De Beers rough diamond sales up 9%
De Beers increases revenue from its first sale of the year but underlying concerns about the market remain
Mining group De Beers had a strong start to the year with rough diamond sales of about R8bn, fuelling hopes the downturn in the market that battered the industry has ended.
De Beers reported a 9% increase in the first sale of the year, achieving $545m in revenue, which is higher than that of the same period in 2019, but remains relatively low compared with earlier years.
“The De Beers results and comments echo reports from other diamond producers, including Petra Diamonds' comments earlier this week suggesting that signs of a modest recovery in rough diamond pricing may be under way,” said SP Angel analyst John Meyer.
The global rough diamond market had a difficult year in 2019 because of a surfeit of rough diamonds and a logjam of cut and polished diamonds after slow buying of diamond jewellery.
De Beers, which is 85% owned by Anglo American and 15% owned by the Botswana government, said its first of 10 sales — which De Beers calls sights — for the year achieved revenue of $545m, which is higher than the previous year’s $500m. The sales revenue is the same as it was in 2016, but well below the $729m and $672m achieved in the next two years.
“Demand for rough diamonds increased during the first sight of 2020 following the end of year selling season and subsequent inventory restocking,” said De Beers CEO Bruce Cleaver.
The year-end period is marked by the busiest diamond jewellery selling period in the US, the world’s largest market. De Beers is the largest source of rough diamonds by value while Russia’s Alrosa is the largest supplier measured by carats.
Rough diamond sales at De Beers fell by 8% during 2019 to 31-million carats, while prices dropped to an average of $137 (almost R2,000) per carat from $171.
Based on the sales data released by De Beers during 2019 for its 10 sales, its full-year revenue fell by 25% to $4.04bn. Alrosa’s full-year sales fell by 12% to 33.4-million carats, with revenue falling by a quarter to $3.3bn.
Rapaport, a market intelligence business focused on the polished diamond industry, said in a report this week that US year-end jewellery buying was “positive” and that diamond dealers were “optimistic” about the year ahead.
Repeat of glut
However, in India, the largest source of diamond cutting and polishing, especially of smaller stones, there were concerns about the start of the year. “Polished slower than usual for this time of year. Dealers worried about repeat of 2019 diamond glut as they anticipate influx of rough following large De Beers and Alrosa January sales,” Rapaport said.
“Chinese New Year offering some optimism for suppliers. Local Indian jewellery market weak amid tight liquidity and high gold prices,” it said.
Citing unnamed sources, Rapaport has reported that De Beers is looking at changing the way it sells diamonds to a handpicked base of about 80 clients called sightholders who attend the 10 sights in Gaborone, the Botswana capital. The sightholder contracts expire at the end of 2020 and will be renegotiated during the year.
Cleaver told Business Day that De Beers had introduced unprecedented flexibility in the way it sold its diamonds to sightholders during 2019 because of the nature of the market. Demand for smaller diamonds tapered off during the year.
The bulk of diamond miners’ production are small diamonds. At the De Beers’ sorting and aggregation office in Gaborone these small diamonds are moved around in large steel buckets.
A Bloomberg report said De Beers was considering reducing the number of sightholders.