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De Beers On-Track for the Next 2000 Summer 1999

De Beers seems to be well on its way to an outstanding change-of-the-millennium with a reported $2.45 billion in first-half sales for 1999, a leap of 44%. The improved sales figures are seen by analysts as a healthy recovery of the Company over the last 18 months. First-half sales in 1998 were $1.7 billion, down from 1997’s $2.8 billion.

Stronger Retail Demand

De Beers attributes the plummeting sales of 1998 to the Asian economic crash, in particular the Japanese market which, at 20%, comes in second in the line-up. Experts worldwide believe that the Japanese market is bottoming-out and that the decline of the first half of 1999 is much less than last year’s. With the rapid growth of the market in China and as the East Asian markets have begun to recover – with particular note, South Korea, up 8% – and luxury items are once again in demand, De Beers may find itself with a very happy New Year, indeed.

The millennium marketing campaign, including sales of 20,000 specially branded, numbered and packaged "Millennium Diamonds," is well under way and, while De Beers has spent hundreds of thousands on the plan already, the Company clearly believes there’s gold in them thar ads. The U.S. accounts for almost 50% of sales and demand continues to rise, up by 8% in the first quarter of this year. If demand continues through the second half of 1999, the U.S. will mark nine consecutive years of growth.

Won’t You be Mine?

And, as if all these romantic sales weren’t enough, De Beers and BHP Diamonds announced the signing of the definitive contract for the sale of 35% of the run-of-mine production from the Ekati mine in Canada’s Northeast Territories to De Beers. That percentage is equal to between $130 and $140 million in both industrial and gem-quality diamonds. One wonders if the tiny maple leaf currently being engraved on diamonds from the Ekati mine will give way to a South African lion, but it seems, for both companies involved, to be an excellent match.

An End to the Siege

Even the negatives of the past few months are turning out well for De Beers these days. Although the three-month delay in export of goods from the South African mines will certainly have a negative impact in the next quarter, that stalemate has been resolved, at least for now. De Beers has resumed limited exporting of goods, still no large stones or specials, but no one – not De Beers and not DVIC, the company that was recently appointed to the position government diamond valuator – is talking about how they came to that agreement or even what the terms of any agreement will be. It has been stated by Victor Sibiya, CEO of the Diamond Board, that whatever the agreement is, it will be "short-term" and that the fight isn’t over yet.

As well, one of De Beers’ partner companies, Anglo American, which recently made a move from South Africa to the UK, is coming back around after a short stock slide. Anglo’s stock had gotten a running start in April when the Company first moved to London. But May’s extreme volatility had even hard-core investors worried. July’s leveling off of the stock has been a welcome development, both for Anglo and for De Beers. v


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