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Diamond miner De Beers on Friday reported an increase in output in the first six months, ended June 30, 2010. The first six months of 2010 (H1 2010) have seen a strong recovery against the low comparisons of H1 2009. With demand for rough diamonds increasing strongly, both sales volumes and prices have increased significantly. The company reported a 134 percent rise in its output to 15, 4-million carats in the period under review. The results posted on Friday had exceeded the group’s expectations and demonstrated the effectiveness of De Beers’ strategy to produce in line with demand, while focusing on its cost management and creating efficiencies throughout the business, outgoing De Beers boss Gareth Penny said.

De Beers, which had taken about 50 percent of its operating costs out of the business and reduced its global workforce by about one-third in 2009, had aimed to make most of those cost savings, excluding those that were variable costs, permanent. The group highlighted that the first half of this year witnessed a strong recovery against the lows of the first half of last year, with demand for rough diamonds increasing and sales volumes and prices having improved significantly. However, the group’s operating costs had increased to $699-million during the first half of this year, compared with $479-million in the first half of last year. In the first six months of the year, De Beers increased production by 133 percent across its operations to 15.4 million carats compared to 6.6 million carats during the same period last year.

This reflects the impact of a production holiday taken in the first half of 2009, and was in response to increased demand from DTC Sightholders following a better than expected Christmas season as well as steady improvements in market sentiment. In H1, Venetia mine produced two million carats (2009: 0.7 million), Jwaneng mine 5.3 million carats (2009: 2.3 million) and Orapa mine 4.3 million (2009: 1.4 million). Debswana’s Cut-8, the major expansion project at Jwaneng mine, has started. Having successfully refinanced its debt, DBCM continues to look at ways to enhance its future prospects. De Beers also announced that the first half saw strong double digit growth in consumer demand from China and India and a modest improvement in demand from the United States of America (USA).

Since the 2008 launch, Forevermark (a diamond brand from the De Beers Group) has expanded rapidly across Asia with 289 doors in China, Hong Kong and Japan. Much of this growth can be attributed to mainland China where the brand has been rolled out to 10 cities with plans for further expansion this year. While encouraged by the strengthening demand in H1, De Beers has cautioned that the global economic climate remains fragile especially in the important diamond markets of the US, Japan and Europe “so we look to the remainder of 2010 with caution and measured optimism”. A period of market stabilisation is expected in H2. With most restocking activity by the trade now largely completed, further demand growth is dependent on increases in consumer demand, and De Beers remains encouraged by the strength of demand in the emerging markets of Asia, particularly China and India.