Following a difficult sales year in 2019, Global Diamond mining giants De Beers Group has started the year 2020 on higher note as its first cycle of rough diamond sales registers significant upswing compared to the same cycle in 2019.
According to a statement released by Anglo American, De Beers’s parent company on Wednesday, rough diamond sales value for De Beers’ first sales cycle of 2020 as conducted at the Global Sight holder Sales and Auctions amounted to $545 million. This provisional figure mirrors 9 percent increase when gauged against the first sales cycle of 2019 which registered $500 million actual value. This is also much higher that the preceding sight of December 2019 which registered $426m actual sales value.
Chief Executive Officer of De Beers Group Bruce Cleaver attributed this sales upswing to continued increase in demand spilling over from 2019 year end “Demand for rough diamonds increased during the first Sight of 2020 following the end of year selling season and subsequent inventory restocking”.
DIFFICULT YEAR IN 2019
De Beers didn’t have it easy in the year 2019, experiencing the worst sales path since the 2008/09 global financial crises. The lucrative industry behemoth sold about $1.36 billion less worth of rough diamonds. In the year 2018 De Beers’ rough diamonds sales amounted to US$5.39 Billion, approximately P54 Billion, this was a slight pickup from the 2017 sales value of US$5.31 Billion.
For the year 2019 the company‘s entire ten cycles only gathered total sales provisional value of US$4.04 billion, way below the 2018 value by about $1.35 billion (around P14 billion) mirroring a 25 % decrease. During the year 2019 De Beers provided customers with additional flexibility to defer some of their rough diamond allocations to later in the year. The flexibility offer ran into cycle 7 and 8 giving its clients the opportunity to leave up to 50% of available goods on the table to lower the pressure on buyers without lowering their prices.
The company announced in an internal communiqué to sight holders in August that it would buy back up to 20% by carat weight of customers’ purchases instead of the typical 10%, specifying that they could not use both options on the same box of goods.
It offered several options to increase the flexibility for manufacturers and traders struggling with an oversupply of rough and polished: in addition to the higher level of buybacks – whereby customers purchase the diamonds and then sell them back to De Beers at an agreed price, while having those purchases count toward their demonstrated demand which determines future allocations.
De Beers also enabled buyers to make additional deferrals of goods to later sights, and set an earlier date on the annual opportunity for customers to reschedule their purchases. Following 2019 revised full year production guidance to approximately 31 million carats of diamonds down 11 percent from 35 million the previous year, De Beers’ parent company Anglo American further cut its diamond production forecast for the next two years. In 2020, it expects De Beers will mine 32-34 million carats, down from its previous outlook of 33-35 million. For 2021, the forecast was cut from 35-37 million carats to 34-36 million carats. Production guidance for full year 2022 is 33 to 35 million carats.
OVERHAUL OF SUPPLY POLICY
Last week international media reported that De Beers has plans to abandon its practice of using sightholders’ purchase history as the main factor in determining how it allocates rough supply. According to Rapaport , a US based diamond industry insights and think tank the move, which would go into effect from 2021, would see the mining giant shift to more subjective criteria for deciding the value of goods each client receives.
The current system, known as “demonstrated demand,” requires sightholders to buy the rough that De Beers has allotted them or risk losing access to De Beers’ diamonds in future. The method has faced criticism for encouraging dealers and manufacturers to take on unprofitable inventory. But with the current sightholder agreement expiring at the end of this year. Rapaport reports that De Beers has told clients demonstrated demand will not be the main driver of allocations in the new contract period.
It is reported that during this ended sight discussions between De Beers and its sight holders continued in Gaborone about the matter. The proposals include studying data about clients’ business activities, as well as qualitative factors, to help determine whether companies should be on the client list, a sightholder explained to Rapaport on condition of anonymity. De Beers is also considering reducing the number of sightholders, according to a Bloomberg report last week.
SALES RECOVERY IN 2020
Late last year Rapaport reported that Going into 2020 there is some optimism for the new decade. The company says the industry can expect lower rough supply, market consolidation, and further changes to the way diamonds are bought and financed aswell as greater use of technology. Rapaport further predicts that there will be more emphasis on ethical sourcing, and segmentation of lab-grown and natural diamonds into distinct markets.
According to the Las Vegas based experts, to navigate these trends and bring about an upswing in diamond prices, the industry must invest in marketing and develop more efficient processes and inventory management. “Diamond jewelry sales must outperform the last decade’s and should exceed $100 billion by 2030,” forecasts Rapaport.
China’s Gross Domestic Product (GDP) expanded by 3% year-on-year to 121.02 trillion yuan ($17.93 trillion) in 2022 despite being mired in various growth pressures, according to data from the National Bureau Statistics.
The annual growth rate beat a median economist forecast of 2.8% as polled by Reuters. The country’s fourth-quarter GDP growth of 2.9% also surpassed expectations for a 1.8% increase.
In 2022, the Chinese economy encountered more difficulties and challenges than was expected amid a complex domestic and international situation. However, NBS said economic growth stabilized after various measures were taken to shore up growth.
Industrial output rose 3.6% in 2022 over the previous year, while retail sales slightly shrank by 0.2% data show that fixed-asset investment increased 5.1% over 2021, with a 9.1% hike in manufacturing investment but a 10% fall in property investment.
China created 12.06 million new jobs in urban regions throughout the year, surpassing its annual target of 11 million, and officials have stressed the importance of continuing an employment-first policy in 2023.
Meanwhile, China tourism market is a step closer to robust recovery. Tourism operators are in high spirits because the market saw a good chance of a robust recovery during the Spring Festival holiday amid relaxed COVID-19 travel policies.
On January 27, the last day of the seven-day break, the Ministry of Culture and Tourism published an encouraging performance report of the tourism market. It said that domestic destinations and attractions received 308 million visits, up 23.1% year-on-year. The number is roughly 88.6% of that in 2019, they year before the pandemic hit.
According to the report, tourism-related revenue generated during the seven-day period was about 375.8 billion yuan ($55.41 billion), a year-on-year rise of 30%. The revenue was about 73% of that in 2019, the Ministry said.
The state of the art jewellery manufacturing plant that has been set up by international diamond and cutting company, KGK Diamonds Botswana will create over 100 jobs, of which 89 percent will be localized.
Local diamond and metal exploration company Tsodilo Resources Limited has negotiated a non-brokered private placement of 2,200, 914 units of the company at a price per unit of 0.20 US Dollars, which will provide gross proceeds to the company in the amount of C$440, 188. 20.
According to a statement from the group, proceeds from the private placement will be used for the betterment of the Xaudum iron formation project in Botswana and general corporate purposes.
The statement says every unit of the company will consist of a common share in the capital of the company and one Common Share purchase warrant of the company.
Each warrant will enable a holder to make a single purchase for the period of 24 months at an amount of $0.20. As per regularity requirements, the group indicates that the common shares and warrants will be subject to a four month plus a day hold period from date of closure.
Tsodilo is exempt from the formal valuation and minority shareholder approval requirements. This is for the reason that the fair market value of the private placement, insofar as it involves the director, is not more than 25% of the company’s market capitalization.
Tsodilo Resources Limited is an international diamond and metals exploration company engaged in the search for economic diamond and metal deposits at its Bosoto Limited and Gcwihaba Resources projects in Botswana. The company has a 100% stake in Bosoto which holds the BK16 kimberlite project in the Orapa Kimberlite Field (OKF) in Botswana.