De Beers production in H1 up 12%

In the six months ending June 30, 2014, De Beers noted 12 percent rise in production to 16 million carats, which the mining giant attributes to improvements at Debswana in Botswana and its Consolidated Mines in South Africa. Its total sales also rose in the period, by 15 percent (on y-o-y basis) to $3.8bn (of which $3.5bn was rough diamond sales). Rough diamond demand was robust. This contrasted with the first half of 2013, when encouraging growth in the US was not matched in India (where demand was weak). The company noted the rise in sales is an indicator of diamantaires’ restocking after a successful selling season and a reasonably positive outlook for polished diamonds in the key markets of the US, China and India.

For the entire year, the company holds a positive outlook and expects global growth in demand for diamond jewellery of between 4-5 percent in 2014, driven primarily by the key markets of the US and China. It also hopes to look at a recovery in Indian market, following positive sentiments delivered by a new government at the centre. It also noted that the seasonal nature of polished diamond consumption means that De Beers’ annual performance is generally more heavily weighted towards the first six months, reflecting normal restocking by midstream diamantaires after the key selling season. While stocking levels increase as the end of the year approaches, this is offset by manufacturing slowdowns that typically impact upon rough demand in the second half. This trend is expected to continue this year.

The company also noted that fundamentals of the industry remain strong, as growing demand will continue to outpace production. With positions across the value chain, De Beers is well-positioned for growth.

Production guidance for 2014 has been taken to 31-32 million carats from 30-32 million carats.

Operating profit for the Group rose 34 percent to $765million, contributed by stronger rough price environment and product mix, higher volumes and favourable exchange rates. De Beers said it continued to invest for growth, as it sees making progress with projects in South Africa (Venetia underground mine), Botswana (Jwaneng Cut-8) and Canada (Gahcho Kue JV).

The company also achieved good performance from its two diamond brands. Also, Forevermark has expanded to over 1,400 jewellery stores in 29 countries, having launched in Turkey in H1 and plans to launch in the UK and Ireland later this year. De Beers said it continues to develop its two sales channels, with a new sales approach for Global Sightholder Sales’ rough diamond customers, and greater flexibility in forward contracts for Auction Sales customers.