According to Sunday Times, Gareth Penny's decision to quit as De Beers CEO came as little surprise to diamond analysts in London.

His contribution to the diamond company has been praised by chairman Nicholas Oppenheimer. But De Beers has still to define a direction to address the results of management follies that stretch back decades, the report said.

While the $2.6 billion sales of rough diamonds during this year's first half were much higher than the catastrophic $1.4 billion of 2009's first half and the second half's $1.8 billion, the sufferings of the recession are far from over. The sales improvements owe much to restocking by cutters and the trade, now about complete.

Achieving a degree of stability now depends on actual purchases at retail jewellers. And that demand remains fragile in North America and Europe, though the group says it is "encouraged" by demand in Asian markets.

On this will depend the group's ability to continue to generate positive free cash flow needed to manage its recently restructured $1.98 billion external debt and shareholders' loans of $785 million, the report said.

It might be possible to clear some debt by selling more South African assets, following those of the Cullinan and Kimberley underground mines to Petra Diamonds. Selling stakes in the partially-owned Botswana mines, which delivered two-thirds of the past six months' 15.4million carats, is simply not on.

Much the same goes for the Namibian properties.

Gaborone and Windhoek have progressively reversed the years of what they saw as one-sided "exploitation" by De Beers.

Finding a replacement for Penny will be an exercise in horse-trading between the dominant shareholders Anglo American (45%) and the Botswana government (15%). Despite its 40% shareholding, the Oppenheimer family is increasingly viewed as the junior partner.

Finance director Stuart Brown and commercial director Bruce Cleaver will act as interim joint CEOs. Penny will remain until the end of September, but will defer to the two.

Suggestions that he might be replaced by fourth-generation Jonathan Oppenheimer are unofficially dismissed by Anglo insiders. They are aware that Anglo must be sensitive to its own shareholders' insistence that De Beers be led by someone competent to fill the CEO's position. Anglo is itself undergoing a thorough change of direction and focus, and that has called for fresh approaches to influential shareholders, said the report.

Outsiders place the odds on Brown becoming CEO, if an insider is selected. But Anglo itself brought in an outsider as CEO, Cynthia Carroll, when it felt the need for a fresh focus and a clean leadership break from the old Oppenheimer influence.

Among issues the new CEO will need to address is the outcome of the folly of believing lawyers might enable De Beers to beat class actions in the US. The hope that making an offer and coughing up millions might work has been proved baseless by the court's recent overturning of a proposed settlement, the report said.

What does Anglo plan to do with its minority stake in De Beers?

The two extremes are that it sells out, just as it has with non-core interests, or that it buys out the asset-rich but relatively cash-stretched Oppenheimers, it said.