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DeBeers records positive H1

Publishing Date : 31 July, 2018

Author : TSHEPISO GABOTLHOMOLWE

A few months after announcing their appreciation of synthetic diamonds, De Beers Group of companies has announced a positive 6 months period in their half year interim results.


Having registered a 4 percent sales volume price increase― a notable $162/carat compared to 2017’s $ 156/carat, the Executive Vice President, Paul Rowley noted that the 1.6 percent increase relates to a positive continuation from 2017. He has highlighted that the ability of the Diamond Company to make significant positive changes even through the phase of the Dollar weakening was mitigated by their high production.  


Rowley has in the results highlighted that their solid financial performance in the first half of 2018 reflects a strong market presence which is supported by continued focus on enhanced operations performance. Having registered a significant 8 percent of diamond production amounting to 17.5 million carats when compared to the same period of 2017, the group has recorded a strong diamond demand for the elapsed 2018 period with the total overall demand at US$ 82 billion.


In their overall financial and operational overview, underlying Earnings Before Interests, Taxes, Depreciation and Amortization (EBITDA) registered a 9 percent decrease to $ 712 million from $786 million in the same period of 2017, a registered $74 million difference. Even with that the results indicate that the unfavorable exchange rate movements and higher proportion of waste mining costs which are considered a once off occurrence have also been mitigated by the high production. They further highlight that the underlying EBITDA was impacted by the lower trading margins which were experienced in the ended period.


Marginally it is reported that $1 billion was registered following a $3.1 million revenue of 2017 and registered a steady but commendable 2.9 billion in the sales of rough diamonds.  Revenue is noted to have substantially come from but not limited to Element six where revenue has been in line, De Beers jewelers who are reported to have had their results consolidated following the acquisition in March 2017 of LVMH’s 50 percent interest. The already mentioned 1.6 percent price increase is also associated with the improvement in the sales mix which was substantially driven by volumes of lower value goods sold in 2017 after a demonetization programme befell India in 2016.


The Group has explained that the United States (US) market accounts to 50 percent of all polished diamonds globally and further highlighted that in China there is a registered growing trend that seems to be slowly gaining momentum as products confidence is realized in the Hong Kong market. In their overall mining and manufacturing over view,  in South Africa DBCM’s production decreased by 16 percent from 2.5 million carats of 2017 to 2.1 million carats.


The reduction is noted to have been primarily influenced by the suspended production in Venetia following fatal accidents. The group however noted they have since started investing tremendously in their health and safety. The Venetia Underground project is expected to become the mine’s principal source of production by 2023.


Debswana in Botswana which is highlighted to have registered the highest production volume in carats increased by 9 percent to 12.1 million carats compared to the same period in 2017 which registered 11.1 million carats in response to stronger market conditions. Production at Jwaneng was 2 percent higher owing to a 10 percent increase in plant throughout. At Orapa, a 16 percent rise in output was driven by the continued ramp-up of Plant 1, the successful restart of the Damtshaa operation and commissioning of the Letlhakane tailings plant. In June 2017, Jwaneng processed its first ore from Cut-8, which is now the mine’s main source of ore.


The results highlight that Namibia (Namdeb Holdings), production increased by 21 percent to 1.0 million carats compared to 0.9 million carats of the same period in 2017. Production from the marine operation is reported to have been 2 percent higher following improved availability of the Mafuta crawler vessel and technology-led optimization of the drill fleet.


Production at the land operations increased by 99 percent to 0.3 million carats (H1 2017: 0.2 million carats), driven by access to consistently higher grades. In Canada, it is reported production increased by 37 percent to 2.3 million carats owing to the ramp-up of Gahcho Kué, which entered commercial production in March 2017, as well as slightly improved grades at the mine.


Higher grades are noted to have also been achieved at Victor, where output increased by 16 percent to 0.4 million carats. For 2018, the group has concluded forecast diamond production which is based on a 100 percent basis, except at Gahcho Kué on an attributable 51% basis which remains unchanged at 34-36 million carats, subject to trading conditions.

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