23 Feb 2020

De beers Group has recorded a decrease of 24 per cent of its total revenue for the year 2019.

Speaking at a media briefing recently, the group’s chief financial officer, Ms Susanne Swaniker-Tettey said the company recorded a decline in revenue in 2019 as compared to 2018.

 She said the results for 2019 stood at US$4.6 billion compared to the US$6.1 billion the company recorded in 2018. She attributed the decline to a sales fall of rough diamonds, which went down by 26 per cent, which amount to US$4 billion compared to the US$5.4 billion in 2018.

Ms Swaniker-Tettey said this was due to an eight per cent decrease in consolidated rough sales volumes to 29.2 million carats compare to 31.7 million carats in 2018 and a 20 per cent reduction in average realised price.

She said other contributing factors included, among others, and not limited to, is the US/China trade tensions, which resulted in a lower than expected holiday retail sales, which led to higher than anticipated stock levels in the industry’s midstream at the start of the year 2019.

She said another factor came as a result of stock market volatility, which saw a low demand for rough diamonds and another one closure of some US bricks and mortar retail outlets, which then put the midstream inventory position under immense pressure and the tighter financing also affected the midstream’s ability to hold stock, all of which resulted in lower demand for rough diamonds.

Ms Swaniker-Tettey said in US$ terms, global consumer demand for diamond jewellery was broadly flat in 2019, despite the challenges of increased uncertainty around the economic outlook, owing to the continued US/China trade tensions as well as the impact of Hong Kong protests and certain macro-economic issues affecting consumer confidence in India.

She said in response to the challenging midstream trading environment, De Beers offered increased supply flexibility to Sightholders and sold lower value and volume of rough diamonds to the midstream, while increasing marketing expenditure to US$178 million in 2019 as compared to US$166 million in 2018, and this was done entirely to further drive consumer demand for diamond jewellery.

Regarding the operational performance, she said rough diamonds production decreased by 13 per cent to 30.8 million carats in 2019 as compared to 35.5 million carats in 2018.

Primarily driven by a reduction in South Africa.

She said while trading conditions had improved in the third quarter of the year, production was lower in response to softer rough diamonds demand conditions compared to 2018.

Ms Swaniker-Tettey said in Botswana production was four per cent lower at 23.3 million carats in 2019 as compared to 24.1 million carats is 2018.

However, there was an increase of five per cent of carats in 2018 at Jwaneng mine, while Orapa saw a decrease of 12 per cent the previous year.

The most hard hit was South Africa, which saw a decrease of 59 per cent in 2018 as the mining sequence at the Venetia open pit had a higher waste to ore ratio as it moves into its final year, prior to the transition to the underground, whereas production at Voorspoed ceased following the operation being placed onto care and maintenance in the final quarter of 2018.

“Namibia also experienced a decrease of 1, 7 million carats in 2019 from 2.0 million carats in 2018, output from the marine operation declined by 10 per cent owing to routine planned maintenance for the Mafuta vessel and the production at the land operations declined by 29 per cent tin 2018 as a result of placing Elizabeth Bay onto care and maintenance in December 2018 followed by the sale announcement in September 2019,” she said.

The production in Canada decreased by 13 per cent of carrats as Victor reached the end of its life during the second quarter of 2019, resulting in a 55 per cent decrease in output, whereas Gahcho Kue maintained output at 3.5 million as in the previous year.

She said the 2020 production guidance was 32-34 million carats, subject to trading conditions and the higher production was driven by an expected increase in ore from the final open pit cut at Venetia, supported by a currently anticipated improvement in trading conditions compared with 2019.

Regarding the lifespans of the mines, Ms Swaniker-Tettey said the Jwaneng cut 9 was expected to run up to 2035 while Orapa cut 2 would go up to 2030, Letlhakane 2043 and Damtshaa 2034. ENDs