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

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 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

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 Reduces Prices at Second Consecutive Sight

 

De Beers has sharply decreased its prices for select larger rough diamonds at this week’s sight, as the weak market has shown few signs of recovering.

The price cuts range from 5% to 15% in several categories for stones 0.75 carats and up, with an emphasis on 2-carat diamonds and larger, industry insiders told Rapaport News on Monday. Some of these goods already saw price reductions last month, they noted, while the 15% cuts are in a handful of sluggish categories that the miner left untouched in June.

De Beers has focused its adjustments on the lower-quality items for which demand has been especially slow, the sources said on condition of anonymity. Polished sales in SI to I2 clarities have slumped this year due to the overall weakness of US retail — the main market for this range — as well as competition from lab-grown diamonds.

The company also maintained its policy of allowing 30% buybacks for certain low-performing items, the industry sources said. Buybacks let sightholders sell a proportion of the rough they’ve purchased back to De Beers, allowing them to offload the stones that will generate the least profit. The limit is usually 10%.

De Beers declined to comment on the price changes.

The July sight — the sixth of the year — began Monday and runs through Friday in Gaborone, Botswana. It is the first sight since De Beers and the Botswana government announced a new 25-year mining license and a 10-year sales agreement that will see state-owned Okavango Diamond Company (ODC) gain access to 50% of the country’s rough over the course of 10 years.

The June session saw sales fall 32% year on year to $450 million after De Beers slashed prices of many categories above 1 carat. The negative trends that were present then have continued into July, with the seasonal US summer slowdown compounding the situation. Many manufacturers in India have lowered their polished production to around 50% capacity in response to low sales and tight margins. They have shifted to smaller, lower-value rough to keep factories running.

However, even a 15% price drop for rough is not enough to solve the problem, one executive at a sightholder company said Monday. “[Polished] prices have fallen more than that over the last couple of months. More importantly, there’s still no [foreseeable prospect] of sales. We are all still waiting for the US to wake up.”

Source: rapaport

Diamonds are for now: Botswana reach new deal with De Beers

Botswana has reached an eleventh-hour deal with diamond giant De Beers after months of tense negotiations that saw the continent’s top producer threatening to cut ties with the storied company.

The Botswana government and Anglo-American, the majority owner of De Beers, have reached an “agreement in principle”, the two sides said in a statement issued late Friday.

The agreement provides for a new 10-year agreement to sell the rough diamonds produced by Debswana — a joint venture equally owned by the government and De Beers — and a 25-year extension of its mining licenses.

The agreement also gives Botswana an increased 30 percent of diamond production for sale via the state-owned Okavango Diamond Company, progressively increasing to 50 percent in the final year of the contract, De Beers said in a separate statement on Saturday.

No value was given for the agreement.

The previous 2011 sale agreement between the southern African country, one of the continent’s richest, and the world’s largest diamond company by value, was extended exceptionally until June 30, 2023, due to the coronavirus pandemic.

Under terms negotiated by the two sides in 2011, De Beers received 90 percent of the rough diamonds mined, while Botswana had 10 percent to sell itself.

In 2020, Botswana’s share was hiked to 25 percent.

President Mokgweetsi Masisi had threatened to cut ties with the company if the latest talks proved unfavourable for his country.

“If we don’t achieve a win-win situation each party will have to pack its bags and go,” he said in February.

The country turned up the heat the following month by announcing it would soon conclude an agreement to take a 24 percent stake in the Belgian diamond manufacturer HB Antwerp.

Last year, De Beers obtained about 70 percent of its rough diamonds from Botswana.

Diamond mining accounts for a third of the landlocked country’s GDP.

Source: DCLA

De Beers Sales Slide as Slow Trading Continues

De Beers’ sales value fell this month as global rough demand weakened and the miner reduced prices of its larger stones.

Proceeds dropped 32% year on year to $450 million at 2023’s fifth sales cycle from $657 million in the equivalent period a year earlier, De Beers reported Wednesday. Sales declined 6% compared with the $479 million that the fourth cycle brought in. The total included the June sight as well as auction sales.

“Following the JCK [Las Vegas] show, and with ongoing global macroeconomic challenges continuing to impact end-client sentiment, the diamond industry remains cautious heading into summer,” said De Beers CEO Al Cook. “Reflecting this, we saw demand for De Beers rough diamonds during the fifth sales cycle of the year slightly softer than in the fourth cycle.”

De Beers lowered prices at the sight by 5% to 10% mainly in 2-carat categories and larger, as well as for some 1- to 1.5-carat items, market insiders said. It also extended its buyback program, which allows sightholders to sell goods back to the miner following the purchase.

This reflected weakness in the rough that produces polished above 0.30 carats, and especially the stones that yield 1-carat finished diamonds. These sizes are especially weak in the US market amid economic uncertainty and a lull in engagements, dealers explained. Rough under 0.75 carats has seen a mild recovery as Indian manufacturers look to fill their factories with low-cost material.

Source: DCLA

The Industry’s Diamond-Origin Conundrum

The Group of Seven (G7) meeting that took place in Japan in mid-May proved to be an anticlimax for the diamond trade.

The industry had expected a major announcement to come from the meeting relating to required declarations on the origin of diamonds imported to those countries — an additional measure that would help prevent polished diamonds sourced from Russian-origin rough entering their markets.

While a clear guideline did not emerge, the member nations — Canada, France, Germany, Italy, Japan, the United Kingdom and the United States — pledged to work toward such measures.

“In order to reduce the revenues that Russia extracts from the export of diamonds, we will continue to restrict the trade in and use of diamonds mined, processed or produced in Russia,” the group said after the meeting.

As it stands, the US and the UK have implemented bans on diamonds sourced directly from Russia. However, the sanctions don’t account for “substantial transformation,” and consequently the manufacturing center is regarded as the source. For example, diamonds polished in Belgium, India, Israel or the United Arab Emirates (UAE) from Russian rough can technically be imported to the US.

Implementing such detailed declarations is proving more complicated than originally thought. Creating such mechanisms will take time, as Feriel Zerouki, the De Beers executive who heads the World Diamond Council (WDC), said in a recent panel discussion at the JCK Las Vegas show in early June. These measures would apply to the entire industry, seemingly requiring a disclosure of origin for all diamonds at customs.

“How do we support the [sanctions] without paralyzing the industry and making it very cumbersome for natural diamonds to enter the G7 countries,” Zerouki challenged the Las Vegas audience.

Setting standards
It’s a sensitive point for an already heavily audited industry, and for companies in each segment of the supply chain that would bear the added expense of verifying such information.

It’s also worth noting that the G7 cannot enact such requirements as a bloc. It will be left to each country to implement its own import rules. That said, there does at least seem to be an effort among those countries to apply some consistency in their systems. It was an open secret that members of various governments and industry bodies met in Las Vegas during the show to advance these discussions, which presumably covered a wide spectrum of industry-related issues.

Central to the talks must surely be the practicality of such declarations. What mechanisms are available to the industry that would facilitate traceability? And who verifies that these initiatives meet the required standards? And on what are those standards based?

The trade has at its disposal industry structures as well as company programs that tackle the challenge of traceability and source verification — although arguably nothing is foolproof.

See full article here

Anglo American reports latest diamond sales value for De Beers

Anglo American plc announces the value of rough diamond sales (Global Sightholder Sales and Auctions) for De Beers’ fourth sales cycle of 2023, amounting to US$480 million.

The provisional rough diamond sales figure quoted for Cycle 4 represents the expected sales value for the period 1 and 16 May and remains subject to adjustment based on final completed sales.

Al Cook, CEO of De Beers, said:

“Sales of our rough diamonds in the fourth sales cycle of the year saw a small decrease from the previous cycle as the industry has entered what is traditionally a seasonally quieter period. Rough diamond demand was also influenced by ongoing macroeconomic uncertainty and a slower pace of recovery in consumer demand from China than was widely anticipated.”

Source: DCLA

De Beers finds diamond within a diamond, names it the “Beating Heart”

The “Beating Heart”

De Beers, the largest diamond producer by value, has unveiled a unique piece it named the “Beating Heart”, a 0.33-carat rough specimen that consists of a diamond within another diamond.

The unusual discovery – a D-colour, type IaAB diamond – has an internal cavity enclosing a smaller loose diamond, which is trapped, yet free to move around within the space.

De Beers said the gemstone was discovered at one of its mines in either Africa or Canada, but the exact origins can’t be pinpointed.

It arrived at the De Beers Institute of Diamonds facility in Maidenhead, England, in November last year, where it was verified to be a natural occurring stone.

Initial conclusions from the Institute’s experts suggest that an intermediate layer of poor-quality diamond etched away during its travel to the surface of the Earth, leaving only the better-quality material: the outer diamond and the core.

“The ‘Beating Heart’ is a remarkable example of what can happen on the natural diamond journey from formation to discovery,” Jamie Clark, Head of Global Operations at De Beers Institute of Diamonds, said in the statement.

Now registered on De Beers’ Tracr blockchain platform, which certifies a diamond’s provenance and production journey, the “Beating Heart” will be kept in its rough form for research and educational purposes.

Competitor Alrosa found a similar diamond in 2019, which was named “Matryoshka” after the famous Russian nesting dolls. The 0.62 carat gem, estimated to be over 800 million years old, resulted from one diamond growing inside another, according to Alrosa’s scientists.

Source: DCLA

De Beers Lifts Prices of Its Smallest Rough Diamonds

 

De Beers Diamonds small rough

De Beers has increased prices of small rough diamonds for the second consecutive sight as a combination of demand and supply factors continue to create a hot market for the category.

Prices for tiny stones rose by around 10% on average at this week’s trading session, with sharper advances in certain segments, customers and insiders estimated Monday. The changes were mainly for minus-7 sieve sizes, which weigh about 0.03 carats, across a range of qualities. De Beers was unavailable for comment.

The February sale runs this week from Monday to Friday in Gaborone, Botswana.

Rough under 0.75 carats became a sought-after asset in the second half of 2022 as melee demand from luxury brands strengthened and Indian manufacturers needed cheaper material to fill factories amid thin profit margins. In addition, Western sanctions on Russian diamonds created a mixture of real and perceived shortages in those sizes, for which Alrosa is the biggest supplier. The trade is watching for potential further restrictions as the one-year anniversary of Russia’s invasion of Ukraine approaches.

“Are people preempting what the [new] measures might be on Russia? [The strong market] might have to do with that,” a rough-market participant told Rapaport News on condition of anonymity.

Last year, De Beers made only modest increases in the prices of smalls, even when the segment saw robust demand, a sightholder explained on condition of anonymity. The miner raised prices at last month’s sight by approximately 10% — alongside decreases in the slower, larger goods.

The fresh hikes caught many dealers by surprise, as they were expecting De Beers to monitor the Chinese recovery before making further price adjustments.

Source: DCLA

Botswana, De Beers row over diamond profits

Botswana diamonds and De Beers

Botswana’s President Mokgweetsi Masisi warned Sunday that his country could sever ties with South African diamond giant De Beers if talks to renegotiate a sales agreement prove unfavorable for his country.

The 2011 sales agreement governing the terms of marketing diamonds produced by Debswana – a 50-50 joint venture between the government and De Beers – expired in 2021.

It has been extended by the parties, who cited the coronavirus outbreak as the reason for the delay in concluding negotiations, and will end on June 30, 2023.

Speaking at a rally of his ruling Botswana Democratic Party (BDP) in his home village of Moshupa, about 65 kilometers from the capital Gaborone, Masisi warned, “If we don’t reach a win-win situation, each side will have to pack up and go home.”

Under the 2011 agreement, the mining company De Beers received 90% of the rough diamonds produced while Botswana, Africa’s largest diamond producer, received 10%. In 2020, Botswana’s share was increased to 25%.

In 2020, Botswana’s share was increased to 25%.

Today, “we got a glimpse of how the diamond market works, and we found out that we received less than we should have,” said Mr. Masisi, who spoke in both English and the local language, Tswana.

“We also found out that our diamonds are bringing in a lot of profit and that the (2011) agreement had not been favorable to us,” he added, before warning: “We want a bigger share of our diamonds. Business cannot continue as before.

Source: DCLA