DIAMOND PAGE — De Beers flies high in first half

During the first six months of 1997, earnings for South Africa-based De Beers Consolidated Mines (dbrs-q) increased to US$507 million, compared with US$482 million in the first half of 1996.

The rise is largely attributable to the US$75 million which the company received for its share of the sale of part of its holding in fellow South African major JCI. Without that sum, attributable earnings fell 10%, to US$432 million (US$1.14 per share).

De Beers’ diamond account was up 14% in U.S. dollars and 30% in South African Rand. The company’s diamond account increased 51%, to 1 billion Rand, whereas Centenary’s diamond account increased US$4 million, to US$275 million.

Prospecting and research expenses increased over the 6-month period to US$67 million from US$54 million.

The value of the company’s diamond stocks fell US$561 million over the period, to US$4.1 billion from US$4.7 billion on Dec. 31, 1996. The Central Selling Organization (CSO) enjoyed record sales of US$2.9 billion during the first half of 1997.

Near-gem market

De Beers also reported that competition in the smaller, near-gem diamond market increased in the last half of 1996, owing to Russian stockpile sales and Australian independent marketing. Price adjustments to market levels in this area enabled the CSO to sell significant quantities of those diamonds, but not without having an impact on trading margins.

Although the CSO’s contract with Russia was terminated at the end of 1996, De Beers believes the government still sees the relationship as important, citing a recent presidential decree and government resolution. Nonetheless, further negotiations are required before any new agreement is reached. In the first half of 1997, the CSO purchased about $150 million worth of diamonds from Russia on a non-contractual basis.

The retail market, according to De Beers, is mixed, with continuing strength in the U.S. being offset by weakness in Japan and other Southeast Asian countries.

De Beers speculates that local-currency sales throughout 1997 will remain at levels recorded last year, but would be down in dollar terms. The results for the year depend on the extent to which the CSO is able to maintain its increased market share.