From this morning's news:
Wednesday March 3, 8:11 am Eastern Time
Angolan war seen boosting diamond giant De Beers
By Steven Swindells
JOHANNESBURG, March 3 (Reuters) - Renewed war in Angola has improved South African
diamond giant De Beers' bottom line as supplies from the southern African state are disrupted
and prices pushed higher, diamond analysts said on Wednesday.
De Beers, which controls 70 percent of the world's diamond market by regulating sales through
its Central Selling Organisation (CSO), has earned $800 million in two sales so far this year, a
33 percent increase over 1998 levels.
Analysts forecast the CSO was on course to earn $3.7 billion from diamond sales this year -- up 10 percent up from 1997 -- allowing De Beers to
recover from a poor performance in 1998 when Asia's economic downturn bit heavily into profits.
Analysts said the diamond price was being pushed higher because of reduced supplies from Angola where fresh fighting erupted on December 5
between the government and UNITA rebels, shattering a 1994 peace accord.
Prospects for a negotiated peace are slim and the United Nations Security Council has ordered its remaining 1,000 peacekeepers to leave the country
by March 20.
''De Beers has been fortuitous because of the conflict in Angola. There's been a radical decline in sales out of Angola,'' said analyst James Allan at
Barnard, Jacobs, Mellet and Co.
De Beers shares were up 2.8 rand or 2.64 percent at 109 rand at 1250 GMT on Wednesday.
Fears of UNITA attacks has led some foreign concessions to halt operations while the outbreak of full blown war has halted many civil engineering
projects needed to exploit the river beds where Angolan's alluvial diamonds rest.
Foreign companies have been uneasy in the former Portuguese colony since November when gunmen attacked the Canadian Diamond Work's
(Toronto:DMW.TO - news) operated Yetwene mine, killing eight workers and kidnapping 10 employees who remain missing.
The attack is believed to have been carried out by UNITA.
Toronto-based SouthernEra Resources (Toronto:SUF.TO - news) shutdown its Luo and Cassanguidi concessions in the diamond-rich northeastern
province of Luanda Norte in Janaury because of fighting.
Previous rounds of fighting between Angola and UNITA, the National Union for the Total Independence of Angola, had seen increased Angolan
diamond supplies on world markets as UNITA used diamonds from its territory to fund its forces.
But the renewed violence has seen a different pattern with supplies falling, providing a boost to world prices already helped by an upturn in
jewellery demand in Asia and other supply disruptions from Russia and other African producers.
''When it comes to the Antwerp trading market we're told there are less Angolan diamonds appearing on the market...UNITA has taken its eye off
the mining ball and focused on the running of the war,'' said Hilton Ashton at B.O.E. Securities.
UNITA was using financial reserves built up over the last five years to fuel its war machine, analysts said.
British-based human rights group Global Witness put UNITA's earnings from illicit diamond sales at $3.7 billion between 1992 and 1998, enough
to re-equip for further fighting.
''All the indications are that there are a lot less diamonds coming out of Angola. Any escalation in the war can be good for De Beers,'' said Keith
Bright at Fedsure Asset Management.
Diamond analysts estimate that $600-700 million worth of diamonds are produced each year, of which UNITA mines just under half. The Angolan
government says diamond output rose to 2.764 million carats in 1998, worth $431.9 million.
PHIL |
