De Beers Says Kimberley to Produce 2 Million Carats

De Beers’ Kimberley mine will produce two million carats this year as the mine achieves its highest output since 1912, De Beers Consolidated Mines (DBCM) Chief Executive Jonathan Oppenheimer said.

The two million carats would be 15 percent more than the 1.7 million carats the company budgeted for and double last year's production.

DBCM holds the diamond giant’s South African assets, seven diamond mines, and about 10,000 permanent workers.

Oppenheimer said DBCM would boost production 13 percent this year to 13.5 million carats from 11.9 million in 2003.

Oppenheimer said the rand's strength against the dollar meant only two of DBCM's mines were profitable, and only Venetia in Limpopo was cash positive after taking capital expenditure into account.

But its “thrive at five” (rand to the dollar) strategy was designed to keep the company afloat even if the rand strengthened further.

Oppenheimer said that although he “was not contemplating pulling the plug on any mines”, he did not think all seven mines could survive if the rand remained at its present levels.

He said all DBCM’s mines would break even at about R6.50 to the dollar. The rand is currently trading at 5.71 to the dollar.

Oppenheimer said De Beers would announce its black economic empowerment partner next year and poured cold water on hopes that local stone polishing would grow in line with the government's drive to boost local beneficiation of natural resources.

Polishing costs per carat in India, which employs around 1 million polishers, are about $6, in China they are around $10 a carat but as much as $30 in South Africa where only 4,000 polishers are employed.

The diamond industry was a low margin-high volume business and, because of its high cost structure, South Africa could only process “bigger, better quality diamonds” where profits per gem were larger, Oppenheimer said.

“To encourage the industry, we need to develop skills to be cost competitive,” he added.