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Dull times for diamonds

LONDON, Feb 11 – Diamond mining group De Beers reported tough times for diamonds on Thursday, reporting a switch into loss and a capital increase, but said sales in China were robust and overall business was picking up.

The British-South African mining group Anglo American said that it would subscribe in line with its 45-percent stake in De Beers to 45 percent of the share capital increase totalling 1.0 billion dollars (724 million euros).

But Anglo American said that the increase was needed in part to secure banking facilities.

The subscription will therefore maintain Anglo American\’s interest in the company. The Oppenheimer family owns 40 percent of De Beers and Botswana 15 percent.

De Beers said: "The diamond industry was severely affected in 2009 by the global recession."

There had been "substantially lower demand for rough diamonds" but in consumer markets global demand had improved in the fourth quarter

"Demand remained strong in the developing markets of India and China with US Christmas trading results likely to show the first year-on-year increase since September 2008."

Anglo American commented that last year "De Beers implemented a successful restructuring of its business and achieved significant efficiency improvements and cost reductions, with production and operating costs reduced by 45 percent, and a 23-percent reduction in its global workforce."

It said: "The rights issue forms part of a wider refinancing package for De Beers designed to provide the company with a more appropriate capital structure and to secure ongoing banking facilities, at a time when the demand outlook for diamonds is improved."

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De Beers reported a net loss for last year of 32 million dollars in contrast to a profit of 279 million dollars in 2008.

However, sales of diamonds in the second half of the year were 24.0 percent higher than in the first six months.

The company made an annual operating profit of 654 million dollars, half the figure of 1.222 billion dollars .

Profit before interest and tax was 318 million dollars, down from 823 million dollars in 2008.

Anglo American said that of this, there was a contribution of 64 million dollars to its own annual operating profit.

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