De Beers releases its 2008 Operating and Financial Review
27th February, 2009
Introduction from the Chairman
De Beers experienced mixed fortunes in 2008. The first nine months of the year were marked by strong sales and sustained price growth during which time we formally opened two new mines in Canada and a third in South Africa. The final quarter of 2008 was shaped by the onset of the global economic crisis. As a result, De Beers overall financial performance in 2008 was largely in line with the 2007 results.Financial
Total sales in 2008 were US$6.89 billion compared with US$6.84 billion in 2007. Significant gains during a buoyant first half were offset by a slowdown in sales in the fourth quarter following the escalation of the global financial crisis. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) was level with 2007. The slow down in the 4th quarter also held back expected growth in EBITDA at US$1.2 billion (2007 – US$1.23 billion).
De Beers underlying earnings increased by 7% to US$515 million compared with 2007. This was primarily a reflection of the success of restructuring initiatives that commenced in 2007 which, in turn, served to reduce operating costs. We are confident that these efficiencies will hold us in good stead as we weather the global economic downturn.
De Beers celebrated its 120th anniversary in 2008. To have thrived as a business for so long speaks volumes not only about the product we sell, but also of our ability to adapt quickly to rapidly changing circumstances. De Beers has weathered numerous global crises in the past, emerging stronger and better equipped to make the most of the inevitable recovery in every instance.
Our longevity is a reflection of both the long-term approach required to be successful in the diamond business and commensurately, the extent to which a sophisticated approach to sustainability lies at the heart of our business model as documented in our annual Report to Society. Our longevity can also be credited in part to our willingness to embrace innovation and change.
Our milestone achievements in 2008 – the opening of three remarkable new mines, the launch of the Diamond Trading Company Botswana and the launch of the Forevermark in Asia are all testament to this quality. As was the decision to sell a number of more marginal mines including Cullinan in South Africa and Williamson diamond mine in Tanzania.
Victor mine and the Snap Lake mine in Canada are De Beers first mining ventures outside of the African continent. Victor mine is located in the James Bay lowlands of northern Ontario, about 90km west of the First Nation community of Attawapiskat. It is so remote that it can only be accessed by air or seasonal ice road. The mine employs more than 400 local people and has channelled more than C$175 million of investment into local Aboriginal businesses.
Our Snap Lake mine lies 220 km northeast of Yellowknife and is Canada’s first completely underground diamond mine. As with Victor mine, travel to Snap Lake is only possible by air for all but eight to ten weeks of the year during which time it is accessible by ice-road. It is also one of the most technically challenging diamond mines ever brought into production. Snap Lake mine is the only diamond mine in the North West territories that was ISO 14001 certified through advanced exploration, construction and pre-operational phases. Furthermore, an environmental agreement with the territorial and federal governments and Aboriginal communities near the mine provides for ongoing monitoring of the environmental stewardship of the company.
Voorspoed mine in the Free State Province of South Africa is an equally remarkable mine albeit for different reasons to our new Canadian ventures. All employees at Voorspoed have a minimum Grade 12 education – a unique achievement in South Africa. Perhaps even more extraordinary, Voorspoed is breaking new ground in women’s empowerment by implementing plans to place women in 50% of technical positions by the close of 2009. Voorspoed is also the first De Beers mine to be opened in South Africa since De Beers Consolidated Mines (DBCM) entered into a Broad-Based Black Economic Empowerment (BBBEE) partnership with Ponahalo Holdings (proprietary) Limited in 2006. As part of this BBBEE commitment, Voorspoed has targets in place for the inclusion of historically disadvantaged South Africans into its management.More than 70% of the mine’s employees will be recruited from the local Fezile Dabi region.
Jim Gowans, De Beers Canada Managing Director and David Noko, DBCM Managing Director, and their respective teams deserve great praise and recognition for their achievements in driving these projects to completion.
>> Download report De Beers OFR 2008 (PDF, 2.3MB).
>> Download report DeBeers OFR 2008 Low Res (PDF, 13.9MB).