish on the future.

De Beers' exploration projects include AK06 in Botswana which has acquired a mining license, Ghacho Kue in Canada where it is evaluating drilling results and Verkhotina in Russia, 58% owned by the company and one of the world's largest known undeveloped diamond pipes containing 50m indicated and 50m inferred carats.

"We are looking to bring the exploration projects online as soon as possible, while considering every project's viability very carefully," said Penny.

He said the diamond industry has been talking about the supply demand gap for a long time, but De Beers believed it was now coming through at the high end of the market and that this has created the momentum in prices.

Penny said the world was an insecure place at the moment, but the company believed it would be able to sustain the first half's production level. De Beers today announced a 10% increase in total sales to $3,740m in the first half of 2008 compared to the first half of 2007, an 8% increase in underlying earnings to $350m and a 31% increase in EBITDA to $831m.

The company said carat production of 24.2m for the first half was only marginally behind carat production of first half 2007 at 25.2m.

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