Saturday, March 2, 2024

De Beers maintains production target, buoyed by recent sales

Rough diamond sales are improving ahead of the holiday selling season, where key customers from the USA and China are expected to buy more diamond jewellery, revealed Anglo American in its production report for the third quarter of the year.

The report released on Thursday carries the company’s both agony and hope after a challenging year which was turned on its tail by the outbreak of coronavirus earlier this year. Anglo American, the 85 percent major shareholder in iconic diamond miner De Beers said sales are improving despite a slight decrease in output.

Between July and September, diamond production at De Beers owned mines saw rough diamond production decreasing by 4 percent to 7.2 million carats, driven by planned reductions in production to reflect the lower demand for rough diamonds due to the Covid-19 pandemic. The company added that Covid-19 related measures remain in place to safeguard the workforce while maintaining operational continuity.

Debswana, equally owned by the Botswana Government and De Beers, was responsible for 70 percent of De Beers’ supply of rough diamonds. Debswana operates the prolific Jwaneng mine, considered the world’s most valuable diamond mine in terms of quality gems, and also owns the Orapa, Letlhakane and Damtshaa (OLD) mines, also known to be the world’s largest reserves of diamonds by area.

Production decreased by 15 percent to 4.8 million carats due to the planned treatment of lower grade material at both Jwaneng and Orapa, with production targeted at levels to meet lower demand, Anglo American said in its report.

In Namibia, where De Beers is also in a joint venture with the government, production decreased by 43 percent to 0.2 million carats as the marine fleet suspended production for part of the third quarter to reflect lower demand and one vessel was in dock for planned maintenance during the period.

The South African diamond mine, Venetia,  fully owned by De Beers increased production to 1.2 million carats due to an expected change in ore mix, with more ore sourced from the higher grade material from the last cut of the open pit as the mine transitions to the underground.

The diamond miner has two mines in Canada, but only Gahcho Kué was operational, registering an increase output  by 17 percent to 0.9 million carats, due to treatment of higher-grade material at the mine.

“Demand for rough diamonds showed signs of improvement in the quarter as Covid-19 restrictions gradually eased in cutting and polishing centres and consumer markets ahead of the key end of year holiday season,” said De Beers’ chief executive officer Bruce Cleaver.

The diamond mining company’s fortunes remarkably improved in the third quarter of the year, with rough diamond sales totalling 6.6 million carats  from three sights compared with 0.3 million carats  from two sights in the second quarter of  2020, but was lower than 7.4 million carats from three sights in the third quarter of 2019.

De Beers 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 the company. However, De Beers had to break from tradition this year, making several concessions, which included cancelling the third sales cycle, and temporarily moving away its sights from Gaborone, and later combined the fourth and fifth cycles together. Even then, sales were still lower by any standards. However, following the flexible approach adopted by De Beers, the sixth and seventh sights have traded near pre-pandemic levels, after the sights were extended beyond its normal week-long duration.

With only two sales cycles left, the company has so far sold $1.87 billion of rough diamonds and will certainly be lower than the $4 billion earned from the ten sales sights 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.

The diamond miner has kept its production guidance unchanged at 25 to 27 million carats, subject to continuous review based on the disruptions related to Covid-19 as well as the timing and scale of the recovery in demand.


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