Profit Margins Improve at $425M De Beers Sale

RAPAPORT... De Beers' rough sales totaled $425 million in December,the highest since April, as lower price levels and better profit marginsspurred an upturn in demand from sightholders. Buyers are returning to the market after six months ofsluggish activity, market sources said. While sales were 22% lower than a yearago, they improved compared with November's total of $400 million, De Beersreported Wednesday. "Following continued polished-diamond price stability inthe lead-up to the final sales cycle of the year, we saw further signs ofsteady demand for rough diamonds during sight 10," said De Beers CEO BruceCleaver. De Beers maintained its prices at last week's sight inBotswana after reducing them by around 5% in November. The lower cost of roughhas made manufacturing more profitable and increased the premiums dealers canget when they resell the miner's goods on the secondary market, a broker noted. "The prices are now more convenient, and while it's stilldifficult to make a decent profit, sightholders can either sell the rough atcost or a 1% premium, and manufacturers can make a few percent," the brokerexplained on condition of anonymity. Sightholders are more positive about themarket than they were, and are now looking for rough since inventory levelshave decreased, the broker continued. The rough market has struggled this year amid anoversupply of goods in the midstream, with De Beers' sales falling 25% to $4.04billion for the full year, according to Rapaport calculations based on theminer's reports. The company introduced extra concessions for much of thesecond half, allowing sightholders to reject more goods than usual, butwithdrew that flexibility for the December sight as sentiment had improved,rough-market sources told Rapaport News. The company's average selling price fell around 20% forthe first nine sights, reflecting a 5% drop in its rough-price index and ashift to lower-value goods, Mark Cutifani, CEO of parent company AngloAmerican, said last week.Image: De Beers' Orapa mine in Botswana. (Ben Perry/Armoury Films/De Beers)