De Beers, which can account from its interests for around 40% a year of the world's rough diamonds, has emerged from 2010 as not seen for at least a decade. It has been a rough few years. During the general financial markets crisis of 2008, few commodity prices were battered as badly as rough diamonds.

De Beers's rough diamond sales via its Diamond Trading Company (DTC), which had been around the USD 6bn mark during each of 2006, 2007, and even 2008, collapsed to USD 3.2bn in 2009. De Beers's free cash flow (operating cash flow, less capital expenditure), fell to a precipitously low USD 45m in 2009.

Free cash flow for 2010 was close to USD 1bn, on DTC sales booming back, to USD 5.1bn. The recovery was assisted by heavily pared cutting across-the-board. This includes "soft" investment, such as exploration, and research and development, all areas that may be considered vital to ensuring longer term success.

Various assets have been sold off: with less of everything, including far less net debt than the USD 4.1bn seen at the end of 2007, De Beers is generating returns at a rate it has been unable to achieve for years.

De Beers was selling as many as 50m carats a year in 2007; in 2009, that number was halved. During 2010, 33m carats were sold, a number that could rise in the medium term to around 40m carats. Group production today comes from Botswana, South Africa, Canada, and Namibia.

The biggest new project is at Botswana's Jwaneng, the richest diamond mine yet known. Planned new projects to continue the mining at Jwaneng until 2025 are set to cost around USD 3bn, and should continue to underpin De Beers's competitive position that was evidently reestablished during 2010.

Possible new mines are tipped to be found in Botswana and Canada, and also Angola, a notoriously difficult environment for miners, but also one of the few countries likely to yield up a truly significant new diamond deposit.

De Beers has reported from Angola the Mulepe-1 project, in the form of three large adjacent kimberlites discovered in 2007. The combined size is estimated at a minimum of 20 hectares, with 20m to 40m of sand cover. Preliminary results are "encouraging" says De Beers, which is proceeding to resource phase drilling and conceptual studies. De Beers is also reporting some interesting results from India, where diamonds have been mined from time to time over the centuries.

De Beers

USD m	2010	2009	2008	2007	2006
Free cash flow
Operating cash flow	1,160	226	700	844	809
Capital expenditure	-204	-181	-403	-1,503	-1,194
Free cash flow	956	45	297	-659	-385
Net debt	-1,762	-3,200	-3,552	-4,057	-2,994

This information is obtained from miningspot.com

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Gem Diamonds Ltd has sold two major gems found at its Letseng mine in Lesotho for a total of $22.7 million.

The London-listed company said on Thursday it sold the 196-carat and 184-carat rough white diamonds by tender in Antwerp to the South African Diamond Corporation (SAFDICO)

"It is very pleasing that Letseng's diamonds continue to attract strong prices," chief executive Clifford Elphick said.

Also, at the normal tender for Letseng's output, a 4.68-carat rough blue diamond was sold for $155,000 per carat, the highest price per carat achieved for a Letseng rough diamond, the company said.

source

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WAVING his index finger into the balmy heat, the taxi driver barely pauses while driving through the hub of international diamond dealers who have set up near Zimbabwe's border.

"Here Lebanese. Americans stay here. Ten Guineas stay in that house. Here Pakistan. Here Nigeria," Raymond Reba, 24, offers every few metres, with one man raising a hopeful finger to signal he is open for business.

"There is a buyer. Here another buyer. There again, another buyer."

Globally these rocks are restricted as "blood diamonds", with the watchdog Kimberley Process failing to agree last week if it will allow Zimbabwe to resume exports from the country's controversial Marange fields.

But a short drive away in Manica, in Mozambique, which is a not a member of the Kimberley scheme, dealers openly wait in guarded houses for cross-border sellers who once asked a few dollars for an oil can's worth.

"They used to cut the top off and fill them," recalled a 27-year-old Belgian who arrived in the small town four years ago.

News soon spread of the wild profits after a free-for-all digging frenzy in Zimbabwe in 2006, when villagers found gems lying in the sandy soil of the arid Marange hills.

Roadside sellers would wave down motorists with diamond shapes cut out of yellow plastic containers to advertise their bounty, while sellers crossed to Manica to barter dirty pebble-like uncut gems for groceries.

"People started coming here mid-2007. It's just word gets around," said the Belgian, who estimates there are 150 to 200 dealers in Manica.

But with Marange's potential yearly windfalls estimated at 1.2bn dollars, Zimbabwe's police soon moved in for a share through abusive syndicates with small-scale miners.

In late 2008, President Robert Mugabe's government sent in the army, which killed more than 200 people in a three-week bloodbath that saw bodies turned away from the overflowing local mortuary, according to Human Rights Watch.

By the end of the year, the military was forcing locals to dig for diamonds, prompting rights groups to call for a ban on the gems.

In Manica, smuggling boomed during Zimbabwe's electoral violence in 2008, as buyers flew in from around the world, snapping up houses and equipping them with diamond examining and weighing tools.

"In 2006, let's say, there was about $500,000 to $600,000 worth of goods coming in every day," said the Belgian, at a home with two silver 4x4 pick-ups in the yard.

"Then in 2008, 2009, it got a lot more."

The trade at its peak? "Probably 1 million to 1.2 million a day based on what I used to see - that's without the big customers," he said.

"I used to have a customer that would bring me 700,000 dollars' worth of goods every week."

But dealers say fewer smugglers are coming into Manica, since Kimberley restricted Marange gem sales last year over claims of forced labour and torture and ordered Zimbabwe to clean up its act.

Since then, three companies have been licensed to work the field, with two vetted gem auctions taking place.

"We knew business would go down if Kimberley allowed them to start shipping out," the casual diggers, said the Belgian.

But he stops short of calling the stones conflict diamonds, and notes that Mozambique has no laws on diamond dealing.

"What's happening here is not blood diamonds. It's just political parties that are a little bit stubborn."

While some dealers risk crossing the border to buy gems, the sentiment is that Manica's diamond rush has slowed.

"When I came here I heard everything has closed. For me, I see it's finished," said a 23-year-old Lebanese dealer who arrived around six months ago from Kono in Sierra Leone for a trade he acknowledges is illegal.

"You have no future here," he said, stubbing out a cigarette as a home-shopping TV advertisement played via satellite.

The knock-on stretched beyond the dealers: taxi driver Reba built a house after making nearly 20,000 dollars in five months last year.

"Manica is full of buyers. The good houses you are seeing are because of the buyers or else this could be looking like a very poor place," he said.

"In the past, every day it would be busy with that business. Now the diamond fields are sealed so there are few people coming here.

"It has really gone down."

source

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