1 Dec 2009 17:17

De Beers confident of refinancing $1.5-bln debt

MOSCOW. Dec 1 (Interfax) - De Beers is negotiating with banks about refinancing its debt of $1.5 billion and is confident the talks will be successful.

"We are currently in discussions with our banks about renewing a $1.5 billion loan facility scheduled to come due in March 2010. These have been positive and productive discussions and we are entirely confident about our ability to renew the financing," Lynette Gould, Media Relations Manager at De Beers, said in an interview with Interfax.

De Beers also has $2 billion in debts maturing in 2012.

Gould did not comment on press reports that De Beers is asking its shareholders to refinance the debt and that the shareholders have agreed to invest $1 billion.

"As with any refinancing process, once we have progressed sufficiently, our shareholders will review the terms and determine the best way forward. We won't speculate on the final details of the refinancing until the process has concluded," she said.

Regarding the rough diamond market in general Gould said: "The short-term reduction in diamond inventories and sales, coupled with a significantly lower level of investment in exploration and new mining projects, is likely to create a shortfall in previously forecast levels of diamond supply in the medium-term."

"In the long-term, even in a recession people continue to get engaged, married and celebrate special anniversaries, and diamonds are inherently linked to the marriage tradition in the US and emerging economies. Demand for diamonds has been consistently increasing for many years, and this is expected to continue in the long term - particularly as more high net-worth individuals emerge in the developing markets such as China and India," she said.

"Diamonds are a rare and finite treasure of nature and, with future demand growth in emerging markets, demand is likely to significantly outpace what is forecast to be lower levels of diamond supply for many years to come. Demand for diamonds has been consistently increasing for many years, and this is expected to continue in the long term - particularly as more high net-worth individuals emerge in the developing markets such as China and India."

Asked whether De Beers intended to increase diamond output in 2010 and raise the amount of rough offered to the market, Gould said: "As we have said throughout 2009, we will continue to produce in line with demand from the DTC Sightholders."

Regarding pricing for rough diamonds, Gould said: "Obviously each company has its own system of pricing. De Beers is in a position to comment only on its model and, even then, only at a very high level. De Beers takes a long term, sustainable view on our pricing which we consider to be a fair reflection of market value. De Beers' pricing decisions are influenced first and foremost by the prevailing market conditions for polished. The rough diamond industry remains highly competitive."

Asked about cooperation with other companies in marketing polished diamonds and supporting the diamond market, she said: "In response to fundamental changes in the diamond industry and extraordinary times - the recession and its effect on discretionary spending - this year De Beers introduced a new, innovative marketing concept. This model introduces an extensively consumer tested major new product concept -- the Everlon Diamond Knot Collection - for the US Holiday 09/10 season, along with a full-scale integrated marketing campaign."

"For the first time, a set of participating DTC Sightholders and retailers who represent the best-in-class at every level of the trade (from independents to small regional chains to department stores and national chains) are helping us to cooperatively fund this programme."

"In October, members of the IDB (International Diamond Board) steering group (BHP Billiton, Rio Tinto and De Beers) agreed to postpone the start-up phase of the IDB until [Russia's] Alrosa has had sufficient time to review its plans and confirm its participation. A key success factor for the IDB is to secure support from all parts of the diamond value chain and, to this end, the contribution of Alrosa is seen as critical. It is hoped that the situation will be clarified by the end of the year," Gould said.