De Beers has lowered its production plan for 2024 by 3 million carats in response to the diamond market’s ongoing downturn and following a decline in first-half sales and profit.
The miner expects to recover 23 million to 26 million carats of rough this year, compared with an earlier forecast of 26 million to 29 million carats, parent company Anglo American said Thursday in its interim results. Production was 31.9 million carats in 2023.
The decision comes amid a growing imbalance between supply and demand in the diamond industry and follows discussions with De Beers’ production partners, which the company flagged last week.
Anglo American cited a “prolonged period of lower demand, higher than normal levels of inventory in the midstream, and a focus on working capital.” Production levels are subject to trading conditions, it noted.
The global market slump has hit De Beers’ financial performance this year. The diamond unit’s revenue fell 21% year on year to $2.25 billion for the January-to-June period, Anglo American reported.
Sales volume dropped 22% to 11.9 million carats, with the average price up slightly at $164 per carat from $163 a year earlier, reflecting an increase in the proportion of higher-value rough in the sales mix. The average rough price index for the period slid 20% year on year.
Underlying earnings decreased 14% to $73 million, as sales fell and unit costs rose due to lower production and the ramp-up of the Venetia underground project in South Africa.
“Weaker demand is expected to continue for some time, given the prevailing levels of midstream inventories,” the miner commented.
“This is expected to be followed by a gradual recovery as demand from the US, India and other countries draws down midstream inventories.”
Meanwhile, De Beers’ new sales and mining agreements with Botswana, which are still to be finalized, no longer require approval by Anglo American shareholders due to changes to UK corporate rules, the parent company noted.
SOURCE:rapaport.com
