Saturday, May 30, 2020

De Beers emerges from a slump period with a spark

BY BONNIE MODIAKGOTLA

De Beers is recovering from the previous two rough diamond sales slump, igniting hopes that the diamond-mining giant is back to sparkling fortunes on the back of improvements in the midstream, as the company had hoped.

The provisional rough diamond sales for the third sight, also known as sales cycle, came at about $575 (P6.1 billion) ÔÇô an increase of 9.7 percent from 2018’s third sale of $524 million (P5.5 billion) and a 15.9 percent uptick from the second sales cycle of the year which netted $496 million (P5.2 billion).

Commenting on the latest sale, De Beers CEO Bruce Cleaver said: “As we move into the second quarter of the year, we saw a continuation of stable demand for our rough diamonds during the third cycle of 2019.”

This is a turnaround of fortunes for De Beers which opened the year with lower sales underpinned by concerns over decreasing demand for lower value rough diamonds ÔÇô which gained momentum in mid-2018, forcing De Beers to break with its tradition and allowed buyers to postpone their purchase of some lower-quality stones, with the condition that they still had to purchase their quota of gems before the end of the year. This resulted in the unusually higher sales recorded in the last sight of 2018, which is even higher than this year’s opening sale ÔÇô an uncommon occurrence for De Beers.

Traditionally, the first sight of the year has always been the largest of the year as traders and manufacturers return to the market after working down their inventories over the festive selling period. The decline was attributed to “the slow movement of lower value rough diamonds through the pipeline”.

The diamond-mining giant holds ten Global Sightholder Sales and Auction Sales every year in Gaborone and the sights or auction sales are restricted to its top 80 Sightholders who buy the diamond packages at a price determined by De Beers.

With the latest rough diamond sales, De Beers this year has so far raked $1.6 billion (P16 billion) in the three sales, making it the lowest since the mining company started publicly publishing its rough diamond sales in 2016, ending the quarter 11 percent lower than last year’s sales level.

De Beers’ latest rebound also coincides with positive data from the Antwerp World Diamond Centre (AWDC), which shows that Antwerp’s polished-diamond trade continues to see rising prices in 2019 following a year which the industry recorded its highest ever average price per carat for polished exports.

The average price of polished exports rose by nine percent in March to $2,776 per carat from $2,556 per carat in March of 2018. Polished imports also rose by 11 percent to $2,571 per carat. Across the first quarter of 2019, the average price per polished carat exported has risen by seven percent to $2,652 from $2,481 in 2018’s first quarter – far outpacing the record of $2,392 per carat which set a new record last year.

This bodes well for De Beers, which hopes to recover from the last two sales slump and try to replicate the previous stellar year: In 2018, De Beers hit its lower end of its production target, unearthing 35.3 million carats, an increase of 6 percent from 2017’s 33.5 million carats. Moreover, the mining giant sold rough diamonds worth $5.4 billion (P54 billion), a slight figure above $5.3 billion (P53 billion) earned in previous year and 2016’s sales of $4.12 billion (P41 billion).

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Sunday Standard May 24 – 30

Digital copy of Sunday Standard issue of May 24 - 30, 2020.