De Beers CEO steps down after buoyant H1

The Business of Mining - thebusinessofmining.com | July 26, 2010 | 1:53 pm

“De Beers, the world’s biggest diamond producer, said that its chief executive has resigned, in a suprise announcement on Friday after reporting a surge in first-half net profits on the back of a rebound in demand.

‘Gareth Penny has advised the board that he believes it is an appropriate time for him to step down,’ a statement said, giving no reason for the move. He will leave in the ‘coming months’ and until a successor is appointed Chief Financial Officer Stuart Brown and Chief Commercial Officer Bruce Cleaver will act as joint CEOs, the firm said.


De Beers, 45 percent owned by mining group Anglo American, said net earnings rose to $255 million including one-off items from $3 million last year. Anglo said it will report an underlying profit of $148 million from De Beers. Rough diamond sales surged 84 percent to $2.6 billion and production more than doubled to 15.4 million carats from 6.6 million.”

Source: Reuters, July 23, 2010

Observations:

  • The rough diamond demand increased by 84%, mainly driven by consumer demand in Asia. No mention was made of changing demand for industrial diamonds.
  • Gareth Penny announced to step down as CEO, a position he has held since March 2006. Which the company recovering after the global crisis he deems this a good moment to leave.

Implications:

  • The enormous increase in output of the diamond miner indicates a strong ability to tailor production levels to demand. One of the key achievements mr. Penny has been to turn the company from a supply driven to a more demand driven organization.
  • As no internal promotion to CEO has been announced, DeBeers will likely appoint a senior AngloAmerican official or an external diamond-expert.

©2010 | Wilfred Visser | thebusinessofmining.com