De Beers Increases Production in Q2 To Meet Demand, Rough Prices Rising

Mining and Exploration
19/07/2018 11:57

De Beers rough diamond production increased three percent to 9.0 million carats during the second quarter of 2018, "reflecting production increases to meet stronger demand as well as the contribution from the ramp-up at Gahcho Kué", the company today announced. Botswana led the way in overall production at 6.3 million carats, seeing increases at the Jwaneng as well as Orapa mines in response to stronger trading conditions, while Namibia saw the largest percentage increase during the quarter (32%), with Canada not far behind with a 17% production increase 17 to 1.2 million carats due to the completion of the ramp-up at Gahcho Kué. Production declined in South Africa fell by 28% to 1.0 million carats, primarily owing to a period of suspended production at Venetia following a fatal incident in March.

Debswana's production in Botswana was equally divided among Jwaneng and Orapa (which includes the Orapa, Letlhakane and Damtshaa mines): Jwaneng production increased four percent to 3.0 million carats due to an increase in tons mined and treated, while at Orapa, production increased eight percent to 3.3 million carats due to the ramp up of additional processing capacity. Overall production in Botswana also increased by 9% over Q1, from 5.8 to 6.3 million carats. At Namdeb Holdings in Namibia, while year-over-year production increased 32% to 515,000 carats from 391,000 carats, driven by access to consistently higher grades at the land operations and technology-led optimisation of the marine drill fleet, it actually fell by 2.5% compared to Q1 production. De Beers Canada production continued to rise as Gahcho Kué reached mature production, not only outstripping Q2 2017 by 17%, but also outpacing Q1 production by 9%, rising from 1.1 to 1.2 million carats.

Sales and prices on the rise

De Beers reports that its rough sales volumes were 10.0 million carats (9.4 million carats on a consolidated basis) from three sales cycles in Q2 2018, compared with 5.9 million carats (5.4 million carats on a consolidated basis) from two sales cycles in Q2 2017. In addition to the different number of sales cycles over the period, sales volumes benefited from positive sentiment in the midstream following growth in consumer demand for diamond jewelry in late 2017, and a continuing positive outlook.

The H1 2018 average realised rough diamond price increased by 4% to US$162/carat (H1 2017: US$156/carat) due to a 1.6 percent increase in the average rough price index and an improvement in the sales mix, driven by the substantial volumes of lower value goods sold in H1 2017 following the Indian demonetisation program in 2016. Excluding this impact, the average value of the production mix was lower in H1 2018, as a higher proportion of lower value carats was delivered from Orapa and Gahcho Kué. Despite the average price per carat increasing to $162 in H1 2018, it is still far off the pace of H1 2016 ($177/carat) and 2015 ($206/carat).

De Beers' full year production guidance remains unchanged at 34 to 36 million carats, subject to trading conditions.

Image: Jwaneng diamond mine, courtesy of De Beers