Sourcing

De Beers’ Sales Drop 26%, Production Forecast Cut for ‘20

SourcingDec 16, 2019

De Beers’ Sales Drop 26%, Production Forecast Cut for ‘20

Parent company Anglo American said it’s been a “tough market” for diamonds.

2019_De_Beers_Orapa_Mine_1.jpg
A shot of Orapa, one of the diamond mines De Beers Group operates in Botswana. Parent company Anglo American cut its production forecasts for the miner for fiscal years 2020 and 2021. (Photo courtesy of De Beers Group)

London—De Beers Group parent company Anglo American Plc said the diamond miner’s sales fell 26 percent this year amid “challenging market conditions,” and it’s lowering its sights on production in the near future.

In an update for investors and analysts released last week, the London-based company said De Beers is expected to mine approximately 31 million carats of diamonds in 2019, down 11 percent from 35 million last year.

Prices on a full-year basis have dropped about 20 percent while the diamond price index is down about 5 percent.

De Beers’ mix is down in terms of quality (by price) about 15 percent, due in part to the company holding back some higher-quality goods in hopes market conditions improve.

On a call with analysts held in conjunction with the update, Anglo Chief Executive Mark Cutifani said it has been a “tough market” for diamonds.

In an email to National Jeweler, De Beers spokesman David Johnson elaborated on what made 2019 so tough for the miner.

He said a weak 2018 holiday season meant retailers did not need to restock early in the year.

This created an “amplified impact on demand up through the value chain,” affecting diamond manufacturers, who continue to struggle to secure financing for their operations, and mining companies like De Beers. 


That’s why De Beers sold less rough in 2019 and has cut its production forecast for the next couple years.

Johnson said De Beers’ struggles are not the result of losing market share to lab-grown diamonds.

“The lab-grown diamond market remains very small compared with the natural diamond market (around 1-2 percent of the size of the natural diamond market), and all our research shows that consumers see natural diamonds and LGDs as different product categories, suited to different occasions.

“As noted above, consumer demand for diamond jewelry has been broadly stable compared with last year, and the changes in our rough diamond sales and production outlook are a result of the midstream challenges we’ve seen, rather than being related to anything at the consumer level of the industry.”


Anglo’s Cutifani said on the call he is waiting until the first couple sales of 2020 to make predictions about next year.

“We’ve certainly seen a little bit of improvement later in the year. I think the best thing to say is the first couple of sights in the new year will be, I think, a

better point in terms of how that market is going.

“We’ve seen some encouragement, but I think it’s still a little too early to bank that in any more of a substantive sense.”

Bain & Co. said in its annual diamond report released last Wednesday that 2020 will be “a better year” for the industry but doesn’t expect a full recovery until 2021.

Anglo has cut its diamond production forecast for the next two years.

In 2020, it expects De Beers will mine 32-34 million carats, down from its previous outlook of 33-35 million. For 2021, the forecast was cut from 35-37 million carats to 34-36 million carats.

Production guidance for FY 2022 is 33 to 35 million carats.

Anglo executives also gave a brief update on Chidliak, a potential diamond mining site on Canada’s Baffin Island that De Beers bought from Peregrine Diamonds Ltd. in September 2018.

Cutifani said the company is currently examining some different technologies for mining diamonds on the cold, remote island and likely will give a progress update on the project in mid-2020.

“More generally, in De Beers the focus is obviously on market and how we’re positioning in the marketplace,” he said. “Again, we think there’s some encouraging signs, but we don’t want to talk to those too early, so we’ll wait and see the first few sights next year.”

On a whole, Anglo American, which also mines platinum and copper, said it expects production to be up 1-2 percent year-over-year in 2019.

In 2020, it forecasts a 3 percent increase in production, aided in part by the diamond market “coming back to balance,” Finance Director Stephen Pearce said.
Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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