De Beers, the renowned diamond mining company and a subsidiary of Anglo American has announced a downward revision in its production guidance for 2024, adjusting the forecast to between 26 million and 29 million carats from the previously anticipated 29 million to 32 million carats. This adjustment comes in response to elevated inventory levels in the market and a projection of only a gradual recovery in the demand for rough diamonds.
An upward adjustment in the unit cost guidance for the full year accompanies the revision in production guidance. Initially estimated at $80 per carat, the cost is now expected to rise to about $90 per carat. This shift is largely attributed to decreased production volumes which typically raise per unit costs due to fixed overhead allocations.
The first quarter of 2024 saw De Beers’ rough diamond production fall by 23% year-on-year, totaling 6.9 million carats. This significant reduction reflects strategic changes in production configurations aimed at addressing the high market inventory levels and the sluggish rebound in diamond demand. Despite these challenges, there has been a noticeable uptick in demand for rough diamonds, initially sparked by an increase in diamond jewelry purchases in the U.S. during the previous holiday season.
De Beers’ strategy over the past year has included providing greater flexibility in rough diamond allocations and supporting a voluntary import moratorium on rough diamonds into India during the fourth quarter of 2023. These measures have contributed to a more balanced supply and demand in the wholesale market. However, uncertainties concerning economic growth continue to promote a cautious approach among sightholders, with expectations set for a slow and steady recovery in demand throughout the remainder of the year.
In a geographical breakdown of production, Botswana reported a 28% decrease in diamond output, yielding five million carats in the first quarter. This decline was deliberately engineered through reduced production activities at the Jwaneng mine and a temporary shift in the plant feed mix at Orapa to process existing surface stockpiles.
Meanwhile, production levels in Namibia remained relatively stable at 633,000 carats. In contrast, South Africa’s output saw a decrease of 19% to 598,000 carats, primarily due to the ongoing depletion of lower-grade surface stockpiles ahead of a planned escalation in underground operations at the Venetia mine expected to span the next few years.
Canadian production also experienced a modest decrease of 4%, with 645,000 carats mined, reflecting the planned processing of lower-grade ore.
Despite these reductions in volume, the first quarter witnessed a 23% year-on-year increase in the average realized price per carat, which rose to $201. This price improvement is partly due to a strategic change in the sales mix towards higher-value rough diamonds and the positive impact of a price adjustment made during the first Sight sale of the year.
The ongoing developments at De Beers illustrate the complex interplay between production strategies and market dynamics in the diamond industry. The company’s cautious yet adaptive approach aims to align closely with market conditions, balancing operational efficiency with market demand to maintain profitability and market stability. As the year progresses, the diamond industry will continue to monitor these adjustments closely, gauging their effectiveness in navigating the fluctuating landscape of global diamond demand and supply chain challenges.
Source: Mining Weekly
