Diamond giant, De Beers is reading positive signs of recovery from its latest sales, which showed a near three-fold increase in earnings over the last two auctions of the precious stones.
The coronavirus (COVID-19) restrictions in its producer nations and a drop in global demand saw De Beers’ revenue slump in the first half of the year by 54% year-on-year to $1.2 billion (P13.2 billion).
De Beers, which is a 50-50 partner with government in Debswana, is amongst the principal anchors of government revenues through dividends, royalties and taxes.
In its latest update, De Beers said sales at its seventh auction had risen to $320 million from $116 million at its sixth, with CEO Bruce Cleaver noting the easing of COVID-19 restrictions globally was helping resuscitate earnings. De Beers conducts 10 auctions in Gaborone, mixing, processing and selling product from its mines in Botswana, South Africa, Namibia and Canada.
“Diamond markets showed some continued improvement throughout August and into September as COVID-19 restrictions continued to ease in various locations, and manufacturers focused on meeting retail demand for polished diamonds, particularly in certain product areas,” Cleaver said.
He added that overall industry sentiment has become more positive as “jewellers in the key US and Chinese consumer markets gained confidence ahead of the important year-end holiday season, supported by strong bridal diamond jewellery demand across markets”.
For De Beers, the festive period covering Thanksgiving in the United States, Christmas, the New Year and the Chinese New Year in February represents the peak retail period, with hundreds of millions of dollars invested each year in intensive marketing globally.
The US, China and India are the main consumers of diamond jewellery, with these sales supporting rough diamond output
“Accordingly, we saw a recovery in rough diamond demand in the seventh sales cycle of the year, reflecting these retail trends, following several months of minimal manufacturing activity and disrupted demand patterns in all major markets,” Cleaver said.
“It’s clear that the recovery is at an early stage and we expect that it will take some time to get back to pre-COVID-19 levels of demand.”
Speaking to reporters virtually in Gaborone recently, De Beers executives noted rising orders ahead of the festive season and said there were signs of ‘pent up demand’ in the market.
“Diamonds will clearly be market-dependent,” Anglo American’s finance director, Stephen Pearce said in a recent earnings call.
“We’re confident the market will come back and demand will flow through quite strongly.
“Whether that happens in November-December or January-February, I’m not too bothered.
“It’s really about the market coming back and I know the teams are looking at how they can sell diamonds in a different way given the circumstances.”
Anglo American holds 85% equity in De Beers with the balance owned by the Government of Botswana.
Government’s latest figures show that from expected mineral revenues of P20 billion in 2020-2021, fiscal authorities now expect about P10.5 billion, due largely to the closure of borders and the slump in global demand as a result of COVID-19.