News – Page 93 – The Diamond Certification Laboratory of Australia (DCLA)

De Beers Rough Prices Decline 5% in 2019

A drop in rough-diamond prices and a sales shift to lower-value items weighed on De Beers’ profitability in the second half, according to executives at parent company Anglo American.

The miner’s rough-price index fell around 5% year on year for the first nine sights of 2019 amid a market slowdown, Anglo CEO Mark Cutifani noted in a call with investors last week. Combined with the weaker product mix, the average selling price slipped approximately 20%.

“It’s been a tough half…for diamonds,” said finance director Stephen Pearce. “In addition to the general price decrease and general market conditions and softness that we’re seeing, we have also sold a lower mix of diamonds, and with that comes lower EBITDA [earnings before interest, taxes, depreciation and amortization] margins.” These margins will be “substantially lower” than the 20% it reported for the first six months, Pearce added.

De Beers’ rough sales declined 26% to $3.6 billion for the January-to-November period, as an oversupply of rough and polished in the midstream hurt demand. Rising diamond stockpiles contributed the majority of Anglo’s $500 million inventory buildup this year, the company said.

However, buyers’ focus on purchasing cheaper items means De Beers now holds relatively high-quality rough inventory that it can sell next year at better margins, the executive explained. “What we’ve actually got then sitting in stock is a pretty good mix that we’ll exit the year-end on, which should have some pretty good EBITDA margins,” Pearce continued.

The drop in the price index reflects discounts of 4% to 8% De Beers offered for lower-quality rough at its June sight, plus a price reduction of about 5% on a wider range of goods in November. That latest move improved profitability for sightholders, resulting in steady demand at last week’s December sight, the 10th and final sales cycle of the year, a rough broker told Rapaport News on condition of anonymity. The miner left prices unchanged for the sale, which ended Friday, the broker added.

For December, De Beers also reverted to its standard limitations on sightholders rejecting goods, ending several months of unprecedented concessions designed to ease the midstream diamond glut.

“We’ve certainly seen a little bit of improvement later in the year,” Cutifani said. “The first couple of sights in the new year will be…a better point [to assess] how that market is going. We’ve seen some encouragement, but I think it’s still a little too early to bank that in any more of a substantive sense.”

De Beers is scheduled to announce the value of the December sales cycle this Wednesday, and will release its annual financial results on February 20.

Source: Diamonds.net

GIA Dubai Location Closure Announcement

GIA’s laboratory take-in facility and education location in Dubai, a branch of GIA India Laboratory Pvt. Ltd., will close by Dec. 31, 2019. The lab take-in facility is no longer accepting stones for submission.

GIA continually evaluates all of our global locations. The difficult decision to close our Dubai operation to align GIA’s resources with our mission priorities was made after careful analysis and consideration.

This location has offered the on-campus Graduate Diamonds program, distance education lab classes and professional development classes since 2008 and laboratory take-in services since 2010.

The Dubai school location will continue to operate through Dec. 31, 2019. We are committed to fulfilling our obligations to our students and will continue to provide quality educational services during this closure period. Students who wish to continue their GIA education or need to complete required lab classes within a credentialed distance education program may enroll through another GIA global location.

GIA’s Education Department, located in Carlsbad, California, U.S., will serve as the record retention center for the Dubai location. Students may order transcripts or replacement diplomas or certificates by contacting [email protected].

Laboratory clients who have previously used the take-in facility in Dubai may submit stones to any other GIA laboratory or take-in facility. Please contact your client service representative with any questions.

We thank the GIA faculty and staff, as well as the clients, students and alumni in the Middle East, for their support of GIA, and we will continue to provide education programs and laboratory services from our other GIA locations.

Source: GIA

ABN Amro Tightens Diamond Lending Terms

ABN Amro will implement changes to its guidelines for lending to the diamond industry in 2020, reasoning that the trade has become more efficient and now requires less credit.

The midstream’s reliance on working capital funding should have diminished given it has streamlined its production and sales processes, a spokesperson said in an email to Rapaport News. That new-found efficiency has resulted from technological advancements, a rising importance of labelled goods and an evolution of marketing channels, the spokesperson explained.

Despite this, “we have unfortunately not yet seen reduction in the typical trade credit terms,” she added, explaining the bank’s decision to change its credit policy.

The lender will reduce its financing from 70% to 65% of the total value of rough purchases, effective from March 1, the bank said in a letter to customers seen by Rapaport News. It has also cut the credit repayment period from 30 to 15 days, while giving clients the option to request an extension of up to 10 days in the event their rough has not been sold in full.

The bank said it may also require additional collateral, such as a property mortgage, against each credit line. Furthermore, clients will be required to provide monthly financial information about their sales and purchases — as well as an inventory of rough and polished, a list of trade receivables and payables, and details on bank positions — to maintain their credit. This information should be disclosed within three weeks after each month end, effective from the beginning of 2020, according to the letter.

In its latest earnings report, published November 13, ABN Amro listed diamonds and the energy sector as the largest contributors to the impairments it incurred during the third quarter. This comes despite earlier measures to reduce its exposure to the industry. The group closed its US and Dubai branches in 2018 before announcing changes to its lending policy in July this year, whereby it would only offer credit if the buyer can make money from the rough.

The bank expects its latest measures to have a long-term benefit for the industry, with the hope that the trade will reduce its inventory and reliance on credit.

“The midstream unfortunately continues to play ultimate inventory holder and financier within the entire supply chain, which we believe is not beneficial as [the] main focus should be the value-add by converting the rough into polished diamonds and diamond set jewelry,” the bank stressed.

Source: Diamonds.net

De Beers Lowers 2020 Production Forecast

De Beers has reduced its production outlook for next year and beyond amid uncertainty about the health of the diamond market.

The miner now expects to recover between 32 million and 34 million carats in 2020, compared to its earlier outlook of 33 million to 35 million carats, parent company Anglo American said Tuesday. Its output is forecast to rise to between 34 million and 36 million carats in 2021, versus a previous projection of 35 million to 37 million carats.

“It’s a slight trimming of production [and] a prudent approach to supply outlook for next year, given the rebalancing the industry is going through,” David Johnson, head of strategic communications for De Beers, told Rapaport News Wednesday. “We’ve got some flexibility in that, so if we did see things change significantly, we could edge things back up again.”

An oversupply of polished diamonds in the manufacturing sector and sluggish consumer demand have forced De Beers to revise its production plan twice in five months. In July, it trimmed its 2019 estimate to around 31 million carats from its earlier prediction of 31 million to 33 million carats, citing weakness in the rough market. While 2020 production is anticipated to be higher, it will still lag behind the 35.3 million carats unearthed in 2018.

De Beers’ revenue has declined 26% for the year to date amid “challenging diamond-market conditions,” it noted in an investor presentation on Tuesday. Anglo American also expects inventory for the entire group to grow by around $500 million in 2019, with De Beers accounting for most of that increase. This follows the company’s decision to offer unprecedented concessions to sightholders in the second half of the year to enable them to buy less rough and reduce their stockpiles.

The excess inventory at diamond cutters has weighed on the entire market this year, with Bain & Company predicting a slight improvement in 2020. However, the management consultancy doesn’t expect a real opportunity for rebalancing until 2021.

“Ongoing supply-demand inequality will prevent full recovery of the industry [in 2020], and may be exacerbated by a continuing decrease in available financing for midstream players,” Bain said Tuesday in its annual sector-wide report. “Few producers have announced sufficient mining plan cuts, so we do not foresee a major decline in supply.”

A shift at De Beers’ Venetia deposit from open-pit to underground mining has also impacted production, as output there has fallen during the transition period. Production at the mine in South Africa was anticipated to increase in 2021 as it focuses on a high-grade section, the company said a year ago. However, the final transition to underground operations will result in a drop in company-wide production to between 33 million and 35 million carats in 2022.

The miner’s final sight of the year is currently taking place in Gaborone, Botswana.

Source: Diamonds.net

Anglo American cuts output targets for coal, iron ore and diamonds

Anglo American cuts output targets for diamonds

Anglo American has cut its production forecasts for coal, iron ore and diamonds for the next two years, but is bullish on the outlook for copper and palladium, it said in an update for investors on Tuesday.

“We are building on the complete transformation of both the quality of our portfolio and our performance over the last six years,” chief executive, Mark Cutifani, said.

The company, which has consistently been offloading coal operations since 2014, lowered its 2020 metallurgical coal production outlook to 21-23 metric tonnes (Mt) from 22-24 Mt.

ANGLO’S DE BEERS, THE WORLD’S NO.1 DIAMOND MINER BY VALUE, WILL MINE 1 MILLION CARATS LESS THAN PREVIOUSLY FORECAST IN BOTH 2020 AND 2021

The diversified miner also revised down expected output at its Kumba Iron Ore business, in South Africa, from 42-43 Mt from 43-44 Mt and lowered its diamond production figures amid extreme weakness in that market.

Anglo’s De Beers, the world’s No.1 diamond miner by value, will mine 1 million carats less than previously forecast in both 2020 and 2021. That equates to less than 1% of global diamond output, but slows the pace of the company’s expansion as an oversupply of roughs weighs on the industry.

Increasing demand for synthetic diamonds has also weighed on prices. Man-made diamonds require less investment than mining natural stones and can offer more attractive margins.

Buyers, those that polish and cut diamonds for retailers, have been hit this year by lower prices and tighter credit, prompting them to delay purchases.

Orange hopes
Despite its trust in copper, Anglo has also cut production guidance for next year to between 620,000 and 670,000 tonnes, with the upper limit of the range previously 680,000 tonnes.

Prices for the industrial metal, used also in green technologies, gained momentum on Monday after trade data showed Chinese imports of refined metal rebounding and concentrate shipments setting a fresh all-time high.

“Anglo American is now amongst the very best in terms of our overall cost curve position as a result of fundamental operating changes, the technical and product marketing expertise we have applied, and the wholesale upgrade of our portfolio,” he added.

Overall, the company said it expected to grow its production volumes by 20%-to-25% by 2023.

Source: mining.com

Tiffany Launches Men’s Pop-Up Store

Tiffany & Co. has opened a one-month holiday pop-up shop in New York featuring its men’s collection.

The store, which will be open from December 6 to January 6, will carry items from the jeweler’s Tiffany Men’s collection, including accessories, barware, home objects and games, the company said last week. The retailer will also offer custom Tiffany basketballs created by Spalding.

“This holiday season, we wanted to offer our New York customers a truly unique shopping experience,” said Tiffany chief artistic officer Reed Krakoff.

Tiffany will also showcase six of the world’s most recognized sports trophies at the pop-up, the first time they have all been featured in one location, it noted. Those include the NFL Vince Lombardi Trophy, NBA Larry O’Brien Championship Trophy, and Major League Baseball Commissioner’s Trophy.

Tiffany is offering its own take on an Indian Scout motorcycle and a Blatt Billiards table, both in distinctive Tiffany blue, and in collaboration with the owners of those brands. Those items can be purchased from the jeweler’s Very, Very Tiffany Holiday gift catalog, with the motorcycle selling for $35,000, while the pool table costs $95,000, according to the jeweler’s website.

Once the pop-up has closed, the location will serve as Tiffany’s two-year home while its Fifth Avenue Flagship undergoes renovations, the company added.

Source: Diamonds.net

De Beers Ends Special Supply Measures

A De Beers sightholder examining a rough diamond.

Rough-diamond buyers are anticipating an improvement in sales at next week’s De Beers sight, as the miner is withdrawing concessions that allowed clients to reject goods.

De Beers will revert to its standard rules limiting sightholders’ ability to refuse or defer their supply allocations, sources in the rough market told Rapaport News. They will also only be able to sell 10% of their purchases back to De Beers, compared with larger amounts in recent months.

“A lot of [sightholders] have tried to push back as much as they could earlier in the year to December, so the December sight might actually be slightly bigger than what people expect,” a rough broker explained. “[It’s] back to the original measures, which are to offer people 10% buyback possibility. There’s no additional flexibility anymore.”

Starting in July, De Beers let sightholders hold off more purchases than usual until later in the year to ease an oversupply of rough and polished in the midstream. At some sights, it made the unprecedented move of allowing them to refuse 50% of individual diamond boxes. It also agreed to buy back up to 20% of the rough it sold, briefly raising that allowance in September to 30% for larger goods.

In December, De Beers will not permit any deferrals, and will repurchase only one in 10 carats it sells, and none of its larger goods, in line with its default policy.

The sale, running from Monday to Friday in Botswana, comes amid increased optimism in the diamond market ahead of the holiday season. A three-week shutdown at Indian cutting factories during Diwali has contributed to a drop in polished inventory, with some categories now in short supply.

“[Manufacturers] have had some time off, and the market has slightly improved,” an India-based sightholder observed. “They’ll be trying to start up their manufacturing [again].”

The upcoming sale is also buyers’ final opportunity to prove demand ahead of De Beers’ decision on the supply each customer will receive in 2020. De Beers is in the process of finalizing allocations for the new intention-to-offer period, or ITO, which it bases on past purchasing records. For that reason, clients are unlikely to reject more goods than necessary, another sightholder explained.

“It feels like whatever is going to be on the table will be sold,” he said. “Anything you’re going to give back now, you have the threat of your ITO being recalculated. They also reduced prices last time, so I don’t see people refusing goods that have been reduced in price at the last sight.”

Sightholders are already expecting the value of their 2020 allocations to be smaller than this year due to a drop in De Beers’ production and the price decline of roughly 5% at the November sight. The miner is predicting output of around 31 million carats for 2019, translating to a 12% decline versus last year, and will release its 2020 forecast on January 23.

De Beers informed sightholders this week of their provisional supply for the new ITO, which will follow a calendar-year cycle for the first time.

Next week’s sight is the 10th and last of the year. Sales fell 26% to $3.6 billion for the first nine cycles, with November seeing a gentler year-on-year decline of 12% as demand began to stabilize.

Source: Diamonds.net

Firestone Diamonds’ Liqhobong mine back at full tilt as power returns

Shares in Africa focused Firestone Diamonds went ballistic on Wednesday after it announced that stable power had returned to its Liqhobong mine in Lesotho, with the plant processing at full capacity.

Firestone had warned in October that the mine was struggling due to insufficient power supply due to a two-month maintenance shutdown at its only power supplier — Lesotho Highlands Water Project.

As a result, processing operations were halted from the beginning of the month to Oct. 26, when diesel generators were commissioned. The plant then operated at between 80% and 90% capacity throughout November.

While the LHWP resumed operations on Dec. 1, the company said it had to book $1.1 million in additional costs from the use of the generators, adding that it had also filed an insurance claim over loss of profit.

Firestone’s stock was up 128% on Wednesday mid-day in London at 0.97 pence a share, leaving the company with a market capitalization of £6.18 million. The stock price, however, is far from the £3.88 the company’s shares were trading at a year ago.

Diamond miners are struggling across the board, especially those producing cheaper and smaller stones, where there is an over-supply.

Increasing demand for synthetic diamonds has also weighed on prices. Man-made diamonds require less investment than mining natural stones and can offer more attractive margins.

Buyers, those that polish and cut diamonds for retailers, have been hit this year by lower prices and tighter credit, prompting them to delay purchases.

De Beers, the world’s No.1 diamond miner by value, has responded by axing production — with a target of 31 million carats this year compared with 35.3 million in 2018. It has also given buyers more room to maneuver, by allowing them to refuse half the stones in many of the diamond parcels.

The Anglo American unit is also spending more on marketing. At the latest sale, the company increased the amount of stones buyers were allowed to reject in each lot purchased from 10% to 20%, according to people familiar with the auction.

Firestone’s chief executive, Paul Bosma, has said he’d expect prices for smaller diamonds to increase towards the end of 2020, in part due to the closure of Rio Tinto’s Argyle mine in Australia.

Source: mining.com

Diamond miners dented by liquidity crisis among India’s polishers

Diamond miners are feeling the pressure after a funding crunch in the world’s polishing hub dented sales of rough gemstones.

Since celebrity jeweller Nirav Modi fled India in 2018 accused of having defrauded a state bank of nearly $2bn, banks have sharply cut back lending to diamantaires, who cut, polish and trade the world’s diamonds.

“Bankers have blacklisted the jewellers industry,” said Shantibhai Patel, president of the Indian Bullion and Jewellers Association in Gujarat, the country’s diamond-cutting centre.

The squeeze has forced diamantaires to buy less from diamond producers such as De Beers, Rio Tinto and Gem Diamonds — which have seen sales and margins suffer as a result.

De Beers is on course to report its worst annual sales in at least four years. In response, the world’s largest producer reduced prices for its rough diamonds by 5 per cent last month at its November sale, the biggest discount in years, Bloomberg reported. De Beers declined to comment on its pricing.

Across the sector, rough diamond prices have fallen 15 per cent since last November, according to Polished Prices. Industry experts say a further 10-15 per cent drop would push some smaller producers to file for bankruptcy.

“It’s a liquidity crisis that’s affecting the middle of the pipeline,” said Edward Sterck, an analyst at BMO Capital Markets. “Diamond manufacturers can’t afford to pay rough diamond prices . . . It’s a function of necessity that prices have come down.”

Diamantaires — 90 per cent of which are based in India — buy rough diamonds from producers such as De Beers that they then cut with lasers and polish for use in jewellery.

The flight of Mr Modi, whose clients included actress Kate Winslet, prompted banks to tighten up lending terms for manufacturers. Bank credit to the diamond industry, of which Indian companies receive about four-fifths, fell 20 per cent to $8bn this year, according to WWW International Diamond Consultants.

As a result, diamond cutters are working through existing stocks rather than buying on the global market. According to India’s Gem and Jewellery Export Promotion Council, imports of rough diamonds into the country fell 22 per cent year over year to $7.3bn between April and October.

This has struck diamond mining companies hard. Stuart Brown, chief executive at Toronto-based Mountain Province Diamonds, said the rough stone market was “challenging” in its third-quarter results.

Mid-sized producers including Canada’s Lucara Diamond and the UK’s Petra Diamonds all reported lower prices for their diamonds in the latest quarter. Lucara reported a selling price of $390 a carat, a 13 per cent drop from last year and a steep fall from 2014, when gems sold for $644 a carat. Dire market conditions drove Quebec-based Stornoway Diamond into bankruptcy in September.

The diamond industry differs from other commodities given the large influence of the two largest producers on pricing, and the fact that diamonds vary in size, quality and colour. De Beers is a “price setter” that offers uncut stones to traders for fixed prices and quantities at sales, known as “sights”.

Production cuts and concessions, including discounts and flexibility to return stones, have provided some relief to De Beers and its customers. Sales rose last month but were still below $400m — the lowest in a November sight on record.

Mr Patel welcomed the Anglo American-owned company’s price cut, but expected little uplift in the foreseeable future. “There’s no work,” he said. “For one year, one and a half years, we’re not expecting any bullish trends.”

But Colin Shah, managing director of manufacturer Kama Schachter, is hopeful that the worst was over for diamantaires. He said that manufacturers were adjusting to the tougher norms in place after the Modi scandal, which could get liquidity flowing again.

“There’s much more [scrutiny] than there used to be,” he said, referring to banks’ lending practices. “Inventories have come down, everyone has made their business models leaner . . . I think the second half of 2020 will be better.”

Industry executives point to tightening supply over the next few years that will help restore diamonds’ key feature: rarity. Rio Tinto’s Argyle mine, which outputs 90 per cent of the world’s valuable pink diamonds, is set to close next year.

Meanwhile, retail demand for diamonds has been robust, particularly in the US where spending on diamond jewellery grew 4.5 per cent to $36bn last year. French luxury group LVMH’s $16.6bn acquisition of Tiffany, agreed last week, was seen by analysts as a vote of confidence in long-term consumer demand for diamond jewellery.

But other industry figures say more drastic action by diamond mining companies is needed to help bedraggled manufacturers. Martin Rapaport, founder of the world’s largest diamond trading platform, said the price cut was insufficient. “It’s not enough to recapitalise the industry,” he said.

“They need to drop prices as much as 50 per cent to return liquidity to the market. It’s too little too late.”

Source: ft.com

Sarine Joins Race to Buy HRD Antwerp

Sarine Technologies has entered the running to acquire HRD Antwerp, according to two sources close to the sale process.

The Israel-based diamond-technology company has registered its interest in buying the Belgian laboratory, as have two previous heads of HRD, the two anonymous sources told Rapaport News.

Peter Meeus, who ran the organization between 1999 and 2005, was one of the first candidates be linked to a potential bid around a month ago. He is now joined by Serge Couvreur, who served as HRD’s general manager from 2013 to 2014, as well as by Sarine. The International Gemological Institute (IGI) also entered a bid earlier this year, as reported by Rapaport News in early November, but has since pulled out, the sources confirmed. The situation is changing constantly, another source pointed out.

Sarine’s move could be seen as part of its increased focus on grading and other downstream activities. While its main business is providing diamond-mapping equipment to manufacturers, the polished-grading sector offers considerable revenue opportunities and margins, Sarine noted last month.

Potential buyers of HRD have until next Tuesday to submit a final bid with a proposed price, one of the sources added.

HRD and the Antwerp World Diamond Centre, which owns the lab, declined to comment, as did the three bidders and IGI.

Source: Diamonds.net