02 Aug 2016

De Beers has registered a profit growth of two per cent during the first half of this year to US$585 million as a result of higher revenues from stronger rough diamond demand.  

Announcing the interim results on Thursday, De Beers Group’s head of strategy and corporate affairs Mr Gareth Mostyn said other factors which contributed to the profit are tight operating costs and favourable exchange rates.

The good results are a bonus for the government of Botswana as it has a 15 per cent stake in De Beers, Mr Mostyn said.

He said as a result of cost-saving programmes and portfolio changes, supported by favourable exchange rate movements, consolidated unit costs declined from US$82 per carat to US$65 per carat.

Revenues for the diamond company operating mines in Botswana, South Africa, Namibia and Canada increased by eight per cent to US$3.3 billion driven mainly by rough diamond sales which increased by 11 per cent to US$3.1 billion.

This, Mr Mostyn said, was due to a 29 per cent increase in consolidated sales volumes to 17.2 million, partly offset by a 14 per cent decrease in average realised rough diamond prices to US$177 per carat which reflected the 16 per cent lower average rough price index for the period.

In 2015 during the same period, revenue stood at US$3 billion while the sales amounted to 13.3 million carats but the rough diamond price was US$206 per carat.

Talking about the markets, Mr Mostyn said the US market, which amounts to 45 per cent of the global demand, showed positive growth while the Chinese was relatively stable.

He said Japan demonstrated modest growth in local currency, whereas consumer demand in India was hampered by a month-long jewellers’ strike in March this year against government regulations.

A decision was taken to reduce rough diamond production due to the trading conditions that prevailed during the second half of last year.

Debswana production, a major contributor to De Beers’ overall production, decreased by 9 per cent to 10.5 million carats with Orapa down by 25 per cent while Damtshaa was placed on care and maintenance from 1 January 2016.

At Namdeb, a De Beers and Namibian government partnership, production decreased by 17 per cent to 0.7 million carats with reduced production at Debmarine Namibia and lower grades at Namdeb’s land operations.

In South Africa, production declined by 20 per cent to 1.8 million carats mainly due to the completion of the sale of Kimberly Mines in January 2016.

Mr Mostyn said Canadian production fell by 69 per cent to 300 000 carats as Snap Lake has been placed on care and maintenance since December 2015.

Talking about ongoing projects, he said 77 per cent of the 500 million tonnes of waste stripping required to expose the ore has been mined and the first processing plant remains scheduled for next year.

Construction of the Venetia Underground mine continues to progress and first production from the underground operation is scheduled for 2022. Mr Mosytn said Forevermark has made a global presence operating in 38 markets with 1 874 outlets, a 6.5 per cent increase since the end of 2015.

He said De Beers also invested in additional Chinese New Year marketing campaigns to further stimulate diamond jewellery gift giving, which was received positively by the industry.

Mr Mostyn said the European market remains insignificant for the ‘Brexit’ to make a direct impact, save if global markets and economy could be hit.

On the outlook, he said the macro economic conditions remain stable and rough diamond revenues are expected to be weighted towards the first half of 2016. ENDS