Slow trading dents De Beers revenue

Baitshepi Sekgweng

$20million investment due for consumer marketing activities

A much challenging first half of 2023 has seen De Beers revenue falling sharply amid a weak consumer demand, a lower average selling price, and a rise in expenses.

This is despite strong operational performances from all of De Beers operations in Botswana, Namibia and Canada with a broadly flat production of 16.5 million carats.

Compared to the 16.9 million carats raked in June 2022, the company’s production guidance remains unchanged at 30-33 million carats.

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Speaking at the presentation of the company’s 2023 H1 interim results in Gaborone on Thursday, De Beers Executive Vice President- Diamond Trading, Paul Rowley said they will be protecting the integrity and the desire for diamonds recovered by De Beers at a time when origin is an increasing priority.

According to Rowley, this is to take sustainable action to position the business for growth and ensure resilience into the future as De Beers seeks to secure its position as the world’s leading diamond suppliers for decades to come.

The diamond miner’s total revenue fell down to $2.8 billion from $3.6 with rough diamond sales decreasing to $2.5 billion from $3.3 billion, therefore reflecting a softening demand.

“The diamond industry has always been cynical, challenging macroeconomic conditions impact consumer confidence which in turn impacts demand for polished and rough diamonds. The industry is operating off the back of two best years of 2021 and 2022. Some moderating of demand towards the long term trend was to be expected as US fiscal stimulus ended and competition from travel and experiences returned. Further, the impact on rough diamond demand was compounded by the challenging macroeconomic environment, high stock levels in the midstream and a slower than anticipated return of demand in China,” explained Rowley, further saying the underlying desirability for natural diamonds remains strong despite all the challenges.

Total rough diamond sales volume of 15.3 million carats were in line with the prior period as a result of higher proportion of lower value rough diamonds being sold in 2023. While demand remains low, De Beers is counting on the increased measures and sanctions to prevent the import of Russian mined diamonds, something which has the potential to support greater demand for the non-Russian diamonds.

As a result, this affected the realised price which dropped by 23 percent to $163 per carat from $213 per carat in June 2022. Further, the capital expenditure increased by 21 percent to $302 million from $250 million due to the Venetia underground project and the continued execution of life extension projects.

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While the ongoing macroeconomic headwinds are due to continue to weigh on consumer confidence, De Beers is investing an additional US$20 million in consumer marketing activities to support the demand potential for the second half of 2023.

“Rough diamond supply is expected to continue to tighten as existing deposits become older, more depleted and costlier to operate and as there are very few new mines currently planned to come online. However, the demand growth opportunity is very significant with substantial incremental sales opportunities to the growing number of middle class end clients in markets such as China and India,” added Rowley.

Meanwhile, with regards to diamond beneficiation, De Beers has been successful in attracting key global manufacturers to Botswana. In H1 of 2023, the miner sold $460 million worth of diamonds to local factories which have since increased by 25 percent from 31 in December 2022 to 39.

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