JOHANNESBURG (miningweekly.com) - The world might see an improvement in diamond demand as 2009 progressed and inventories reduced, De Beers CEO Gareth Penny said on Friday.

Penny said, in a video broadcast, that as economic conditions improved, emerging demand, coupled with a decline in long-term diamond supply, would form a positive foundation for future growth and diamond values.

At the Anglo American results presentation earlier, Anglo CFO Rene Medori disclosed that Anglo had participated, along with the two other De Beers shareholders, the Oppenheimer family and the Botswana government, in providing a $500-million loan to De Beers that would be interest-free for the first two years and subject to market pricing thereafter. Medori told enquiring analysts that he believed that, as matters stood currently, De Beers would not need any further injection of cash.

Because he expected retailers to continue to focus on reducing inventory levels during the first half of 2009, Penny said that De Beers was preparing for "smaller-than-normal sights", as sight holders corrected inventory levels and managed their own liquidity.

After posting a profitable set of 2008 results, Penny said that De Beers was focused on running a sustainable business in 2009 at lower levels of sales by ensuring that its operations and its activities continued to reflect and respond to the needs of its clients.

Through production holidays and renewed focus on maintenance at De Beers mines, the lull would be used to ensure the long-term sustainability of its operations.

In its release of results to the media, De Beers said that global economic crisis was having a "significant" impact on sales of retail diamond jewellery, liquidity and demand for rough diamonds in the cutting centres.

That, in turn, had resulted in the Diamond Trading Company (DTC) selling fewer rough diamonds.

"We expect trading conditions to remain challenging throughout 2009," the company added, reiterating that it had taken steps to reduce production levels, costs and capital expenditure across all operations.

These actions, together with the business restructuring initiatives already completed, had positioned De Beers to "weather this tough economic environment".

Recent market research from the US and China confirmed that consumers' desire for diamonds remained strong. As economic conditions improved, emerging demand, coupled with the decline in long-term diamond supply, would form a positive foundation for future growth in diamond prices, De Beers predicted.

Total sales for the year were up 1% to $6,8-billion and underlying earnings up 7% to $515-million.

Earnings before interest, tax, depreciation and amortisation was up 0,5% to $1,2-billion and cash from operations was down 17 % to $700-million.

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