By Eric Onstad
"We are in an environment where the rough diamond market is strong," Managing Director Gareth Penny told a conference call.
He cautioned, however, that a rebound in the group's natural rough diamond sales -- which fell 3.7 percent to $5.9 billion in 2007 -- could hinge on the U.S. economy and a power crisis in South Africa.
"We put up prices several times through the back end of last year and again earlier this year. This has largely been driven by supply/demand -- there is just a shortage of rough in the market," Penny said.
Rough diamond sales by the group's marketing arm -- the Diamond Trading Company -- dipped largely due to an anti-trust deal with the European Union to phase out distribution of gems from Russian state diamond miner Alrosa.
HIGHER COSTS
"Production and sales (were) in line, it was costs that were higher than expected," Citigroup said in a research note, adding that it had forecast that EBITDA would rise to $1.4 billion.
De Beers said it took an impairment of $965 million on its Canadian assets due to a stronger Canadian currency and higher fuel, labor and capital costs.
The impairment also caused the bottom line to sink to a net loss of $521 million versus a profit of $730 million in 2006.
The company warned that electricity supply problems in South Africa could hit output there. The government has said it would seek to maintain power at 90 percent of normal levels, but if it dipped below this, problems could be serious, De Beers said.
South Africa has been hit by a power crisis that has blacked out homes, brought traffic to a standstill and halted mines for five days in the world's top platinum producer.