Anglo American reported diamond production fell in the second quarter ended June 30 by 11% to 7.2 million ct largely due to market conditions and a focus on planned maintenance and waste stripping while De Beers, in which Anglo American currently holds a 45% stake, reported profits for the first half of 2012 fell sharply year-on-year.
Softness in the diamond market sent De Beers’ first half profit before finance charges and taxation down to $502 million from $1 billion in the year ago period. Total sales slid 14% to $3.3 billion from $3.9 billion and diamond production dropped to 13.4 million ct compared to 15.5 million ct in the first half of 2011.
The company forecasts it will produce between 28 million and 30 million ct of diamonds this year, a slight drop from the 31.3 million ct it produced last year.
Philippe Mellier, De Beers’ chief executive, told news agency reporters that the company is allowing “sightholders” — buyers of rough diamonds such as cutting and polishing centres — to defer up to half their diamond purchases until March 2013.
Edward Sterck of BMO Capital Markets in London noted that De Beers sees moderate growth in global polished diamond sales in 2012, mainly supported by demand from the USA, China, Japan and Gulf markets, but that the company “expects trading conditions for rough diamonds to remain challenging in the second half of 2012.”
He pointed out that De Beers’ analysis of market conditions and its outlook in the second half of the year is in line with BMO Research’s expectations for “subdued prices in 2012 followed by a return to growth in 2013.”
Sterck also reported that Anglo American’s decision last year to purchase an additional 40% stake in De Beers from the Oppenheimer family is expected to close in the current quarter. The sale has received regulatory approval and will take Anglo American’s interest in De Beers to 85%.
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