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De Beers Rough Diamond Production Dips 14% in Q2; Full Year Guidance Reduced

Jul 18, 2019

De Beers released its production figures for the three-month period ending June 30, 2019 (Q2 2019), reporting a 14% decline in rough diamond production to 7.7 million carats, driven by reductions in Botswana (Debswana) and South Africa (DBCM). This takes rough diamond production for the first half of the year (H1 2019) to 15.6 million carats, or 11% below the level during the comparative period last year.

The Company said that the drop was on account of it continuing “to produce to market demand and as Venetia transitions from open pit to underground”.

Demand during the period has remained subdued as a result of challenges in the midstream with higher polished inventories, and caution due to macro-economic uncertainty, including the US – China trade tensions, De Beers stated.

Rough diamond sales during the quarter were 9.0 million carats (8.3 million carats on a consolidated basis i.e. after excluding the proportionate share outside the group by JV partners in Botswana and Namibia) from three sales cycles compared with 10.0 million carats (9.4 million carats on a consolidated basis) from the same number of sales cycles in Q2 2018.

De Beers also stated that the H1 2019 average realised rough diamond price decreased by seven per cent to US$ 151/carat (H1 2018: US$ 162/carat), which was driven by a four per cent reduction in the average rough price index and a change in the sales mix in response to weaker conditions.

Midway through 2019, the Company has also revised its full year production guidance downwards to ~31 million carats from the earlier 31-33 million carats, “in response to weaker trading conditions experienced in the period”.

The country wise break up of De Beers production is as follows:

Botswana (Debswana) production decreased by nine per cent to 5.7 million carats. This was driven by a decrease at Orapa of 23 per cent to 2.5 million carats following a planned plant shut down brought forward from H2 2019, which impacted production in late Q1 and early Q2. Production at Jwaneng increased by seven per cent to 3.2 million carats, driven by an increase in tonnes treated.

Namibia (Namdeb Holdings) production decreased by 35 per cent to 0.3 million carats, driven by Elizabeth Bay transitioning onto care and maintenance in Q4 2018 and planned maintenance for the Mafuta crawler vessel.

South Africa (DBCM) production decreased by 44 per cent to 0.6 million carats due to lower mined volumes at Venetia as it approaches the transition from open pit to underground. In addition, Voorspoed production came to an end as it was placed onto care and maintenance in Q4 2018 in preparation for closure.

Canada production decreased by nine per cent to 1.1 million carats due to planned lower grades at Gahcho Kué. Victor production decreased by four per cent to 0.2 million carats as it reached the end of its life during Q2 2019.

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