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Gold/Mining/Energy : SOUTHERNERA (t.SUF) -- Ignore unavailable to you. Want to Upgrade?

To: Valuepro who wrote (2379)	1/28/1999 8:50:00 AM
From: PHILLIP FLOTOW	Read Replies (3) \| Respond to of 7235

In today's news: Wednesday January 27, 11:03 pm Eastern Time Canadian diamond sales threaten De Beers' grip on market By Paul Simao TORONTO, Jan 27 (Reuters) - Canada's successful entry into the world diamond market has sent a shiver down the spine of South African diamond cartel De Beers Consolidated Mines Ltd. . Representatives of De Beers' London-based Central Selling Organisation (CSO) crisscrossed the planet last year in a frantic but failed bid to bring a quartet of Canadian diamond producers into the fold. The CSO, which controls about 70 percent of the world market for uncut diamonds, is particularly keen to bring under its control production from two diamond mines discovered in the early 1990s in Canada's barren Northwest Territories. By 2002 Canada is expected to produce at least 10 percent of the world's diamonds, surpassing South Africa and rivaling the leading producing nations -- Australia, Botswana, Russia and the Democratic Republic of Congo. Canada's emerging position in the diamond world was confirmed last week after the first parcel of stones from the newly-opened Ekati mine were sold in Antwerp, Belgium, the world's premier diamond market, for $8.5 million in an independent transaction that set jaws wagging from Johannesburg to Sydney. Ekati's owners, Australian resources giant Broken Hill Pty. Co. Ltd. and Canada's Dia Met Minerals Ltd. (Toronto:DMMb.TO - news), said they were delighted with the sales and, most importantly, did not rule out large-scale marketing outside the CSO. ''The option of marketing through the CSO remains under consideration. At the same time, it is for less than 50 percent (of total diamond production) in any event, so we will continue our use of the Antwerp sales office with or without a deal with the CSO,'' BHP spokesman Graham Nicholls said from Vancouver. Nicholls added the Australian resources giant could cut its diamond marketing costs if it avoided the CSO commission, rumored in the secretive diamond industry, to be around 10 percent. Selling a large portion of BHP's diamonds to De Beers could also attract the attention of anti-trust regulators in the United States and jeopardize the Australian firm's U.S-based steel, copper and petroleum assets. The U.S. Department of Justice for years has probed the practices of companies linked to De Beers, which is prevented from operating directly in the United States. Instead, De Beers sells its gems to selected dealers in London and Switzerland who then pass on the gems to independent dealers in the United States. The cartel's strict control of world supply has kept diamond prices relatively stable during a time when gold and other metals have fallen sharply, though De Beers' worldwide sales slid sharply last year. Despite setbacks in Canada, De Beers remains convinced the CSO could ultimately end up marketing the millions of carats expected to pour out each year of Ekati and its nearby sibling Diavik. The Diavik mine, co-owned by British mining conglomerate Rio Tinto Plc (quote from Yahoo! UK & Ireland: RIO.L) and Canada's Aber Resources Ltd. (Toronto:ABZ.TO - news), is considered the bigger prize in Canada's diamond sweepstakes. ''We are still in discussions,'' said George Burne, managing director of De Beers Canada Corp., who dismissed the idea that the recent Antwerp sales represented the first crack in the decades-old cartel. Analysts, however, said the sales would almost certainly force De Beers to make a stronger play for a significant share of Canada's future diamond production. ''The Canadian diamond mines are very unlikely to continue to operate independently as they are structured currently,'' said Vahid Fathi, an analyst at ABN-AMRO Chicago Corp. He added that BHP's relative lack of experience in diamond mining might prompt it to sell out to either Rio Tinto or De Beers. ''Don't count De Beers out yet. They could be a bidder for BHP's stake in the Ekati mine,'' Fathi said. ($1=$1.52 Canadian) PHIL Help