De Beers said Friday that 2008 rough diamond sales were relatively flat at $5.9 billion, “as buoyant demand translated into increased prices” for the first nine months of the year, followed by a significant slowdown in sales in the fourth quarter, “as a result of the onset of the global economic downturn and the subsequent liquidity squeeze in the key global cutting centers.” Total group sales for the year increased 1 percent to $6.9 billion.

Underlying earnings for the year increased 7 percent to $515 million. Earnings before interest, taxes, depreciation, and amortization were flat at $1.2 billion, the mining giant said. Cash available from operating activities declined 17 percent to $700 million.

Net interest bearing debt fell to $3.55 billion (from $4.06 billion in 2007) as a result of the benefits of a stronger U.S. dollar, the repayment of debt, and shareholder support, the company said.

View a video of Gareth Penny, De Beers Group managing director, discussing the company’s resultshere.

Operating performance
De Beers and its joint venture partners saw diamond production decline in 2008 by 5.8 percent to 48.1 million carats (from 51.1 million carats in 2007). Production from Debswana was 32.3 million carats (2007: 33.6 million carats), Namdeb yielded 2.1 million carats (2007: 2.2 million carats), while the output from South African operations fell to 12 million carats (2007: 15.0 million carats) due to the sale of Cullinan mine and the closure of The Oaks mine. The Canadian operations at Snap Lake and Victor produced 1.6 million carats (2007: 81,000 carats).

Element Six recorded total annual sales of almost $500 million for the year and growth of 25 percent as a result of the inclusion of a full year’s trading in respect of E6 Hard Materials (Barat Carbide), acquired in 2007, as well as organic growth, the company said.

Projects and disposals
For the first time in its history, De Beers opened three new mines in a year. In Canada, Victor Mine in northern Ontario was completed and commissioned eight months ahead of schedule and under budget. Snap Lake Mine in the Northwest Territories commenced commercial production in early 2008. De Beers’ Voorspoed Mine in South Africa was also completed on time and commissioned ahead of budget, and was officially opened in November. De Beers also completed the sales of Cullinan Diamond Mine in South Africa and Williamson Diamond Mine in Tanzania.

Outlook
“The global economic crisis is having a significant impact on sales of retail diamond jewelry, liquidity, and demand for rough diamonds in the cutting centers, De Beers said in its outlook. “This, in turn, has resulted in a reduction in sales of rough diamonds by the DTC. We expect trading conditions to remain challenging throughout 2009. We have taken steps to significantly reduce production levels, costs, and capital expenditure across all operations. These actions, together with the business restructuring initiatives already completed, have positioned De Beers to weather this tough economic environment.

Recent market research from the US and China confirm that consumers’ desire for diamonds remains strong. As economic conditions improve, emerging demand, coupled with the decline in long-term diamond supply, will form a positive foundation for future growth in diamond prices.”

JCK