De Beers to slash production costs

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The Independent Online
DE BEERS, the South African diamond giant, said it planned to slash production costs in response to falling demand, writes David Bowen.

The company gave no details, but analysts said they believed a quarter of the workforce of the Premier mine, near Pretoria, would be laid off. Premier produces 25 per cent of the world's large investment gems.

De Beers has been hit by the slump in demand for luxury goods. In July, it reported lower first-half earnings, and said its final dividend was likely to be cut. It also announced a cut in the diamond quota controlled by its subsidiary, the Central Selling Organisation, which runs the world cartel.

Analysts said the measures were unlikely to improve the prospects for De Beers' share price, which has dropped to R47.57 (nearly pounds 10) from a high of R93 six months ago.

The Russians have indicated that they may start selling their dollars 4bn stockpile of diamonds on the free market. A De Beers spokesman said the effect would be 'catastrophic'.

Michael Coulson, analyst with Credit Lyonnais in London, believes that De Beers may have to close mines if the new measures are not enough.