Top diamond producer De Beers bolstered its balance sheet today with a $1 billion (€727 million) rights issue and bank refinancing as it swung to an annual $220 million (€160 million) underlying loss after demand plummeted for luxury goods.
The company was cautious about the future and said output would only slightly rise in 2010 after halving last year.
"With the fragility of the world economy and perceived weakness of the global recovery post recession, the company would only expect a gradual increase in production levels, sales and prices," a statement said.
De Beers said 45-per cent owner Anglo American and two other shareholders confirmed they will pump more cash into the company after it was forced to shut mines last year during the downturn.
The group said in December that Anglo, South Africa's Oppenheimer family with a 40 per cent stake and the Botswana government with the remaining 15 per cent had agreed to a rights issue of up to $1 billion to cut its $4 billion of debt.
The group, which controls around 40 per cent of the rough diamond market, said today banks had granted credit approval for the refinancing of a $1.5 billion facility after months of negotiations.
Profits were hit after the group slashed output in early 2009 and its biggest unit in Botswana shut down completely for several months when consumers shied away from buying luxury goods during the downturn.
De Beers moved to an underlying loss of $220 million in 2009 after underlying net profit of $515 million in 2008 while rough diamond sales tumbled to $3.2 billion from $5.9 billion.
Anglo said it would report an underlying loss of $90 million from its holding in De Beers. De Beers is a small part of Anglo, contributing about 5 per cent of the group's operating profit in the past two years.
Reuters