Diamond giant De Beers was keeping an open mind on discussions about launching a diamond exchange traded fund (ETF) and would consider any proposals presented to it, De Beers MD Gareth Penny said, Business Day reported.



He said proponents of a diamond ETF had asked for De Beers’ input and expertise but discussions had not progressed beyond that level.



He was responding to reports that a diamond ETF could follow the success of gold, silver, platinum and other ETF funds. It could attract investors because global diamond production was declining, with little prospect of new major mines, the report said.



Penny said volumes of diamond demand from De Beers’ sightholders had more than doubled in the second quarter of this year compared with the first and there had been a general improvement in sentiment in the past two to three months.



Diamond prices realized by De Beers had fallen about 15% between the beginning of last year and the first quarter of this year but had now regained about 5%-6%, he said.

De Beers cut diamond production 90% in the first quarter to 1,1 million carats due to weak demand, but the pace of activity resumed to 5,5 million carats. For the full year De Beers expects to produce about 24 million carats of diamonds and it might sell more, Penny said.



Although De Beers has scaled down overheads to save costs, and said some of the efficiencies that had seen a huge cut in the size of the global workforce were permanent, the group’s diamond production in the long term was likely to return to similar levels as last year, at between 40 and 50 million carats, he said.



De Beers’ revenue dropped 54% to $1,7 billion in the first half of this year compared to the same period last year and it posted an underlying loss, which excludes some once-off items, of $164 million.

Gearing dropped to 40% from 47% because of the injection of a 500 million loan, which is classified as quasi-equity, from the group’s major shareholders.



The diamond group was in discussions to roll over $1,5 billion of debt that falls due next year but had no further need for funds, Penny said.

Business Say (South Africa).