Oppenheimer calls U.S. subprime woes 'worry'

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Oppenheimer calls U.S. subprime woes 'worry'

March 17, 2008

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Johannesburg, South Africa—The U.S. subprime mortgage crisis is causing concern in the diamond industry due to the high volume of "lower-quality, cheaper diamonds" sold here, De Beers Chairman Nicky Oppenheimer said in a recent interview with Mining Weekly.

But, demand for higher-quality stones continues in the United States, unaffected by the turbulence in the housing market.

"America remains 50 percent of the diamond jewelry worldwide offtake and, in that 50 percent, America has a disproportionate element of the somewhat lower-quality, cheaper diamonds, so that's a real worry there," he told the South Africa-based publication. "The balance is the better-quality diamonds, which seem to be remaining in demand, and that's obviously helped by the very strong growing demand in Asia."

Overall, Oppenheimer said, the economic volatility worldwide "is not good for us."

He said the dramatic strengthening of the Canadian dollar has negatively impacted De Beers' business in that country while, conversely, the weakening of the rand in South Africa has helped De Beers, which sells its diamonds in U.S. dollars.

In the same interview, De Beers Consolidated Mines (DBCM) Managing Director David Noko said the company is working to negate the impact the power crisis in South Africa is having on De Beers' output.

A 10 percent impact on production is forecast, with DBCM budgeting production of 12.7 million carats in 2008, compared with 15 million in 2007. This lower estimate, Noko said, is due to the sale of some of DBCM's assets, not the power crisis.

Also, De Beers Group Managing Director Gareth Penny said the Diamond Trading Co. (DTC) continues forming local DTCs in Botswana, Namibia and South Africa.

A total of eight De Beers retail stores launched in 2007, pushing the total to 23 globally, and De Beers plans to double the number of stores in 2008.

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