The Group’s share of operating profit from De Beers increased by 5% to $484 million. Earnings from joint ventures were higher than in 2006 and there was a modest rise in diamond prices in 2007, although the weakening of the dollar in the second half of the year had an impact on costs and margins. Diamond sales were lower than in 2006, resulting from diminishing supplies of rough diamonds to DTCI from the Russian state producer Alrosa. Underlying earnings at De Beers were higher than prior year, principally reflecting an increased share of earnings from joint ventures and a tax refund to DBCM, which offset lower preference share income arising as a result of the June 2006 redemptions and higher minorities due to the Ponahalo BEE transaction which was completed in April 2006.
In the US, preliminary agreement was reached in March 2006 with all of the plaintiffs, which resolved all outstanding class actions in the US and settlements were paid into an escrow account pending conclusion of the settlement process. The matter is proceeding according to the timetable of the Court and De Beers anticipates that a Fairness Hearing will occur in the first half of 2008.
The Court of First Instance in Luxembourg announced in July 2007 that it had annulled the European Commission’s decision to accept commitments offered by De Beers to cease all purchase of rough diamonds from Alrosa from 1 January 2009. De Beers will continue to purchase goods from Alrosa, up to the agreed levels and within the proposed timeframe set out in the prior commitments.
In South Africa, De Beers was informed by the DME on 4 February 2008 that it has granted a New Order Mining Right in respect of the Venetia mine, to be executed in March. De Beers has already been granted New Order Mining Rights for Voorspoed and Cullinan and conversions for Namaqualand, Kimberley and Finsch mines are being processed by the DME.
De Beers has made an impairment charge of $965 million ($434 million attributable) against its Canadian assets. This non-cash valuation adjustment has been brought about by the strengthening of the Canadian dollar against the US dollar, revised long term crude oil prices, labour cost pressures and the effect of capital expenditure overruns at Snap Lake.
|$ million (unless otherwise stated)||2007||2006|
|Share of associate's operating profit||484||463|
|Group's aggregate investment in De Beers||1,802||2,062|
|Share of Group operating profit||5%||5%|