De Beers has made sharp price changes at this week’s sight, implementing deep reductions in larger goods and increases for smaller stones.
Prices fell by as much as 10% in 2-carat rough and above, with lower-quality items seeing the most significant drops, sources told Rapaport News Monday on condition of anonymity. Prices of diamonds under 0.75 carats rose by similar percentages, reflecting a market split that has persisted since late last year, insiders said. Sizes in between saw more modest declines.
“There have been quite wild increases and decreases,” one source said. “Not to say that they’re not justified, but it’s interesting that they’ve done that.”
De Beers declined to comment.
The adjustments follow months of sluggishness in larger, lower-quality rough as Chinese demand slumped during the country’s Covid-19 outbreaks and inflation dented mid-market US spending. Stones in the 3-grainer category and below have remained relatively strong due to steady sales of polished melee and Indian manufacturers’ efforts to fill factories with cheaper material.
De Beers kept its prices firm throughout 2022 despite the weakness in the larger categories, which constitute a significant proportion of its sales. This impacted profit margins at cutting firms, many of which perceived the miner’s rough to be expensive, insiders explained.
“These are the prices [at] which they should have been selling since October,” a sightholder commented. “It’s aligning with reality [rather than] reflecting a relatively poor end of year.”
De Beers is known for its reluctance to reduce prices during downturns, as was the case during the Covid-19 crisis. Now, as then, it has waited for a slight improvement in trading before taking action. China’s reopening has boosted sentiment, while the recent US holiday period was satisfactory, albeit slower than 2021’s record season.
The first sight of 2023, which runs Monday to Friday, comes amid uncertainty about the global economic situation, the Russia-Ukraine crisis, and the prospects for the Chinese New Year, which occurs on January 22.
It’s also a time of transition at De Beers, which is welcoming a new CEO, Al Cook, to succeed Bruce Cleaver on February 20 and is in the middle of negotiations with the Botswana government over an updated sales deal.
“Generally, things are a bit better than they were four or five months back, but that is because of low [polished] production, not because of an improvement of the market,” a manufacturing executive commented. “So the challenges remain.”
A portrayal of De Beers’ operations past and present.
Bruce Cleaver reflects on the changes that took effect in the six years he headed the diamond company.
RAPAPORT… Bruce Cleaver had a very focused “to do” list when he took over as De Beers CEO in July 2016. Having previously worked on strategy and business development at the company, as well as at parent Anglo American, he recognized De Beers’ need to evolve, and to protect it from the increasing volatility evident in the global economy and diamond market.
“I wanted to build a more sustainable business; one that was less prone to economic cycles,” Cleaver stresses in an interview with Rapaport News. “I wanted to ensure we’d never get caught in the position we had in 2008 when we hit a very serious downturn and our balance sheet was very stretched.”
Bruce Cleaver
He never imagined those goals would be challenged by a global pandemic and a war in Ukraine that has brought sanctions on Russian diamonds — approximately one-third of global rough supply. These aren’t events you predict in your risk analysis, he notes.
In contrast to 2008, when De Beers had to take on more debt to weather the financial crisis, the company emerged from Covid-19 stronger than before, and it may even have benefited from the limitations on Russia-based Alrosa — its biggest competitor. The $491 million in underlying earnings it reported in the first six months of 2022 was its best half-year profit since 2011, and the $3.54 billion in revenue its highest since 2014 (see graph).
But Cleaver looks beyond the financials as he reflects on his tenure at the helm of the world’s largest diamond company. His six-and-a-half-year stint brought a significant transformation to De Beers’ structure, brand positioning, messaging, and relationships, all of which he believes demonstrate transparency and a willingness to change that were not always evident at the company.
Call to collaborate
His first public statement after being appointed to the position called for greater cooperation and partnerships within the trade. He actively sought to ease the tension that often stood between De Beers and sightholders and at times its government partners, he admits.
“It was important for us to show people we would change, listen more and collaborate more,” he reflects. “I do feel there is much more trust now than before, and a sense of working toward a common goal — that we can agree to disagree in a more friendly way.”
Central to achieving that was the refurbishment of the sightholder application process, which he concedes had previously been complicated and intimidating. The current system further demonstrates De Beers’ willingness to be more open and transparent, Cleaver insists. It’s a complicated task, he adds, considering the company distributes some 33 million carats a year and must set criteria to award goods to certain people and not to others.
The sheer volume of De Beers’ production means the company is unlikely to shift away from the sight system any time soon. However, it did tweak its distribution at the beginning of 2022 to provide more bespoke supply by classifying sightholders according to their business type: manufacturer, dealer, or retailer. The move was seen as an attempt to reduce the flipping of boxes on the secondary market and to bring more efficiency to the supply chain.
Special stones to sell
There has been speculation that the Botswana government — a 15% shareholder in De Beers and a joint venture partner in its mining and selling distribution businesses — is pressuring the miner to sell its specials through the parastatal Okavango Diamond Company, in vertically integrated deals with manufacturers. The two are currently negotiating a new 10-year supply deal and the renewal of De Beers’ mining licenses in the southern African country.
Structuring supply in such a way would see the company (and government) take a share of profit from the sale of the resulting polished. Smaller companies have struck similar partnerships, such as Lucara Diamond Corp.’s agreement to sell its 10.8-carat-plus rough through manufacturer HB Antwerp.
Cleaver notes the deeper considerations with which De Beers must contend. “It’s a whole different ball game selling 33 million carats a year than 50,000 carats. We have an offering that we must sort, value, sell, trace and track on a completely different scale,” he points out. “You have to be much more sophisticated, more thoughtful and have a much stronger balance sheet.”
That’s not to say the company is set in its ways, particularly regarding how it sells specials. Last year, it partnered with sightholder Diacore to buy an exceptional 39.35-carat blue rough stone from Petra Diamonds for $40.2 million and share in the profit from the polished. The De Beers Blue, the 15.10-carat, fancy-vivid-blue polished that resulted from that rough, fetched $58.7 million at Sotheby’s Hong Kong. The two companies also teamed up to buy five blue rough diamonds from Petra in 2020, with the resulting polished stones expected to garner over $70 million at Sotheby’s in November (after press time) and December.
“It’s not difficult as a seller of a small volume of goods to find one buyer who will buy one particular stone at a significant premium to the market — that happens to us all the time,” he adds. “We just don’t publicize it.”
Tech at play
Technology has been the central tool to improve the way De Beers sells rough, Cleaver underlines. He teases that the company will introduce various innovations in the next 12 to 18 months that will be “game changers in how we continue to sell in this evolving market,” but he declined to reveal further information about these developments.
Data is also playing a much more important role in enabling De Beers, and others, to make more rapid decisions than before — and that data-centric strategy is being driven by technology, he notes.
In fact, technology is influencing change across all De Beers business units, Cleaver says. That includes at its mining operations, where it is tackling the challenge to “mine more gently,” using less water and energy to be more environmentally friendly. He also highlights the Tracr program — De Beers’ blockchain-driven traceability platform — which is gaining traction and will enable companies to show the provenance of their De Beers supply.
Building forever
That all feeds into the strong focus on sustainability that De Beers has adopted in recent years and the need to show one’s diamond is ethically sourced. While Cleaver recognized the need to talk about sustainability early in his tenure as CEO, the rapidness with which the subject became a focal point for brands surprised even him.
“I wanted to make sustainability a bigger issue, but I don’t think I realized at the beginning just how important it is,” he admits. “Now ‘Building Forever’ is an absolutely key part of everything we do.”
Building Forever outlines 12 goals De Beers has set to achieve by 2030, encompassing four areas it has identified to make a meaningful impact.
Those are leading ethical practices, partnering for thriving communities, protecting the natural world, and accelerating equal opportunity. “These are vitally important not only to our business, but also to our employees, partners and communities across all facets of our operations,” the company emphasizes on its website.
The program gradually emerged as the core message of the De Beers brand, taking its cues from the rising awareness among millennials and Gen-Zers on issues such as carbon neutrality, climate change, and social upliftment. The program is what distinguishes De Beers, and it provides an opportunity to maximize the value of the brand that was not apparent five years ago, Cleaver says.
Cleaning the mess
The evolution of that message paralleled Cleaver’s advocating for more brands across the industry as well as cleaning up and strengthening the De Beers brand. Key to that development was taking full ownership of its name in early 2017, when it bought the 50% of De Beers Diamond Jewellers (DBDJ) that was owned by LVMH.
“It always felt messy having the De Beers name co-owned by someone else,” he observes. “I’m very pleased we’ve been able to unify the brands into one master brand.”
The company sought to leverage its strong name recognition as much as possible. Most notably that played out at retail with the LVMH deal and subsequently renaming the retail operation De Beers Jewellers (DBJ). It also rebranded Forevermark as De Beers Forevermark, and the strategy extended beyond its retail operations to align the whole group into one “De Beers” corporate identity with a common goal.
“I wanted to define a more holistic business strategy: to run the company as one business rather than three separate silos,” Cleaver shares. “I think we’ve been pretty successful in achieving that.”
Staying brilliant
De Beers previously had a more vertical structure, split between the pillars of mining, rough sales and its retail brands. Over the past half decade, it has morphed into a more integrated end-to-end business with every employee, regardless of which area of the company they work, having the same stated purpose: to “make life brilliant,” Cleaver explains.
As such, the outgoing CEO carefully defines De Beers as a “natural-diamond company” with an integrated structure that encompasses exploration, mining, rough sales, and retail brands. Lightbox, the company’s lab-grown business, is considered an “adjacency” that doesn’t fit into the core business model, he insists.
With that structure in place, Cleaver is confident the company can double-down on innovation – as he claims it did with Tracr and Lightbox — strengthen its relationships with the trade and government, and in doing so, lead the industry on big issues such as sustainability. He hopes to continue to influence that path in his new role as cochairman, through which he will take an active role in engaging with external stakeholders.
“It’s important that De Beers pushes agendas and ideas that might be surprising they came from a big organization,” Cleaver discloses. “But when you look at some of the sustainability work done by retailers and sightholders today, it’s fantastic, and I think that we did have some small influence on that — that was all deliberate.”
The industry will continue to evolve because the world will continue to change quickly, he continues. “I’ve tried hard to always think about what the next trend or the next move should be — and why shouldn’t it be us who makes them? We recognize that when De Beers talks, people do listen,” he concludes.
De Beers’ revenue rose 24% in the first half of 2022, but the miner gave a more somber outlook for the rest of the year.
“We can only have strong rough sales if that’s also coupled by what’s going on on the polished side,” De Beers chief financial officer Sarah Kuijlaars told Rapaport News on Thursday. “The polished position was very strong in the beginning of the year, but it has leveled off. We have much more caution about the next six months than we’ve had for the previous six months.”
Revenue jumped to $3.6 billion in the first half as strong consumer spending during the 2021 holiday season led to intense restocking in early 2022, parent company Anglo American reported the same day. Underlying earnings gained 84% to $491 million.
Rough sales grew 27% to $3.3 billion from five sights during the period. The remaining revenue relates to other businesses such as the company’s consumer brands and industrial-diamond business.
The miner’s rough-price index, which measures like-for-like prices, rose 28% compared with the same period of 2021. The average selling price for rough surged 58% to $213 per carat, reflecting the market upturn and a shift in the product mix to higher-value goods. Sales volume fell 20% to 15.3 million carats.
The higher average price resulted from the introduction of the new Benguela Gem mining vessel off the Namibian coast, which enabled the extraction of more lucrative stones, Kuijlaars explained. In addition, production at the Venetia deposit in South Africa was focused on the final cut of the open-pit mine, which has a relatively high grade — the number of carats per tonne of ore — and high quality, the executive added.
De Beers’ results painted a complex picture of the market. Last week, the company raised its production plan for the full year in response to strong demand, predicting output of 32 million to 34 million carats. It also noted that the sanctions and boycotts targeting Russian diamonds, as well as growing interest in provenance initiatives, would “underpin” demand for its goods. The sixth sales cycle of the year, which took place earlier this month, brought in proceeds of $630 million — 23% higher than for the equivalent period a year ago.
However, inflation in the US and lockdowns in China have created concerns across the industry.
“This time last year, our operation was coming out of Covid-19 [during which output slumped],” Kuijlaars pointed out. “To stabilize our production has been really important, and that strong production gives us confidence for the full year. That’s our part in delivering reliable supply. As we sell that through, we are very alert to signs of any slowdown in the remaining four sights of the year.”
De Beers’ revenue rose 24% in the first half of 2022, but the miner gave a more somber outlook for the rest of the year.
“We can only have strong rough sales if that’s also coupled by what’s going on on the polished side,” De Beers chief financial officer Sarah Kuijlaars told Rapaport News on Thursday. “The polished position was very strong in the beginning of the year, but it has leveled off. We have much more caution about the next six months than we’ve had for the previous six months.”
Revenue jumped to $3.6 billion in the first half as strong consumer spending during the 2021 holiday season led to intense restocking in early 2022, parent company Anglo American reported the same day. Underlying earnings gained 84% to $491 million.
Rough sales grew 27% to $3.3 billion from five sights during the period. The remaining revenue relates to other businesses such as the company’s consumer brands and industrial-diamond business.
The miner’s rough-price index, which measures like-for-like prices, rose 28% compared with the same period of 2021. The average selling price for rough surged 58% to $213 per carat, reflecting the market upturn and a shift in the product mix to higher-value goods. Sales volume fell 20% to 15.3 million carats.
The higher average price resulted from the introduction of the new Benguela Gem mining vessel off the Namibian coast, which enabled the extraction of more lucrative stones, Kuijlaars explained. In addition, production at the Venetia deposit in South Africa was focused on the final cut of the open-pit mine, which has a relatively high grade — the number of carats per tonne of ore — and high quality, the executive added.
De Beers’ results painted a complex picture of the market. Last week, the company raised its production plan for the full year in response to strong demand, predicting output of 32 million to 34 million carats. It also noted that the sanctions and boycotts targeting Russian diamonds, as well as growing interest in provenance initiatives, would “underpin” demand for its goods. The sixth sales cycle of the year, which took place earlier this month, brought in proceeds of $630 million — 23% higher than for the equivalent period a year ago.
However, inflation in the US and lockdowns in China have created concerns across the industry.
“This time last year, our operation was coming out of Covid-19 [during which output slumped],” Kuijlaars pointed out. “To stabilize our production has been really important, and that strong production gives us confidence for the full year. That’s our part in delivering reliable supply. As we sell that through, we are very alert to signs of any slowdown in the remaining four sights of the year.”
Sales of rough diamonds by Debswana Diamond Company jumped 73% in the first nine months of 2021, statistics released by the Bank of Botswana showed on Tuesday, driven by the reopening of U.S. and China’s consumer markets.
Debswana, a joint venture between Anglo American business De Beers and the Botswana government, sells 75% of its output to De Beers, with the balance taken up by state-owned Okavango Diamond Company.
Debswana sales fell by 30% in 2020 as the covid-19 pandemic hit demand while global travel restrictions hurt trading.
Botswana closed its borders for eight months last year in an effort to curb the spread of the virus, effectively locking out foreign buyers from centres such as Mumbai, Antwerp and China, who traditionally travel to Gaborone 10 times a year to view and buy diamonds from De Beers.
Since mid-2020 De Beers has shifted some of its rough viewings to places closer to international diamond centres, such as Antwerp, to cater for customers unable to travel to Gaborone.
According to data published by the central bank, exports of diamonds from Debswana stood at $2.589 billion in the first nine months of the year compared with $1.498 billion in the same period last year.
Botswana makes about 30% of its revenue and 70% of its foreign exchange earnings from diamonds. While it has taken measures to diversify its dependence on a single commodity, diamond sales continue to be its main revenue earner.
De Beers’ sales softened by 4% in the current sales period, which ended last week, as Indian manufacturers closed factories ahead of the Diwali festival, though the company said diamond jewellery demand remained strong in the United States.
Sales of rough diamonds by Debswana Diamond Company jumped 73% in the first nine months of 2021, statistics released by the Bank of Botswana showed on Tuesday, driven by the reopening of U.S. and China’s consumer markets.
Debswana, a joint venture between Anglo American business De Beers and the Botswana government, sells 75% of its output to De Beers, with the balance taken up by state-owned Okavango Diamond Company.
Debswana sales fell by 30% in 2020 as the covid-19 pandemic hit demand while global travel restrictions hurt trading.
Botswana closed its borders for eight months last year in an effort to curb the spread of the virus, effectively locking out foreign buyers from centres such as Mumbai, Antwerp and China, who traditionally travel to Gaborone 10 times a year to view and buy diamonds from De Beers.
Since mid-2020 De Beers has shifted some of its rough viewings to places closer to international diamond centres, such as Antwerp, to cater for customers unable to travel to Gaborone.
According to data published by the central bank, exports of diamonds from Debswana stood at $2.589 billion in the first nine months of the year compared with $1.498 billion in the same period last year.
Botswana makes about 30% of its revenue and 70% of its foreign exchange earnings from diamonds. While it has taken measures to diversify its dependence on a single commodity, diamond sales continue to be its main revenue earner.
De Beers’ sales softened by 4% in the current sales period, which ended last week, as Indian manufacturers closed factories ahead of the Diwali festival, though the company said diamond jewellery demand remained strong in the United States.
The diamond firm Debswana has announced the discovery in Botswana of a 1,098-carat stone that it described as the third largest of its kind in the world.
The company’s acting managing director, Lynette Armstrong, presented the stone, which was found on 1 June, to the country’s president, Mokgweetsi Masisi, on Wednesday.
It is the third largest in the world, behind the 3,106-carat Cullinan found in South Africa in 1905 and the 1,109-carat Lesedi La Rona discovered in Botswana in 2015.
“This is the largest diamond to be recovered by Debswana in its history of over 50 years in operation,” Armstrong said.
“From our preliminary analysis it could be the world’s third largest gem-quality stone. We are yet to make a decision on whether to sell it through the De Beers channel or through the state owned Okavango Diamond Company.”
The “rare and extraordinary stone … means so much in the context of diamonds and Botswana,” she said. “It brings hope to a nation that is struggling.”
The minerals minister, Lefoko Moagi, said the discovery of the stone, which is yet to be named but measures 73 by 52 by 27mm, could not have come at a better time after the Covid-19 pandemic hit diamond sales in 2020.
Debswana is a joint venture between Anglo American’s De Beers and the Botswanan government, which receives as much as 80% of the income from sales through dividends, royalties and taxes.
Production at Debswana fell by 29% in 2020 to 16.6m carats and sales fell by 30% to $2.1bn as the pandemic affected production and demand.
Debswana plans to increase output by as much as 38% to pre-pandemic levels of 23m carats in 2021 as the global diamond market recovers with the easing of travel restrictions and reopening of jewellers.
The diamond firm Debswana has announced the discovery in Botswana of a 1,098-carat stone that it described as the third largest of its kind in the world.
The company’s acting managing director, Lynette Armstrong, presented the stone, which was found on 1 June, to the country’s president, Mokgweetsi Masisi, on Wednesday.
It is the third largest in the world, behind the 3,106-carat Cullinan found in South Africa in 1905 and the 1,109-carat Lesedi La Rona discovered in Botswana in 2015.
“This is the largest diamond to be recovered by Debswana in its history of over 50 years in operation,” Armstrong said.
“From our preliminary analysis it could be the world’s third largest gem-quality stone. We are yet to make a decision on whether to sell it through the De Beers channel or through the state owned Okavango Diamond Company.”
The “rare and extraordinary stone … means so much in the context of diamonds and Botswana,” she said. “It brings hope to a nation that is struggling.”
The minerals minister, Lefoko Moagi, said the discovery of the stone, which is yet to be named but measures 73 by 52 by 27mm, could not have come at a better time after the Covid-19 pandemic hit diamond sales in 2020.
Debswana is a joint venture between Anglo American’s De Beers and the Botswanan government, which receives as much as 80% of the income from sales through dividends, royalties and taxes.
Production at Debswana fell by 29% in 2020 to 16.6m carats and sales fell by 30% to $2.1bn as the pandemic affected production and demand.
Debswana plans to increase output by as much as 38% to pre-pandemic levels of 23m carats in 2021 as the global diamond market recovers with the easing of travel restrictions and reopening of jewellers.
