De Beers provides good news for its shareholders
DE BEERS, the world’s largest diamond producer by value, yesterday said that it had raked in $572 million (R7.5 billion) in rough diamonds sales in the sixth sales cycle for this year, buoyed by a surge in demand that was supported by this year timing of the Diwali festivities. The sales rose from the $541m of diamonds sold in the fifth sales cycle.
The increase in diamond sales is a second set of good news for Anglo-American shareholders, which owns De Beers in a space of two weeks. The company took markets by surprise last week when it said it was resuming dividend payments six months earlier than expected on the back of lower net debt and healthy cash flow. Anglo also said it was considering expanding its existing assets, a sprawling collection of mines producing everything from diamonds to copper across the world.
Bruce Cleaver, the chief executive of De Beers, said the sixth sales cycle of the year maintained the trend of consistently good demand for rough diamonds across the product range. “With Diwali being earlier than normal in 2017, we saw some demand from Indian diamantaires pulled forward from Sight 7,” Cleaver said. “This was due to these customers needing to make rough diamond purchases in sufficient time to complete their polishing before the holiday begins.” De Beers has taken a bullish posture this year as global commodity prices came to life after a difficult 2016.
According to Rough Diamonds Index, mined diamond production in 2017 is estimated to be 142.3 million carats worth $15.6bn which would be an 11.5 percent increase in carat volume produced over 2016 and a 9.9 percent increase in total value produced. De Beers’ Jwaneng mine in Botswana is ranked number one, and is estimated to independently produce 15 percent of the world’s diamonds in value.
Earlier this week the company said its business in Botswana was on track to produce the most since 2014, exceeding its initial annual production forecast. It said Debswana, as the Botswana operation is known, was expected to produce 22 million carats this year, exceeding its initial 20.5 million-carat target.
The company was forced to cut rough diamond prices last year after cutting back heavily on sales volumes during 2015 in response to the poor state of the rough diamond market. De Beers said that it sold $6.1bn worth of rough diamonds last year, up 30 percent on the 2015 level of $4.7bn. At the start of the year, the company said it forecasts its production for 2017 to range between 31 million and 33 million carats.
It said the range would take production back to normalised levels seen over the last few years. The company said the first half of this year was marked by a resurgence in demand for lower-quality rough that was severely impacted after the Indian government demonetised its highest denomination bank notes last November.
$572m De Beers rough diamond sales in its sixth cycle for this year