Worldwide diamond sales for 2004 grew by 6.2%, DeBeers reports

Preliminary indications are that global retail sales of diamond jewelry for the year were about 6.2% higher than the previous year in local currency and, because of the continued weakening of the U.S. dollar, about 8% higher in U.S. dollars, De Beers said Thursday.

Strong areas of growth were Asia-Pacific, India, and the Gulf region with Japan also recording modest growth for the second year running, De Beers said. The United States, which accounts for more than 50% of world diamond jewelry sales, had a solid Christmas season.

There was strong demand for rough diamonds from the cutting centers in 2004, De Beers said. Sales by the Diamond Trading Company (“DTC”), the marketing arm of De Beers, were $5.7 million, 3% higher than in 2003.

During the year, the DTC raised its rough diamond prices on three occasions, the cumulative effect of which was that sales by the DTC in 2004 were at prices, on average, 14% higher than in 2003, De Beers said.

Despite De Beers Group diamond production being significantly below target in the first half of the year, the deficit was more than made up in the second half, De Beers said. Production for the year as a whole, inclusive of its joint ventures in Botswana and Namibia, totaled 47 million cts., 7% more than in 2003. Debswana mine produced a record 31.1 million cts., an increase of 2% over 2003. Namdeb mine’s production of 1.86 million cts. was 28% higher than in 2003.

De Beers’ South African mines produced a total of 13.7 million cts. in 2004, an increase of 15% from 2003. Kimberley mines produced a record 2 million cts., a production level last achieved in 1914.

Rand mining costs per ton in 2004 were lower than in 2003, the weakness of the U.S. Dollar, the currency in which diamonds are sold, has put De Beers’ older and more marginal mines under continued pressure with five of its seven mines operating at a loss, the company said.

Headline earnings for the year ended Dec. 31, 2004, were $652 million, 11% higher than for 2003, and operating cash flow generated during the year was $985 million.

De Beers says that 2005 is likely to be a more challenging year for the diamond industry. “However, with the transformation of the industry that has taken place over the last few years, there is now growing evidence that diamonds are competing favorably with other luxury products,” the company said.

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