De Beers demystifies lab diamonds

SHARE   |   Thursday, 01 August 2019   |   By Lame Modise
Rowely Rowely

Natural diamonds remain core business

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Competitors in the Lab Grown Diamonds (LGD) sector have begun marketing their products legitimately instead of confusing customers that they are exactly like the natural occurring ones.

De Beers Group Executive Vice President- Diamond Trading, Paul Rowley confirmed this at the group’s announcement of its Interim Financial Results in Gaborone on Thursday.

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Rowley said players in the LGD sector have changed how they used to market their diamonds since the launch of the De Beers Lightbox jewelry range, which is focused on clarifying consumer confusion around LGDs.

“Since the launch, we have seen some other competitors in the LGD sector begin to market their products in the same fashion jewelry category,” he announced, continuing that as the LGD sector develops, the cost of production decreases, prices in retail and wholesale decline and consumer education improves

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The Lightbox synthetic diamond jewelry was launched in 2018 to offer clients, especially millennials a new range of fun, fashion jewelry products at accessible price points. 

Questioned on the threat of LGDs to the business of the natural diamonds, Rowley explained that De Beers has been in the LGD sector for the past 50 odd years and the natural diamond remains the company’s core business.

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“De Beers will spend nearly USD 100 million over the next four years on building a new production facility in the US but will spend 100 more than this over the next 5-7 years on our natural diamond business,” he responded.

The LGDs, he said, currently represent around 2.5 per cent of the global diamond jewelry market.

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Still on natural diamonds being De Beers’ core business, Jwaneng Cut-9 project, which is expected to extend the mine’s life up until 2035, has contracted a local company, Majwe Mining at P15.7 billion. The contract is a joint venture between Bothakga Burrow Botswana and Thiess Botswana.

De Beers expects to invest approximately USD 2 billion over the life of the project that expects to create 1000 jobs, yield 53 million carats of rough diamonds from 44 million tonnes of treated material.

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“Work has already commenced to remove 513 million tonnes of waste material to expose diamond bearing ore,” announced De Beers Group Executive Vice President- Commercial and Partnerships, Allessandra Berridge on the progress of the Cut-9 project. She continued that the recovery of diamonds is expected to start by 2027.

On the De Beers Forevermark store located at the Sir Seretse Khama International Airport (SSKIA), De Beers Vice-President Corporate Affairs and Government Relations, Pat Dambe announced that the store is progressing well.

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“Our sales indicate that 4 out of every 5 purchases are by Batswana. The campaign to drive more traffic there is ongoing,” she stated. Dambe also noted that there have been Batswana who have enquired on bigger diamonds in their product offering.

She said Forevermark is now available in more than 2,400 retail outlets in 32 different markets and announced a new partnership with World Diamond Group that has extended its licensee operations in Europe and Italy.

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“Forevermark unveiled its second retail concept store Libert’aime by Forevermark in Beijing in January, with its innovative in-store offering fully integrated with WeChat, it continues to create an omni-channel experience specifically targeting Millennials,” she said.

Results summary

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·     Total revenue decreased by 17% to $2.6 billion, with rough diamond sales declining by 21% to $2.3 billion.

·     EBITDA decreased by 27% but still achieved profitability of $518 million due to the challenging midstream trading environment and slowing consumer demand growth.

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·     Consolidated rough diamond sales volumes decreased by 13% to 15.5 million carats, while the average rough price index decreased by 4%

·     Average realised rough diamond price decreased by 7% to $151/carat, driven by the reduction in the average rough diamond price index and a change in the sales mix due to weaker market conditions in certain segments

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H1 production decreased by 11% to 15.6 million carats, primarily driven by a reduction in Botswana and South Africa.       



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