Tuesday, March 5, 2024

De Beers says not yet Uhuru

The diamond industry is not yet out of the woods despite early signs of a promising recovery, warned De Beers this week when releasing the provisional results for the latest rough diamond sales. 

The diamond mining behemoth revealed that it will likely earn $440 million from diamonds sold in the third sales cycle – which ran from 22 March to 6 April. The estimated figure is lower than the second sales cycle that netted $550million and the first sales cycle which brought in $663 million. Last year De Beers had to postpone the third sales of the year as Covid-19 containment measures were being implemented across the world, curtailing movements, and trade. 

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,” said Bruce Cleaver, De Beers’ CEO.

“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, 85 percent owned by Anglo American and 15 percent held by the Botswana government, saw production decrease to 25.1 million carats last year compared to 2019’s 30.8 million carats, in response to lower demand due to the pandemic and Covid-19 restrictions in southern Africa during the first half of the year. 

In Botswana, where the company sources nearly 70 percent of rough diamonds, production decreased by 29 percent to 16.6 million carats, with volumes at Jwaneng reduced by 40 percent to 7.5 million carats, while production at Orapa decreased by 16 percent to 9 million carats. This was largely due to a nationwide lockdown from 2 April to 18 May, and the planned treatment of lower grade material at both Jwaneng and Orapa, following their restart, as a production response to lower demand.

For 2021, production guidance is 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.


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