Releasing its Preliminary Financial Results for 2018, De Beers Group reported a total revenue of US$ 6.1 billion for the period, marking a growth of 4% over a total revenue of US$ 5.8 billion earned in 2017.   

Rough diamond sales increased by 4% to US$ 5.4 billion as compared to sales worth US$ 5.2 billion garnered in the previous year. This was “driven by improved overall consumer demand for diamond jewellery and a 1% increase in the average rough diamond price index,” the Company noted.

Breaking down average price realised for its sales, De Beers said that in 2018 it amounted to US$ 171/carat as compared to US$ 162/carat in 2017. This indicates a rise of 6% in average price per carat realised, “reflecting the lower proportion of lower value rough diamonds being sold in the second half, which resulted in a 2% decrease in consolidated sales volumes to 31.7 million carats (2017: 32.5 million carats)”, the Company noted.

De Beers’ “Other Revenue” also increased as a result of  improved ‘high end’ jewellery sales at De Beers Jewellers (consolidated for a full year in 2018, compared with nine months in 2017). This however, was partly offset by a 5% decrease in Element Six revenue “due to a reduction in sales to the oil and gas market”, De Beers reported.

“Underlying EBITDA decreased by 13% to US$ 1,245 million (2017: US$ 1,435 million),” the Company added. “While unit costs and upstream profit margins were maintained, De Beers undertook incremental expenditure on a number of new initiatives, including the launch of Lightbox Jewelry (Lightbox™), Tracr™ and Gemfair™, as well as increasing expenditure in marketing, exploration and evaluation in Canada and increasing provisions in respect of closure obligations. Margins in the trading business were lower owing to volatile market conditions, and the margin at Element Six decreased as a result of lower sales to the oil and gas market.”

The Company said that preliminary data for 2018 indicates an improvement in global consumer demand for diamond jewellery, in US dollar terms. “Global growth during the first half of the year was driven by solid US and Chinese consumer demand,” the Company stated summing up the demand trends in the different important markets for diamond jewellery. “However, during the second half, while the US maintained its growth rate, increased political and policy uncertainty and stock exchange volatility led to a general slowdown of demand. Chinese demand also slowed following the escalation in US-China trade tensions, slower economic growth and stock market volatility. In India, the significant depreciation of the rupee reduced local demand in US dollar terms.”

Further, De Beers noted that the midstream which started the year on a positive note due to healthy demand for polished diamonds from US and Chinese retailers, saw the low-priced product segment coming under “considerable pressure” due to weak demand and surplus availability, in the second half of the year.  Added to this was the rapid depreciation of the rupee and a reduction in bank financing in the midstream. “This resulted in a surplus of low-priced polished diamonds at the end of the year, leading to lower sales at the start of 2019,” De Beers said.

On the operational front, De Beers reported an increase in rough diamond production by 6% to 35.3 million carats over 33.5 million carats produced in 2017. This, the Company noted, was in the lower half of the production guidance range of 35-36 million carats.

In Botswana, Debswana saw production increase to 24.1 million carats in 2018 from 22.7 million carats in 2017, marking an increase of 6%.  Production at Jwaneng was flat, as the effect of processing planned lower grades was offset by a 12% increase in plant throughput, De Beers reported; while Orapa’s production increased by 13% as a result of “higher plant utilisation and the full effect of the successful restart of the Damtshaa operation”.

In Namibia, Namdeb Holdings’s production touched 2.0 million carats and was higher than the previous year’s production of 1.8 million carats by 11% to. “Production from the marine operation increased by 4%, driven by fewer in-port days for the Mafuta crawler vessel and the adoption of a technology-led approach for optimising the performance of the drill fleet,” De Beers elaborated. “Production at the land operations increased by 34% to 0.6 million carats (2017: 0.4 million carats) as a result of access to consistently higher grades, despite placing Elizabeth Bay onto care and maintenance in December.”

South Africa’s DBCM saw a decrease in production by 10% to 4.7 million carats, from 5.2 million carats in the previous year. This, the Company said, was due to the period of suspended production at Venetia following a fatal incident, as well as lower run-of-mine ore grades as the mine approaches the end of the open pit. Output was also affected by the placing of Voorspoed onto care and maintenance in the fourth quarter in preparation for closure, the Company added.

In Canada, production increased by 19% to 4.5 million carats as compared to 3.8 million carats recovered in 2017. This, De Beers attributed to “the full year contribution from Gahcho Kué”, which entered commercial production in March 2017; and higher grades at Victor. “Victor is due to cease production in the first half of 2019, when the open pit is expected to have been depleted,” De Beers reported.

The Company added that “significant progress” was made across the De Beers Group brands in 2018. “De Beers Jewellers opened new stores in Hong Kong and in Xi’an, China, and launched new franchise partnerships in Russia and Saudi Arabia,” the Company stated. “In May, De Beers Jewellers also launched a new online store in partnership with Farfetch, a global marketplace for the luxury industry with a presence in 100 countries.”

De Beers’ diamond brand Forevermark™ is now available in more than 2,400 retail outlets globally. New launches took place in Indonesia, Nepal, Bangladesh, Germany and France, as well as the opening of its first stand-alone store in Africa, in Botswana. The brand celebrated its 10th anniversary in 2018 and   launched a new retail concept, Libert’aime™, by Forevermark™.

De Beers launched several new initiatives in 2918. No doubt, the one that caused most ripples was Lightbox™, a laboratory-grown diamond fashion jewellery brand. Lightbox™ launched in the US and recorded its first sales in September. Further, Tracr™, De Beers Group's blockchain project, was announced in January 2018; and GemFair™, an industry-wide pilot programme to create a secure and transparent route to market for ethically sourced artisanal and small-scale mined (ASM) diamonds, was launched in April, with the first export of diamonds in December.

Referring to the outlook, De Beers said: “Although current economic forecasts remain positive, the outlook for 2019 global diamond jewellery consumer demand faces a number of headwinds, including the risk of a potential intensification of US-China trade tensions, the Chinese government’s ability to rebalance economic growth towards consumption, and further exchange rate volatility.”

The Company said its production in 2019 is expected to be in the range of 31-33 million carats, “subject to trading conditions”. “The lower production is driven by the planned process of exiting from the Venetia open pit, with the underground operation becoming the principal source of ore from 2023,” De Beers explained.  “Associated with this, an increased proportion of production in 2019 is expected to come from De Beers Group's joint venture partners, a proportion of which generates a trading margin, which is lower than the mining margin generated from own-mined production.”