A quarter of two halves for De Beers

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The first quarter of the year was a bag of mixed fortunes for diamond mining behemoth De Beers, with production slumping but rescued by strong sales of rough diamonds, the company reported this week.

De Beers, which is 85 percent owned by Anglo American and 15 percent by Botswana government, reported a 7 percent reduction in rough diamond production between January and March, with the company mining 7.2 million carats  compared to 2020’s first quarter production of 7.8 million carats.

The decline in output was driven by operational challenges, including excessive rainfall in southern Africa and a Covid-19-related shutdown in Canada, as well as planned maintenance in Namibia, the company said.

In Botswana, where the De Beers sources 70 percent of diamond, production decreased by 12 percent to 5 million carats, driven by 24 percent reduction at Orapa due to a lower grade feed to the plant in response to heavy rainfall and operational issues, including continued power supply disruptions.

Namibia production decreased by 34 percent to 0.3 million carats, primarily as the Mafuta vessel was under planned maintenance and another vessel remained demobilised as part of the response to lower demand implemented in the third quarter of 2020.  

South Africa production increased by 55 percent to 1.2 million carats due to planned treatment of higher-grade ore from the final cut of the open pit. Production in Canada decreased by 16 percent to 0.7 million carats, as a result of a Covid-19-related suspension of operations in February.

Though output was slightly down, demand for rough diamonds in the first quarter of 2021 recovered to pre-Covid-19 levels reflecting the replenishment of the depleted midstream, and renewed confidence by the midstream in response to the return of consumer demand for diamond jewellery in the US and China in the second half of 2020.

Rough diamond sales totalled 13.5 million carats from three sights, compared with 8.9 million carats from two Sights in the corresponding quarter last year and 6.9 million carats  from two sights in the last quarter of 2020.

The diamond mining giant sells rough diamonds through ten Global Sightholder Sales and Auction Sales held every year in Gaborone, with the sights or auction sales restricted to its top 80 Sightholders who buy the diamond packages at a price determined by the company. However, De Beers had to break from tradition last year as it made several concessions. These included temporarily moving away sights from Gaborone due to Covid-19 travel restrictions and use of the flexible approach that extends the sights beyond the normal week-long duration to now last two weeks.

While the three rough diamond sales of 2021 have risen to pre-pandemic levels, the company has warned of challenges that lie ahead.

“Following a good holiday season and that trend continuing during the first quarter of 2021, we have again seen solid demand for rough diamonds as we begin a traditionally quieter period of the year for the diamond industry. Sales were in line with expectations and both market sentiment and overall industry conditions remain positive,” Bruce Cleaver, De Beers’ CEO, said last week in the wake of the third sales cycle.

“However, with pandemic developments in Europe and Mumbai’s recent lockdown resulting in the Bharat Diamond Bourse being closed, it is clear that we will continue to see challenges relating to Covid-19.”

The top world diamond producer by value in 2020 sold $2.79 billion of rough diamonds, lower than the $4 billion earned in 2019, and much lower than $5.39 billion in 2018 and $5.31 billion in 2017. De Beers’ rough diamond sales are yet to top the $5.6 billion reached in 2016.

De Beers production guidance for this year remains at 32 to 34 million carats, subject to trading conditions, the extent of further Covid-19- related disruptions and ongoing operational challenges. The higher production is expected to be driven by an anticipated increase in ore and improved grade performance at both Jwaneng and Venetia mine.