Diamonds: Maybe Not Forever
ThinkstockFor the second time in less than a week, a diamond miner has said that it will have to figure out a way to become more profitable in a tough economic environment. The CEO of De Beers, the world’s largest…
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For the second time in less than a week, a diamond miner has said that it will have to figure out a way to become more profitable in a tough economic environment. The CEO of De Beers, the world’s largest producer of diamonds by value, said the company will be looking for ways to get leaner and more flexible. The company produced 27.9 million carats last year.
De Beers, which is owned by British mining giant Anglo American, is the subject of a three-month review by its parent. One unlikely outcome of that review is that Anglo American will try to sell De Beers.
Rio Tinto PLC (NYSE: RIO) said earlier this week that it is taking its diamond mining assets off the market after failing to get an adequate bid for the assets in a process begun in March of 2012. Rio says it will keep its diamond assets — a 60% stake in Canada’s Diavik mine, which is controlled by Dominion Diamond Corp. (NYSE: DDC) and all of Australia’s Argyle mine.
De Beers is working on automating a screening machine and a grading device to replace human workers. The two machines, currently in development, are intended to lower the company’s operating costs.
The company also thinks that business will pick up slightly this year, clearing inventories and raising prices to help pay for more capital investment. China, which has been a significant growth market for diamonds since the Great Recession, appears to be slowing down, and diamond miners like De Beers and Rio Tinto are pinning their hopes on a solid economic recovery in the United States.
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Paul Ausick has been writing for 247Wallst.com for more than a decade. He has written extensively on investing in the energy, defense, and technology sectors. In a previous life, he wrote technical documentation and managed a marketing communications group in Silicon Valley.
He has a bachelor's degree in English from the University of Chicago and now lives in Montana, where he fishes for trout in the summer and stays inside during the winter.