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De Beers eyes China expansion

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De Beers SA, the world’s largest producer of rough diamonds, said Tuesday it plans to further expand its retail outlets in China this year as it expects China, India and the Middle East to outpace U.S. demand by 2015.
 
The Johannesburg-headquartered company said it will open a second store in Hong Kong and more stores in mainland China. During the first half of the year, De Beers Diamond Jewellers, a joint venture with LVMH Moet Hennessy Louis Vuitton, opened its first mainland store in Beijing, its first store in Kazakhstan in Almaty and a new store in Dubai.

Chief Commercial Officer Bruce Cleaver said the company expects China, India and the Middle East to account for 40 per cent of global consumer demand for diamonds by 2015. "We have an aggressive expansion plan particularly focused on China," Cleaver added.

While its first-half diamond production was mostly unchanged from a year earlier due to weather disruptions and equipment-repair issues, rough diamond sales rose 33 per cent due to a roughly 35 per cent increase in prices, strong demand from consumers in China and India, and better-than-expected demand from North America.

The company said it expects prices for rough diamonds to rise further over the coming months and to boost the number of carats produced after a slow start to the year.

Sales of rough diamonds in the first half totaled $3.5 billion. The amount of carats recovered in the period was nearly unchanged on the year at 15.53 million.

The rise in sales helped the company to report net earnings of $685 million, more than double net earnings of $301 million a year earlier. The company reported earnings before interest, taxes, depreciation and amortization, or Ebitda, of $1.18 billion, from $762 million in the same period of 2010.

Founded in 1888 and taken private in 2001, De Beers produces and markets some 40 per cent of the world’s rough diamonds by value. It is 45 per cent owned by Anglo American PLC, 40 per cent by the Oppenheimer family and 15 per cent by the government of Botswana.

Although the company is expanding its retail business, it sold some mining assets in South Africa and altered its agreement with the Namibian government to give it a larger stake in operations in that country.

De Beers said in May that it established a new 50-50 joint venture holding company with the government of Namibia, which increases the state’s effective shareholding in De Beers Marine Namibia from 15 per cent to 50 per cent.

Source – The Wall Street Journal

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