For diamond mining giant De Beers, this week was supposed to be an opportunity to show that the company was back on track with the release of its financial results for the first half of the year. In financial terms, the results were indeed impressive as the long-time leader in diamond production announced record first half sales of rough diamonds for in the first six months of this year.

Group sales reached $3.89 billion, representing a 30 percent rise on the first half of 2010. Similarly, the Diamond Trading Company's sales of rough goods in the period jumped 33 percent on the year to $3.5 billion. The figures, De Beers reported, were boosted by price growth of approximately 35 percent due to soaring demand for diamonds in the first half of this year, which has sent prices higher by tens of percentage points.

There is ongoing demand at the retail level in the huge Indian and Chinese consumer markets and demand in the United States was higher than forecasted. Those trends are expected to continue, the mining company stated. "Reports from the recent JCK trade show indicate that the all-important Christmas season in the U.S., and [the Indian festival of] Diwali, are set to be strong."

Furthermore, De Beers said that profit before finance charges and taxation surged 74 percent higher to $1.02 billion, while its net debt fell by 27 percent to $1.45 billion from $1.98 billion in the same period of 2010. For De Beers' shareholders, the results undoubtedly gave them a reason to smile.

However, the diamond industry noticed a rather less encouraging element in the results. That came in the news regarding production levels, which were almost flat from the first half of 2010 at 15.53 million carats, slightly above the 2010 figure of 15.43 million carats. De Beers reported that the level of output reflected "the impact of maintenance and asset management difficulties and to an extent, excessive rainfall in southern Africa".

That was unlikely to appease manufacturers however, who are having to contend with soaring diamond prices and a lack of supply. Similarly, jewelry makers already battered by surging gold and silver prices for the past year, and having to drastically rethink designs, have the added headache of keeping jewelry at realistic price points in the face of soaring prices for diamonds. A higher supply to the market by producers might have provided them with a measure of relief.

The picture of increased income of reduced supply was repeated the following day when the Russian mining giant Alrosa released its own results for the January-June period.  The company reported that it produced 19.0 million carats and sold 19.1 million carats of diamonds during the period, figures that were significantly higher than those of De Beers.

Moreover, its revenues although down by 2 percent at $1.87 billion from $1.91 billion in the first half of 2010, were on a much lower volume of diamonds. It sold 19.1 million carats of diamonds this year compared with 24.1 million carats a year earlier, and still its value was almost the same. The average price per carat that Alrosa managed to secure for its diamonds jumped to $113 this year from $80 in the first half of last year.

And the icing on Alrosa’s cake? Net profit in the first half of 2011 was more than five times higher at $585 million compared with $105 million in the first half 2010.

Photo: Mining at De Beers' Voorspoed mine in South Africa.

Alrosa remains a rising star. It was not that long ago that De Beers controlled around 80 percent of global diamond production partly due to the fact that it bought Alrosa's diamonds and sold them together with its goods. A reversal of fortunes? That might be a premature judgment but with CEO Fyodor Andreev confidently leading the Russian miner forward with ambitious plans, Alrosa has clearly stated that it is willing and able to take over the number one spot in global diamond supply.