De Beers records 4.9% increase in diamond sales, Anglo says

MULTINATIONAL mining company Anglo American, which owns the majority of De Beers, reported a 4.9 percent rise in diamond sales during the third cycle of the year, compared with the second cycle, reflecting a positive response from the Hong Kong International Jewellery Show last month.

Anglo American owns 85 percent of De Beers, the world’s leading diamond company. The remaining 15 percent of De Beers is owned by the government of Botswana (GRB).

De Beers, the world’s largest rough diamond producer by value, reported provisional diamond sales of $580 million for the third sales cycle to end April 3, compared with $553m generated in the previous sales’ cycle.

Sales for the third cycle of 2016 were $666m. Bruce Cleaver, chief executive of De Beers, said: “We saw the continuation of good rough diamond demand in cycle 3 across the product range. This reflected positive sentiment from our customers following the Hong Kong International Jewellery Show in March.”

Mish-al Emeran, an equity analyst at Electus Fund Managers, said the improvement in the sales of diamonds was because De Beers saw a positive sentiment from customers.

“There are 10 rough diamond sights for the year. So post this third cycle one, there are still seven remaining for the year,” said Emeran. While the third cycle is up by 4.9 percent as compared to the second cycle, the combined first three cycles of this year to date is modestly better than the first three of 2016, pointing to a stable demand,” he added.

“De Beers indicates that they are seeing positive sentiment from customers, which is good.” Towards the end of February, De Beers gave an indication that it is intending to up diamond production levels during 2017.

De Beers reduced production costs by 19 percent to $67 per carat from $83 per carat in 2015. Debswana was the cheapest producer as it churned out diamonds at a unit cost of just $26 per carat. De Beers reduced production to 27.3 million carats in 2016, down from 28.7 million carats in 2015.

But it managed to hike sales volumes by almost 50 percent to 29.9 million carats with the markets and buyer sentiments improving during 2016.

Yesterday, Anglo American reported it is set to sell its first public bond since it was stripped of its investment grade status in February 2016. Anglo American, along with other mining companies, was heavily affected by the fall of commodity prices.

Anglo American’s euro bonds lost up to 48 points when its relegation to junk 14 months ago initiated a bout of forced selling from investment grade accounts. But the miner’s credit profile has improved since then.

As a result, Moody’s upgraded it to Ba1 with a positive outlook earlier last month, from Ba2, to reflect its improving credit profile and accelerated debt reduction.