De Beers Q1 Output Climbs 15%, ALROSA Falls 17%, 2018 Guidance Unchanged

Mining and Exploration
24/04/2018 11:59

The world's two largest diamond miners reported diverging results in the first quarter of 2018, as De Beers production climbed 15% compared to the first quarter of 2017, totaling 8.5 million carats, while ALROSA's first quarter production fell by 17% year-over-year to 7.4 million carats. Noteworthy is that the production guidance for the year 2018 remained unchanged for both miners, as ALROSA confirmed its production plan for FY 2018 at 36.6 million carats, while De Beers' full year production guidance also remains unchanged at 34 to 36 million carats, subject to trading conditions.

De Beers - Gahcho Kué ramp up boosts results

De Beers summarized by saying the 15% increase in rough diamond output is attributable to the ramp-up of production from Gahcho Kué in Canada, which reached nameplate capacity in Q2 2017, and increased production from Orapa in Botswana in response to the sustained healthy trading conditions. The Debswana operations in Botswana reported a production increase of 12% to 5.8 million carats, with Orapa production increasing by 26% to 2.8 million carats mainly due to an increase in tons treated. In Canada, where De Beers is involved in two operating mines - Gahcho Kué (51%) and Victor - production increased by 69% to 1.1 million carats due to the ramp-up of Gahcho Kué, which reached nameplate capacity in Q2 2017. In Namibia (Namdeb Holdings), production increased 12% to 528,000 carats as a result of accessing consistently higher grades at the land-based operations, while in South Africa (De Beers Consolidated Mines), production was in line with Q1 2017 at 1.1 million carats.

Total rough diamond sales volumes in Q1 2018 were 8.8 million carats (8.4 million carats on a consolidated basis) from two sights, compared with 14.1 million carats (13.7 million carats on a consolidated basis3) from three sights in Q1 2017. In addition to the difference in the number of sights over the period, Sight 1 2017 also saw an unusually strong demand for lower value goods following the effects of Indian demonetisation in Q4 2016, leading to higher than normal sales volume.

ALROSA - Mir mine shutdown weighs on output

ALROSA Group’s diamond production for Q1 2018 totaled 7.4 million carats, down by 17% year-on-year from the 8.9 million carats recovered in Q1 2017. “The key factors behind the decline were reduced production at the Mirny Division, which was caused by the shutdown of the Mir underground mine following the August 2017 accident, processing of lower grade ore from the Jubilee pipe and termination of processing of ore from the Udachny open-pit after open-pit mining there was completed," said Igor Sobolev, First Deputy CEO - Executive Director of ALROSA. "At the same time, the Company continues growing production at its key expansion projects: in Q1 2018, output at the Udachny underground mine and Severalmaz demonstrated an increase year-on-year. Production plan for FY 2018 is 36.6 million carats.” 

Indicatively, in Q1 2018 ALROSA Group sold 13.3 million carats of diamonds, including 10.1 million carats of gem-quality diamonds at an average price of $154 per carat, and 3.2 million carats of industrial diamonds at an average price of $8.0 per carat. Rough and polished diamond sales amounted to $1.582 billion and $23.7 million respectively.