De Beers Reduces Quarterly Output by 14 Percent

- July 18th, 2019

The decline in output tallies has also forced the company to revise its full year production guidance, reducing it to 31 million carats.

Global diamond major De Beers has reduced its yearly rough diamond guidance, following a year-over-year production decrease of 14 percent.

During Q2 2019, the Africa-focused diamond miner produced 7.699 million carats of rough diamonds, a 4 percent quarter-over-quarter reduction from the 7.852 million carats of rough stones recovered during Q1.

The decline in output tallies has also forced the company to revise its full year production guidance, reducing it to 31 million carats — the lower end of the previous 31 to 33 million target.

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The diamond miner has attributed the production decline to weaker outputs in Botswana, Namibia, South Africa as well as Canada.

South African diamond output dropped 44 percent to 0.6 million carats thanks to the ongoing closure efforts at Voorspoed. Reduced volumes at Venetia also contributed to the poor showing.

Similarly, Namibia’s diamond yields fell 35 percent to 0.3 million carats during the same period. The transitioning of Elizabeth Bay to care and maintenance in late 2018 and maintenance on the Mafuta crawler vessel all contributed to Namibia’s reduction.

“Demand for rough diamonds remains subdued as a result of challenges in the midstream with higher polished inventories, and caution due to macro-economic uncertainty, including the US-China trade tensions,” reads the company announcement.

The statement goes on to note that reduced rough diamond values have also weighed on the sector in part due to an oversupply in the market.

“The H1 2019 average realized rough diamond price decreased by seven percent to US$151 per carat (H1 2018: US$162 per carat), which was driven by a four percent reduction in the average rough price index and a change in the sales mix in response to weaker conditions.”

According to the Zimnsiky Global Rough Diamond Price Index, the value of rough diamonds has steadily declined since mid-August 2018. Currently the price is at a 52 week low of US$144.78 per carat.

Notably, the value of rough stones has fallen almost 50 percent in the last decade.

While some speculate that the introduction of lab grown diamonds has depressed the prices of small stones, it is more likely that increased efforts to recover more small diamonds has led to an oversupply, which in turn has driven the price lower.

Following its most recent Cycle 5 diamond sale (June 25), Bruce Cleaver, De Beers Group CEO, noted the difficulties facing the diamond sector.

“While overall retail sentiment for diamond jewelry in the US remains solid, a more challenging environment in China and higher than normal polished diamond inventories in the midstream resulted in a cautious approach from rough diamond buyers during the fifth cycle of 2019.”

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Securities Disclosure: I, Georgia Williams, hold no direct investment interest in any company mentioned in this article.

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