The diamond industry began the year in a positive mood following better than expected Christmas season retail sales of diamond jewellery, a significant reduction in inventory of polished diamonds held by the retail trade during 2001 and cautious optimism for recovery in the global economy in 2002. Restocking by the retail trade in the first half of the year meant that polished demand from the cutting centres was above underlying retail demand in the consumer markets. As a result, polished stocks financed by the cutting centres reduced over the period from about $4,1 billion to $3,4 billion. Clients of the DTC, the marketing arm of De Beers, benefited from receiving consistent assortments of rough diamonds at competitive prices which facilitated further investment in marketing.

Against that background, there was strong demand for rough diamonds throughout the period and sales by the DTC for the first six months of 2002 totalled $2 842 million, 8,5 per cent higher than the equivalent period in 2001. Prospects for the remainder of the year will depend on the state of the global economy and consumer confidence, particularly in the USA, which will determine consumer offtake and the level of stock the trade is prepared to hold.

De Beers made further good progress with the European Commission on its Supplier of Choice strategy and anticipates a favourable outcome during the second half of the year.

The new five year $4 billion trade agreement between De Beers and the Russian diamond producer, Alrosa, was formally notified in February to the European Commission for clearance. Both parties are committed to engaging constructively with the Commission to address any concerns it might raise.

In February, De Beers signed a Heads of Agreement with Mvelaphanda Diamonds (Proprietary) Limited, a black empowerment company, on a joint venture committing both parties to grass roots (early stages) exploration for new world-class diamond deposits in the northern part of South Africa. The joint venture agreement was finalised and signed in July.

De Beers has expressed its concern to the South African Government over the lack of certainty and clarity in a number of the provisions of the new Minerals Development Bill. Further, De Beers hopes that the consultative process proposed by Government, which will lead to a new Mining Charter, will confirm the fundamental principles governing industry transformation to which Government and the industry have committed themselves.


Source: De Beers press release
August 2002