De Beers Group of Companies has registered solid financial performance in the first half of 2018, reflecting strong underlying demand supported by a continued focus on enhanced operational performance.
Presenting the half year results to June 2018 on Thursday, Executive Vice President (Diamond Trading) of the De Beers Group Paul Rowley and Alessandra Berridge, Executive Vice President, Commercial and Partnerships announced that the group rough diamond production is up 8% to 17.5 million carats.
"Continued strong demand so far in 2018 follows record global demand for diamond jewellery in 2017 of US$82 billion. We announced a number of innovative initiatives in the first half that will support our business success into the future, many of which will deliver benefits for the diamond industry more broadly," said Rowley.
De Beers results show that production was up by three percent during the second quarter of the year, a reflection of the healthy trading environment for the industry. Rough diamond production increased by 3 percent to 9 million carats when compared with the same quarter last year. The increase in production is said to be a reflection of stronger demand, which the group has to meet, and the increase was also as a result of the contribution from the ramp-up at Gahcho Kue in Canada.
Of the 9 million carats of rough diamond production, over 6 million carats is from Debswana mines in Botswana with production increasing by 6 percent to reach 6.3 million carats, coming on the backdrop of stronger trading conditions. At Jwaneng diamond mine production was 2% higher owing to a 10% increase in plant throughput. Orapa mine saw production going up by 8 percent to 3.3 million carats due to the ramp up of additional processing capacity in response to stronger trading conditions.
De Beers, which has another arrangement with Namibia through Namdeb, registered 0.5 million carats in that country which is an increase of 32 percent which is believed to have been driven by access to consistently higher grades at the land operations and technology-led optimisation of the marine drill fleet.
Although the diamond mining group saw an increase in rough production in the three markets, in South Africa the group saw a decrease in production which went down by a massive 28 % to one million carats. This is blamed on the suspension of production at Venetia following a fatal incident in March this year. Production at Gahcho Kue, the Canadian diamond mine, is also up by 17 percent to 1.2 million carats due to completion of the ramp-up at the mine.
De Beers’ rough diamond sales are also up and have accumulated to 10 million carats from three sales cycles in the second quarter of 2018 when compared to 5.9 million carats sold during the same period in the prior year. In addition to the different number of sales cycles over the period, sales volumes are also said to have benefited from positive sentiment in the midstream following growth in consumer demand for jewellery in late 2017 and a positive outlook.
During the first half of the year, the average realized rough diamond price increased by 4 percent to $162/carat, from $156/carat during the first half of 2017, due to a 1.6 percent increase in average rough price index as well as an improvement in the sales mix which was driven by the considerable volumes of lower value goods in 2017.
This was following the Indian demonetisation programme in late 2016. When this impact is taken out, the average value of the production mix was lower during the first half of the year as a higher proportion of lower value carats was delivered from Orapa and Gahcho Kue.
The average realised rough diamond price is up 4% to $162/carat, due to 1.6% increase in average rough price index and improvement in sales mix. EBITDA decreased 9% to $712 million, primarily due to unfavourable exchange rate movements and waste mining costs.
Emboldened by solid performance rallied by uptick in diamond sales De Beers Executives boldly declare that full year 2018 production forecast remains unchanged at 34 -36 million carats, subject to trading conditions.The duo reiterated that the outlook for the global diamond industry into 2018 remains positive owing to growing demand from consumers, supported by favourable macro economic factors and continued investment in marketing, a prediction previously made by other economic and market experts.
Rowley said Jwaneng CUT-8, expected to produce approximately 92 million carats, has now become the main source of ore for Jwaneng mine and will run to 2030. Thereafter, Cut-9 would extend the life of the mine to the mid-2030s and is expected to produce 48 million carats. Feasibility studies for Cut-9 continue and are progressing well, he said.
He also revealed that in Orapa, studies for CUT-3 are at pre-feasibility stage and will inform the various parameters for the project. He said the current Life of Mine, which only includes Cut-2, extends to 2030. Cut-3 would add many years to the life of Orapa. "The Letlhakane tailings treatment plant has been commissioned and ramp up has been achieved, with the plant now running at full capacity. It will extend the life of Letlhakane by another 20 years to 2043. Damtshaa resumed production late last year, following two years of being on care and maintenance. The Life of Mine is 2034 and it is expected to produce around 300,000 carats per annum," Rowley disclosed.
To enhance consumer confidence in diamonds and ensure all registered diamonds are conflict-free and natural, while also improving efficiency De Beers has embarked on an ambitious project -the TRACR Diamond Blockchain. It is the first blockchain platform to digitally trace a diamond's journey from mine to retail, that will provide a single, immutable record for every diamond registered. In a pilot project, and working with five leading diamond manufacturers and Signet Jewelers- the world's largets retailer of diamond jewellery, TRACR has already succesfully tracked 200 high value diamonds along the value chain.
De Beers is also working with NGO Diamond Development Initiative in a pilot project in Sierra Leone for an initiative called GEMFAIR - for which a tailored app and diamond toolkit has been developed to enable digital tracking of artisanal and small scale mined diamonds production from mine site through to export, ensuring its legitimacy and source. The technology is designed to create a secure and transparent route to market for ethically sourced artisanal and small scale mined diamonds.
De Beers has also launched a new company, Lightbox Jewellery,that offers a new range of fashion jewellery products containing laboratory-grown diamonds at accessible price points. The company comes after research revealed that consumers see synthetics as fun, fashion products suitable for light hearted occassions which should not cost much. It is intended to help clarify any confusion regarding laboratory grown diamonds vs natural diamonds.