De Beers plans return to marketing roots as split from Anglo American looms

De Beers, which created the global market for diamond engagement rings through its “A Diamond is Forever” campaign, is shifting back to its marketing roots as its parent company Anglo American (LSE: AAL) moves to sell it off.

Its new ‘Origins’ strategy is part of a wider pivot back towards natural diamonds, announced on May 31. The move makes sense because marketing has always set the diamond sector apart from other mineral industries and the industry risks losing its way if it becomes focused only on mining and turns away from the demand creation side, New York City-based diamond analyst Paul Zimnisky told The Northern Miner.

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“Marketing is what moves the needle,” he said. “You can throw money at the problem, you can create demand if the products are marketed properly. You have to look at it as a luxury product, not as a commodity.”

In announcing the divestiture of De Beers on May 14, Anglo said the move would give both companies “a new level of strategic flexibility to maximize value” for Anglo American and the government of Botswana, which each hold 85% and 15% stakes, respectively, in the diamond company. The Botswana government also indicated on June 10 that it wants to increase its interest in De Beers. High capital needs and declining diamond supply present further challenges in the diamond sector, analysts say.

Anglo’s announcement of its De Beers plans, as well as plans to sell off its South Africa-based Anglo American Platinum (JSE: AMS) and its steelmaking coal assets was triggered by BHP’s (ASX: BHP) unsuccessful, multi-billion-dollar acquisition bid in mid-May.

‘Growing desire’
De Beers is also suspending its Element Six lab-grown diamonds (LGD) subsidiary for jewelry to focus instead on synthetic diamond technology for industrial applications, it said in May. Production for the Lightbox LGD brand will stop in a few months, De Beers CEO Al Cook said in a June 13 interview with diamond news site Rapaport.

“The outlook for natural diamonds is compelling,” Cook said in a news release, adding that the company’s new approach will involve “growing desire for natural diamonds through the reinvigoration of category marketing, embracing new approaches that maximize reach and impact.”

Cook explained to Rapaport the need to tell better diamond stories is greater now that “there are more diamonds above the surface of the Earth than below the surface. Every year, diamond mines are closing.”

De Beers first entered the synthetic diamond jewelry market in 2018. In setting up a solid difference between mined and lab-grown diamonds, the company initially offered Lightbox jewelry for up to 80% less than its competitors’ prices.

Slowing sales, production
The stronger emphasis on marketing also comes as De Beers grapples with lower sales, with Cycle 4 rough diamond sales, at $380 million this year, down by 20% from last year’s Cycle 4 period of $479 million, the company reported on May 23. The Cycle 4 period approximately covers two weeks in May. Cook said the sales were due to the seasonally slower second quarter and less trading in India during the elections.

Production declined 8% to 31.9 million carats in 2023, from 34.6 million carats in 2022. First quarter output this year, at 6.8 million carats, was down 23% from the year-earlier figure of 8.9 million carats.

The wider industry is also facing the challenge of lower demand, especially in the United States and China. Amid the slow demand, De Beers cut the price of 0.75-carat stones by 4% to 6% at this year’s fourth trading session, according to a May 7 report from Rapaport. In the first sale of the year, the company cut prices by about 10%.

The issue of declining production could be expensive for De Beers to deal with, BMO Capital Markets diamonds analyst Raj Ray implied.

“From mining business point of view, not having a parent company like Anglo American backing De Beers could have some serious implications for diamond supply going forward,” he said.

Rough diamond supply has dropped to around 120 million carats from 150 million carats in 2017-2018, Ray said. It’s expected to drop even more in the next four to five years.

Amid the supply constraints, De Beers has invested $1 billion in expanding the life of its flagship Jwaneng mine in Botswana, and $2.3 billion to move underground the Venetia mine in South Africa.

“The next 12 to 24 months don’t look great for the rough diamond industry,” Ray said. “Anyone looking at De Beers will have to acknowledge (that). There’s huge capital investments that are needed over the next few years across mines to be able to maintain supply, forget about growing supply.”

But despite that hurdle, Ray and Zimnisky both see De Beers maintaining its 30% share of the global diamond market.

“They’ll continue to be the pre-eminent producer in the world,” Ray said. “Anyone who will buy (De Beers) will continue to fund its projects. I don’t see any significant drop in production from the De Beers portfolio.”

Going solo?
Once De Beers formally leaves Anglo as part of the company’s restructuring, which CEO Duncan Wanblad has said could take 18 to 24 months to complete, the diamond miner will face the prospect of being purchased or going alone.

Zimnisky said either option has its own difficulties.

“This is something Anglo has wanted for a while,” he said. “They wanted Anglo to become more of a pure play copper producer, or a green infrastructure buildout commodity producer hoping it would lead to a higher valuation for the company. That said, De Beers is a complicated business and not easy to sell. It has (the) Debswana joint venture, which is the crown jewel of the company.”

Ray agrees that few potential buyers would have interest in a company like De Beers whose business requires massive capital investments. An IPO is also unlikely, he said.

“There’s little interest in the diamond sector from an equity perspective. I don’t see how in a potential IPO there’s enough interest in a new diamond story,” he said. “This has to be a private sale or consortium that needs to come in and take a longer-term view of the diamond sector. There could be growth expected in the retail segment. That’s where I think anyone taking a look at De Beers would see the value.”

Both analysts also see the De Beers sale having minimal impact on the junior exploration sector for diamonds.

“In order to stimulate exploration across the industry you would have to see a notable diamond price recovery,” Zimnisky said. “Prices have been flat for almost a decade now.”

Source: DCLA

Botswana may raise De Beers stake as Anglo weighs spin-off

The Botswana government may raise its shareholding in global diamond miner De Beers, President Mokgweetsi Masisi told JCK News, after parent company Anglo American said it plans to spin off or sell the business.

The government owns a 15% stake in De Beers and Botswana accounts for 70% of the company’s annual rough diamond supply.

Anglo outlined a radical review of its business including a sale or divestment of the diamond business to focus on copper, iron ore and a fertilizer project in the UK to fend off a takeover from bigger rival BHP Group.

Masisi told JCK in Las Vegas that Anglo’s sale of De Beers would be “the best thing” if it happens.

The government could raise its shareholding in De Beers “if it’s attractive to,” Masisi told the online diamond news channel. The president in May told CNBC Africa that government would defend its interests in the diamond miner.

Among the plans Anglo could consider is an initial public offering for the diamond business, Reuters reported on May 14, citing sources.

Like other luxury goods, diamond prices have been hammered by a slump in global demand. De Beers has been limiting supply and offering flexibility to contracted customers. In February, Anglo announced a $1.6 billion impairment charge on De Beers. Anglo acquired De Beers in 2011, buying the Oppenheimer family’s 40% stake for $5.1 billion.

Masisi told JCK News Botswana’s ideal partner in De Beers would be a long-term investor. The government will try to keep the “bad guys out” and wants investors whose vision is aligned with the government’s.

“One of the characteristics of a bad owner is someone who has impatient capital,” Masisi said. “This industry requires somebody who is in it for the long-haul, because it has its ups and downs.”

Source: DCLA

Former De Beers Head Joins Lucapa Board

Industry veteran Stuart Brown, who has led multiple diamond-mining companies, will become chairman of the board at Lucapa Diamond Company.

Brown spent 20 years at De Beers, with stints as both interim CEO and chief financial officer. He was also the head of Firestone Diamonds from 2013 to 2018, and CEO of Mountain Province for three years, Lucapa said Monday.

During his time at Firestone, he raised $225 million to develop the Liqhobong mine in Lesotho, Lucapa noted. He is currently a director of Ukrainian iron-ore miner Ferrexpo and of Digby Wells Environmental Holdings, a provider of environmental, social and governance (ESG) consulting services to the mining industry.

In addition, Ronnie Beevor will take a seat on the board. He has experience in investment banking and mining, having been the head of Rothschild Australia. He is currently a director of Canadian iron-ore miner Champion Iron and Canadian explorer Mount Royal Resources. He serves as chairman of gold explorer Felix Gold and has recently retired as chairman of Bannerman Energy.

Meanwhile, Ross Stanley has resigned from Lucapa’s board, the company added.

Source: DCLA

Anglo reports latest De Beers’ rough diamond sales value

Anglo American has announced the value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ second sales cycle of 2024, amounting to US$430 million.

The provisional rough diamond sales figure quoted for Cycle 2 represents the expected sales value for the period and remains subject to adjustment based on final completed sales.

Al Cook, CEO of De Beers, said: “I’m pleased to see a further increase in demand for De Beers rough diamonds during the second sales cycle of 2024. However, ongoing economic uncertainty in the US has led to retailers restocking conservatively after the 2023 holiday season. Consumer demand for diamond jewellery is growing in India but remains sluggish in China. Overall, we expect that the ongoing recovery in rough diamond demand will be gradual as we move through the year.”

Source: DCLA

Botswana Assigns $65M for Stake in Belgian Manufacturer

Botswana has designated BWP 890 million ($65 million) from its new fiscal 2024-2025 budget for the purchase of a 24% stake in Belgian manufacturer HB Antwerp.

The deal, which it first announced in March, calls for the African country to supply rough from state-owned Okavango Diamond Company (ODC) to HB Botswana for five years. The partnership would operate in a similar fashion to HB’s previous supply deal with Lucara Diamond Corp, enabling Botswana to retain a share of the polished profits.

Lucara terminated its rough-supply agreement with HB in September, citing a “material breach of financial commitments” by the Belgian manufacturer as the reason for the split. That decision came on the heels of HB’s departure from cofounder and managing partner Oded Mansori, whom it has since reinstated to his original role.

There was media speculation late last year that the Botswana government was pressuring Lucara to reconnect with HB, and that the split could affect Botswana’s interest in the manufacturer. Lucara owns the Karowe mine in Botswana. The miner has since announced that it planned to form new supply deals with other vendors.

Source: DCLA

De Beers Rough Prices Slip 6% in 2023

De Beers’ prices fell last year as a prolonged oversupply in the midstream and economic challenges weighed on demand.

The company’s rough-price index, which reflects like-for-like values, dropped 6% for the 12-month period, parent company Anglo American reported Thursday.

Sales volume slipped 19% to 27.4 million carats, with the average selling price sliding 25% to $147 per carat. While the company has not published its full-year revenue, rough sales decreased 36% to $3.63 billion, according to data from De Beers’ 10 sight reports for 2023.

Output for the year was down 8% to 31.9 million carats as the company transitioned its Venetia deposit in South Africa to underground mining and processed lower-grade ore from its Canadian and Namibian sites, outweighing an increase in Botswana.

In the fourth quarter, sales volume plunged 63% year on year to 2.7 million carats, while production declined 3% to 7.9 million carats.

“De Beers offered full flexibility for rough-diamond allocations…as sightholders continued to take a cautious approach to their purchasing during the quarter as a result of the prevailing market conditions and extended cutting and polishing factory closures in India,” the company noted. “De Beers was loss-making in the second half of 2023 owing to the subdued sight sale results, reflecting conditions of cyclical lows driven by the prevailing macroeconomic environment. Whilst there has been some improvement coming into 2024, the prospects for economic growth remain uncertain and it may take some time for rough-diamond demand to fully recover.”

The miner expects to produce between 29 million and 32 million carats in 2024. However, it has cautioned that it “will assess options to reduce production in response to prevailing market conditions.”

Source: DCLA

De Beers Debuts Online Rough Tenders

De Beers has introduced a new online “sealed bid” tender for some of its rough diamonds.

The Offer, which went live last week, allows buyers to key in the price they’re prepared to pay for a lot, unseen by other bidders.

It is an additional sales channel rather than a replacement for the online auctions that have been taking place since 2008.

Online auctions have accounted for the 10 per cent of De Beers production that is not sold at Sights.

“We are constantly looking at new ways for customers to source natural diamond supply with a view to make the experience as simple and flexible as possible while keeping commerciality in mind,” said Rhyzard Bilimoria, account director in De Beers Group Diamond Trading.

“We believe that for certain product ranges and during certain industry conditions, the Offer represents the most effective channel to meet customer and industry needs.”

He said the Offer was quick, simple, confidential and allowed buyers to bid any amount.

“We recognise that in periods when trading conditions are evolving, different customers can perceive different value depending on their specific activities – it is therefore beneficial to implement a sales process where there is no visibility of other bidders’ activity, as this supports customers’ ability to make independent assessments of value that reflect their own underlying demand.”

De Beers cancelled its online auctions in the last two sales cycles of 2023 amid slow demand.

Source: DCLA

De Beers Slashed Rough Prices. Will Polished Suffer?

On Monday, De Beers’ customers turned up at the first day of the miner’s January sight to find rough prices were down by an average of 10% to 15%. The reductions were more drastic than many had predicted.

The drops ranged from slight adjustments for the more in-demand smalls, all the way to an estimated 20% to 25% cut for 2- to 4-carat, lower-clarity rough, sources said.

Sightholders usually celebrate a price decrease, since their margins can be thin at the best of times. But, immediately, the industry started asking the obvious question: Will this cause polished prices to fall?

The basic assumption is that cheaper raw materials mean cheaper end products. Yet the situation with diamonds is more complicated.

First, there are different ways of pricing polished. You can sell based on the current cost of replacing the goods — a method that would imply polished prices should fall, since De Beers rough is now cheaper. However, it’s also possible to price according to the input cost, with the vendor aiming for a certain profit based on how much the rough actually cost. This would, in theory, mean the latest drop in rough prices would not impact polished until around March, when the new, cheaper material enters the market as polished.

Still, most sightholders that spoke to Rapaport News this week don’t expect polished prices to suffer — though the people who buy their polished might disagree. The miner’s move, sightholders argue, was merely an adjustment to polished-price levels and to the price of rough at open tenders and auctions.

De Beers had priced its goods some 15% higher than the rest of the rough market, as it chose to sell less volume since August rather than discounting during the market slump. Its last significant price decrease before this was in July 2023. Since the start of that month, the RapNet Diamond Index (RAPI™) for 1-carat diamonds has fallen 12.5%.

Price drops at De Beers are not always in sync with the market. In recent years, the company has held off reducing prices until crises have eased, as it did in 2020 following the first round of Covid-19 lockdowns. De Beers sold just $216 million in rough at its last two trading sessions of 2023 as it followed this policy amid weak demand.

But the company needs revenue after incurring a loss in the second half of last year. It appears to have chosen the market improvement as an opportune time to stimulate sales.

“In the final quarter of 2023, we saw some stabilization in polished prices, including a number of areas of natural polished now starting to see some price increases,” a De Beers spokesperson said in a statement Wednesday. “Following this stabilization, we have realigned our rough-diamond trading activities, in terms of prices, volumes and supply flexibility, to reflect prevailing industry conditions.”

With the market in flux, De Beers also showed sightholders sample assortments of rough diamonds that indicated the types of goods and prices customers can expect for this year. Based on these so-called “to see” boxes, sightholders were able to apply for additional goods if their need for rough has increased since they submitted their supply applications in mid-December, the spokesperson explained.

However, market participants expect total sales at the sight of $300 million to $400 million — low for January, which is usually a time of post-holiday restocking. The recent season in the US was okay, but Chinese demand remains slow.

Whether sightholders maintain this cautious approach — and De Beers doesn’t sell too much — will be crucial. Excessive buying could lead to a repeat of last year’s oversupply, which ended with India’s two-month voluntary freeze on rough imports. During the recent crisis, De Beers continued selling — albeit at lower volumes — even when competitor Alrosa canceled sales.

At the January sight, De Beers also removed the extra concessions that had allowed sightholders to refuse goods in the final sights of last year without being penalized. The end of this flexibility increases the danger that goods will flood the market and that manufacturers will sell polished cheap to increase cash flow and raise money for rough.

The fact that De Beers diamonds remain relatively expensive could itself support polished prices, since sightholders have no room to offer further discounts.

“There’s no hooray if you look at those prices,” said one sightholder, noting that even the new rates will probably enable businesses to break even rather than turn a significant profit. “It’s just aligning with [reality]. It’s not like you’re going to make 10% [profit].”

Another sightholder agreed the reductions didn’t go far enough — but believed it would likely be up to the trade to drum up polished demand rather than expect further cuts to rough prices.

“If anybody thinks this is a price reduction — no, it’s a halfway correction, and not even achieving the final goal,” he asserted. “But I also believe they won’t do much [in terms of price cuts] after this. I think their expectation is: ‘Listen, we got you 60% of the way. The other 40%, you guys have to jump up now.’”

Source: DCLA

De Beers Cuts Rough Prices by Average of 10% to 15%

De Beers reduced rough-diamond prices by an average of 10% to 15% at this week’s sight, aiming to stimulate sales and bring its rates more in line with the rest of the market, sources told Rapaport News.

The miner lowered prices by 5% to 10% for rough under 0.75 carats, with thinner or no reductions for the smallest items that produce melee, sightholders and other market insiders said Monday on condition of anonymity.

Rough weighing 0.75 to 2 carats saw reductions of approximately 10% to 15% on average, while prices of 2-carat and larger goods dropped about 15%, the sources added.

Select makeables — the 2- to 4-carat rough stones that produce SI2 to I2 diamonds — fell more sharply, with estimates ranging from 20% to 25%. This reflects the impact of lab-grown competition on mid-market US demand in the past year, sightholders explained. De Beers does not comment on pricing.

De Beers tends to sell less volume during a downturn and reduce prices only once the polished market has improved. The RapNet Diamond Index (RAPI™) for 1-carat diamonds slid 21% in 2023, the worst year on record for the category, but sightholders reported a moderate uptick in US demand since the holiday shopping season began, though Chinese orders remain weak.

The global market also stabilized as a result of India’s two-month voluntary freeze on rough imports, which ended December 15.

“[In the past, De Beers] didn’t want to change prices because they didn’t know [what the state of the] polished [market] was,” one of the sources commented. “They have an idea where polished is now, and have adjusted rough to polished.”

However, several sightholders said the drops did not go far enough, with De Beers’ prices still above those of outside tenders and auctions and also too high for many manufacturers to make a profit.

Even with the price reduction, the sources expected demand at the sight to be limited, with sales of around $300 million. The trading session, De Beers’ first of the year, began Monday and runs through Friday in Gaborone, Botswana.

Source: DCLA

De Beers approves $1 billion spending at Botswana mine

Global diamond giant De Beers said it will go ahead with a planned $1 billion investment to extend the life of its flagship Jwaneng mine in Botswana, even as last year’s downturn in gem demand persists.

The Anglo American (AAL.L) unit and the Botswana government, which jointly own Debswana Diamond Company, have approved the spending that will convert the Jwaneng pit into an underground operation.

Debswana said in 2018 it planned an investment to extend the lifespan of the mine by 11 years from 2024. De Beers said the spending is necessary as long-term supply of rough gems is expected to tighten.

Angola last year started mining at its new Luele project, the biggest in the country and one of the world’s largest by estimated resources, despite depressed diamond demand.

“The global supply of natural diamonds is falling, so moving forward with the Jwaneng underground project creates new value for investors,” De Beers CEO Al Cook said.

Demand for rough diamonds has been weak in recent months with India – cutter and polisher of 90% of the world’s rough diamonds – asking global miners to stop selling it gemstones to manage accumulated stocks.

“This investment is aligned with our strategy to prioritise investments in the highest quality projects,” Cook said.

De Beers last year agreed a new diamond sales pact, which will see the government’s share of diamonds from the Debswana joint venture gradually increase to 50% over the next decade.

Source: DCLA

Bruce Cleaver Steps Down from De Beers Boards

Bruce Cleaver will leave his role as cochair of De Beers’ board of directors and will also relinquish his position on the board of the miner’s lab-grown diamond-manufacturing company, Element Six.

The move follows Cleaver’s exit as CEO in early 2023 after six years in the position. Cleaver’s appointment to the boards was to enable a smooth transition of leadership to his replacement, Al Cook, a De Beers spokesperson told Rapaport News.

Additionally, while on the board, “Bruce also supported the finalization of the commercial negotiations with the government of the Republic of Botswana,” the spokesperson said. “With the leadership transition complete, and with De Beers and Botswana having signed heads of terms for the new agreements, Bruce has delivered on those objectives, and so has stepped down from the board of directors.”

Cleaver will remain with De Beers in an advisory capacity, the spokesperson added. Duncan Wanblad, CEO of De Beers parent company Anglo American, will now be sole chair of the miner’s board of directors.

Source: DCLA

Anglo American to Cut De Beers’ Overheads by $100M

Roller machine used to separate and sort flat shaped and non- flat shaped rough diamonds. DTC Botswana, Gaborone, Botswana.

Anglo American will slash De Beers’ budgets in response to the diamond-market downturn, the parent company said Friday.

“At De Beers, we are taking a different approach as the business has performed very well operationally. What’s gone against us is the market,” Anglo CEO Duncan Wanblad said at the group’s annual investor update. “Demand and prices for diamonds have fallen as global GDP [gross domestic product] growth has fallen.”

The current downturn is likely temporary, and there are signs the market is “beginning to turn,” Wanblad added.

“Nonetheless, we are focused on streamlining De Beers, reducing the annual overheads by $100 million in a sustainable manner,” the executive continued. “We have also reduced capex [capital expenditure] for next year, with our investment focused on the highest-value opportunities we see in southern Africa from existing assets as well as on the exploration front.”

De Beers has incurred a loss in the second half of 2023 following sales of just $80 million at the October sight, Wanblad explained. Sightholders expected the recent December trading session to be a similar size.

Still, De Beers kept production steady in the second half of this year leading to an inventory buildup and has maintained its production plan of 29 million to 32 million carats for 2024, said Al Cook, the diamond miner’s CEO.

“We need to be careful with [production cutbacks], because a large number of our costs are fixed,” Cook continued at the same investor event. “So we need to avoid doing something that just disrupts mines, which then take a lot to recover from and doesn’t create the cost savings that you really want to drive out of this.”

The company has a “series of levers” it can pull in 2024 should the expected recovery not materialize and is working with partners in producer countries to identify options, Cook added.

Last week, De Beers announced it was changing its organizational structure and executive committee, with executive vice president and chief brand officer David Prager and acting executive vice president of strategy and innovation Ryan Perry set to leave in 2024.

Source: DCLA

The diamond world takes radical steps to stop a pricing plunge

When the world’s most important diamond buyers arrived at De Beers’ offices in Botswana late last month, they were presented with a rare offer by their host: the option to buy nothing at all.

De Beers markets its rough diamonds in a series of tightly scripted sales, where handpicked buyers are normally expected to take all their contracted allocations at a price set by De Beers, or face potential penalties in the future. But with prices in free fall around the world, the one-time diamond monopoly has been forced to allow more and more flexibility, finally removing the restrictions altogether.

The concessions are the latest in a series of increasingly desperate moves across the industry to stem this year’s plunge in diamond prices, after slowing consumer demand left buyers stuck with swelling inventories. De Beers’s great rival, Russian miner Alrosa PJSC, already canceled all its sales for two months, while the market in India — the dominant cutting and trading center — had self imposed a halt on imports.

At the recent De Beers sale, its buyers, mostly from India and Antwerp, seized on the unusual flexibility, between them buying just $80 million of uncut gems. Normally De Beers would have expected to shift between $400 million and $500 million at such a sale. Outside of the early days of the pandemic — when sales were halted altogether — the company has not sold so few gems since it started making the results public in 2016.

The speed and severity of the collapse in diamond prices caught many by surprise.

The industry had been one of the great winners of the global pandemic, as stuck-at-home shoppers turned to diamond jewelery and other luxury purchases. But as economies opened up, demand quickly cooled, leaving many in the trade holding too much stock that they’d bought for too much money.

What looked like a cool down quickly turned into a plunge. The US economy, by far the industry’s most important market, wobbled under rising inflationary pressure, while key growth market China was hit by a real estate crisis that sapped consumer confidence. To make things worse, the insurgent lab-grown diamond industry started making major gains in a couple of key segments.

While there are many different diamond categories, broadly prices for wholesale polished diamonds have tumbled about 20% this year, firing a more dramatic fall in rough — or uncut — stones that have plunged as much as 35%, with the steepest declines happening though late summer and early autumn.

The industry’s response was to choke off supply in an almost unprecedented way, which finally seems to be working.

Prices at some smaller tender sales and auctions have risen between 5% and 10% in the past week as shortages of some stones start to emerge. With Indian factories set to reopen next month after prolonged Diwali closures, there is now renewed confidence that the worst has passed.

“The diamond industry has successfully taken action to stabilize things,” said Anish Aggarwal, a partner at specialist diamond advisory firm Gemdax. “That now creates a window to rebuild confidence.”

The plunge in diamond prices has coincided with weakness across the luxury space. LVMH Moet Hennessy Louis Vuitton SE, the luxury titan with 75 labels ranging from Christian Dior to Bulgari, has disappointed investors this year as China’s recovery underwhelmed and demand from US consumers cooled, with the stock shedding more than $100 billion in value since mid April. On Friday, Cartier owner Richemont reported a surprise decline in earnings as revenue from luxury watches unexpectedly fell and high-end consumers reined in spending.

Yet there are specific peculiarities to the diamond industry that make it more vulnerable to slowing consumer demand. De Beers sells its gems through 10 sales each year in which the buyers — known as sightholders — generally have to accept the price and the quantities offered.

When prices are rising, as they did for much of the past two years, these buyers are often incentivized to speculate, betting that paying for unprofitable stones now will pay off if prices continue to rise. Buyers are also rewarded for making big purchases by being given bigger allotments in the future, known in the industry as “buying for position.”

These mechanisms often lead to speculative bubbles, which pop when consumer demand slows and polished diamond inventories build up.

In response, Alrosa stopped selling diamonds altogether for two months, while the Indian diamond sector introduced a halt on imports that will run to mid December. De Beers has allowed its customers to refuse all purchases without it having any impact on the future allocations for its last two sales of the year.

While the two dominant diamond miners have a long history of curtailing supply or letting buyers refuse some goods when demand weakens, the speed and scale of the combined actions is extremely unusual outside of a major crisis such as the outbreak of the pandemic.

While prices have stopped falling — and in some areas rising again — much will depend on the crucial holiday season, which spans from Thanksgiving to Chinese New Year, and how the big miners who have accumulated large stocks of unsold gems feed them back into the market.

There also remains uncertainty in the industry about how much of the slowdown is being driven by macro-economic weakness, versus a more worrying shift in consumer choices. Lab-grown diamonds have made rapid progress in some key segments of the market, while there are lingering concerns in the industry about whether Gen Z consumers look at diamonds the same way as previous generations do.

“We expect there to be some cyclical recovery in the diamond markets,” said Christopher LaFemina, an analyst at Jefferies. “But we believe there are also structural issues here that could lead to weaker than expected demand for the longer term.”

Source: DCLA

De Beers Averts Strike with Five-Year Wage Deal

De Beers has signed an agreement with South Africa’s National Union of Mineworkers (NUM) that will avoid a threatened strike at the Venetia deposit.

The deal will provide workers at the South African mine with a wage increase of 7% in 2023, De Beers said last week. The employees will also receive a 6% hike in each subsequent year until April 30, 2028.

Workers will also be able to participate in the Employee Share Ownership Plans (ESOPs), it explained.

De Beers reached the agreement with NUM with the aid of the Commission for Conciliation, Mediation and Arbitration (CCMA) following four months of failed talks during which the NUM set out 10 initial demands. Three of those — related to shifts and overtime — were tabled, while six others have been settled. The wage debate was the only outstanding issue, but the breakdown in discussions drove NUM to plan a strike at the deposit. The agreement affects 1,500 of the mine’s workers.

“We are pleased that we reached a favorable outcome following a very tough negotiation process against the backdrop of challenging market conditions that continue to have an adverse impact on our business and the overall diamond industry,” said Moses Madondo, managing director of De Beers Managed Operations, which oversees the company’s mines in South Africa and Canada. “The agreement provides a measure of certainty to our employees for the next five years as we focus on ramping up the underground mine at Venetia, which is set to extend the life of mine to at least 2046.”

Source: DCLA

De Beers to ‘Progress’ WDC Protocol on Russian Diamonds

The diamond sorting center in Mirny, Sakha Republic, Russia, November 14, 2013.

De Beers has put its weight behind the World Diamond Council (WDC) plan for sidelining Russian goods amid continued controversy over the competing proposals.

“In pursuit of a collaborative, coherent and collective solution that supports the aims of the G7, we have joined with 22 diamond-industry organizations through the World Diamond Council to progress the ‘G7 Diamond Protocol’ proposal,” De Beers CEO Al Cook wrote in an open letter to Group of Seven (G7) leaders on Thursday. “

The protocol — one of a few plans for keeping Russian diamonds out of G7 nations — calls for importers to declare on invoices that stones do not originate from mining companies operating in Russia. The companies making the claims will undergo audits.

While the WDC-led proposal has received wide industry support, it has also drawn criticism for creating a burden for small-scale industry members — including by Rapaport Group Chairman Martin Rapaport.

One other plan, from the Belgian government and supported by the Antwerp World Diamond Centre (AWDC), proposes using technology to confirm the source of goods, with the European city as a suggested center point for the trade of stones with known provenance.

Two further proposals — from India and a French jewelry group — were also on the table at a G7 meeting on Thursday, Reuters reported.

In another letter earlier this month, the African Diamond Producers Association (ADPA) attacked the process for not consulting people on the continent and claimed some of the plans would harm its members and artisanal miners. It highlighted the “G7 Certificate Scheme” — an apparent reference to the Belgian plan — as well as the WDC protocol.

“The proposed changes will bring supply-chain disruption, added burden, and costs to the ADPA mining nations,” the ADPA wrote in the October 13 letter to the Zimbabwe Minister of Mines and Mining Development, Soda Zhemu, who is chairing the Kimberley Process (KP) this year.

The plans will set a precedent for segregating diamonds by origin and damage producing countries’ ability to cut and polish their rough, the group argued.

In the case of the Belgian proposal, “additional costs will be incurred when a parcel of rough diamonds needs to be first shipped to Antwerp to then be reshipped to the country of origin to be polished,” said the Angola-based ADPA, which represents 19 countries that together account for 60% of global rough production.

Efforts to sift Russian diamonds out of G7 markets have taken on momentum since the bloc — which comprises Canada, France, Germany, Italy, Japan, the UK, the US, and the European Union — pledged to “work closely together to restrict trade” in those goods in May.

Where Are All the Russian Diamonds?

However, while there has been agreement about the need to stop Russia obtaining diamond revenues to fund its war in Ukraine, the process of implementing this has proven complex.

“Throughout our discussions, two things have been clear: why we should do this is easy, but how we should do it is hard,” said Cook.

The executive called for G7 leaders to obtain input from the industry and not exclude relevant groups, including artisanal miners.

“We look forward to further engagement with the G7 around the World Diamond Council proposal and urge those that have submitted proposals to work together to create an effective and practical solution,” Cook continued.

The industry had expected any measures to go into effect in January 2024. However, that schedule is now looking unlikely, JCK reported Friday, citing sources involved in the plans.

“We fully agree with Al [Cook]’s view that the results of our efforts to meet the G7 objectives should be collaborative, coherent and collective,” said WDC executive director Elodie Daguzan in a statement to Rapaport News. “In [the] WDC’s own words, it is what we call ‘an industry proposal that is effective and implementable now and that leaves no one behind.’ Also, we understand that the statement made by ADPA is not against the WDC-facilitated protocol but rather against the G7’s objectives without engagement with African producers.”

Source: DCLA

De Beers signs 10-year sales deal for Botswana diamonds

Anglo American Plc unit De Beers and Botswana’s government signed a deal covering the main aspects of a new sales and mining agreement for their Debswana diamond venture in the African nation.

The pact covers a new 10-year sales deal for Debswana’s rough diamond production through to 2033, along with a 25-year extension to the Debswana mining licenses through to 2054, De Beers and the Botswana government said in a joint statement on Sunday.

The terms “provide further detail and clarity to the commercial and operational aspects of the agreement in principle between the two partners” announced on June 30, they said. Among them are stipulations for the apportionment of Debswana supply and other economic arrangements, they said, without giving further details.

Source: DCLA

De Beers Ends Lab-Grown Engagement Diamonds Foray as Prices Drop

De Beers decided to call time on offering lab-grown diamonds for engagement rings even as the man-made alternatives continue to cannibalize demand in one of the company’s most important markets.

After vowing for years that it wouldn’t sell stones created in laboratories, in 2018 De Beers reversed that position and only this year started testing sales of the diamonds in the crucial engagement-ring sector.

The diamond industry leader said Wednesday that the trial showed that it wasn’t a sustainable market.

De Beers’ move comes as the kinds of stones that go into the cheaper one- or two-carat solitaire bridal rings popular in the US have experienced far sharper price drops than the rest of the market, with the lower-cost lab-grown competition seen behind the collapse.

De Beers has said the current weakness is a natural downswing in demand after the pandemic, with engagement rings particularly vulnerable. The company concedes that there has been some penetration into the category from synthetic stones, but doesn’t see it as a structural shift.

Lab-grown diamonds — physically identical stones that can be made in matter of weeks in a microwave chamber — have long been seen as an existential threat to the natural mining industry. Proponents say they can offer a cheaper alternative without many of the environmental or social downsides sometimes attached to mined diamonds.

While the price of some natural stones used in lower-quality engagement rings have plummeted in the past year, the fall in lab-grown prices has been even steeper. De Beers has said it expects lab-grown prices to continue to decline as more supply comes into the market

Retailers would need to double the number of lab-grown carats they sell every two years, just to maintain profits, De Beers said.

Source: DCLA

Former De Beers Chairman Julian Ogilvie Thompson Dies

Mr Julian Ogilvie Thompson

Julian Ogilvie Thompson, former chairman and CEO of De Beers as well as of its parent company, Anglo American, died on August 11 aged 89.

Ogilvie Thompson, a South African native, first joined Anglo American in 1956. He was promoted to personal assistant to then chairman Harry Oppenheimer a year later, De Beers told Rapaport News. In 1966, he joined the board of De Beers, and he became deputy chairman in 1982. Three years later, Ogilvie Thompson took over as executive chairman of De Beers, while Oppenheimer’s son, Nicky, filled his previous role.

In 1997, Ogilvie Thompson retired as chairman but remained deputy chairman until stepping down from the company in 2002. He was committed to supporting the development of young leaders from across Africa, forming an 18-year affiliation with the Mandela Rhodes Foundation, which offers scholarship and leadership programs to youth throughout the continent.

“Julian Ogilvie Thompson — often known in the business simply as JOT — was a hugely influential figure in the history not only of De Beers and Anglo American, but also in the broader South African landscape,” a De Beers spokesperson said. “As the former chairman and chief executive of both Anglo American and De Beers, and as a proud South African, he played a key role in shaping both companies and the nation.”

Source: DCLA

What Causes Diamonds To Erupt? Scientists Crack the Code

New findings hold the potential to spark future diamond discoveries.

An international team of scientists, led by the University of Southampton, has found that the breakup of tectonic plates is the main driving force behind the generation and eruption of diamond-rich magmas from deep inside the Earth.

This insight could significantly influence the trajectory of the diamond exploration industry, guiding efforts to locations where diamonds are most probable.

Diamonds, which form under great pressures at depth, are hundreds of millions, or even billions, of years old. They are typically found in a type of volcanic rock known as kimberlite. Kimberlites are found in the oldest, thickest, strongest parts of continents – most notably in South Africa, home to the diamond rush of the late 19th century. But how and why they got to Earth’s surface has, until now, remained a mystery.

The new research examined the effects of global tectonic forces on these volcanic eruptions spanning the last billion years. The findings have been published in the journal Nature.

Southampton researchers collaborated with colleagues from the University of Birmingham, the University of Potsdam, the GFZ German Research Centre for Geosciences, Portland State University, Macquarie University, the University of Leeds, the University of Florence, and Queen’s University, Ontario.

Tom Gernon, Professor of Earth Science and Principal Research Fellow at the University of Southampton, and lead author of the study, said: “The pattern of diamond eruptions is cyclical, mimicking the rhythm of the supercontinents, which assemble and break up in a repeated pattern over time. But previously we didn’t know what process causes diamonds to suddenly erupt, having spent millions – or billions – of years stashed away 150 kilometers beneath the Earth’s surface.”

To address this question, the team used statistical analysis, including machine learning, to forensically examine the link between continental breakup and kimberlite volcanism. The results showed the eruptions of most kimberlite volcanoes occurred 20 to 30 million years after the tectonic breakup of Earth’s continents.

Dr. Thea Hincks, Senior Research Fellow at the University of Southampton, said: “Using geospatial analysis, we found that kimberlite eruptions tend to gradually migrate from the continental edges to the interiors over time at rates that are consistent across the continents.”

Geological processes

This discovery prompted the scientists to explore what geological process could drive this pattern. They found that the Earth’s mantle – the convecting layer between the crust and core – is disrupted by rifting (or stretching) of the crust, even thousands of kilometers away.

Dr Stephen Jones, Associate Professor in Earth Systems at the University of Birmingham, and study co-author said: “We found that a domino effect can explain how continental breakup leads to the formation of kimberlite magma. During rifting, a small patch of the continental root is disrupted and sinks into the mantle below, triggering a chain of similar flow patterns beneath the nearby continent.”

Dr. Sascha Brune, Head of the Geodynamic Modelling Section at GFZ Potsdam, and a co-author on the study, ran simulations to investigate how this process unfolds. He said: “While sweeping along the continental root, these disruptive flows remove a substantial amount of rock, tens of kilometers thick, from the base of the continental plate.”

The typical migration rates estimated in models matched what the scientists observed from kimberlite records.

“Remarkably, this process brings together the necessary ingredients in the right amounts to trigger just enough melting to generate kimberlites,” added Dr Gernon.

The team’s research could be used to identify the possible locations and timings of past volcanic eruptions tied to this process, offering valuable insights that could enable the discovery of diamond deposits in the future.

Professor Gernon, who was recently awarded a major philanthropic grant from the WoodNext Foundation to study the factors contributing to global cooling over time, said the study also sheds light on how processes deep within the Earth control those at the surface: “Breakup not only reorganizes the mantle, but may also profoundly impact Earth’s surface environment and climate, so diamonds might be just a part of the story.”

Reference: “Rift-induced disruption of cratonic keels drives kimberlite volcanism” by Thomas M. Gernon, Stephen M. Jones, Sascha Brune, Thea K. Hincks, Martin R. Palmer, John C. Schumacher, Rebecca M. Primiceri, Matthew Field, William L. Griffin, Suzanne Y. O’Reilly, Derek Keir, Christopher J. Spencer, Andrew S. Merdith and Anne Glerum, 26 July 2023, Nature.

Source: DCLA