De Beers – Page 26 – The Diamond Certification Laboratory of Australia (DCLA)

De Beers Sales Sink to Lowest Level Since 2015

De Beers’ rough-diamond sales plummeted 53% this month as customers accepted the miner’s offer to defer purchases until the market improves.

Weak polished demand and excess supply in the manufacturing and trading sectors have hurt sightholders’ appetite for rough goods, sources explained. As a result, revenues fell to $250 million at De Beers’ sixth sales cycle, the company reported Tuesday — the lowest since late 2015.

“In the US maybe the demand is there, but because of slow demand in Hong Kong and China, we are not able to get the sales [to match] our inventory,” a sightholder told Rapaport News Tuesday. “It’s difficult to make money, and [with high inventories] it’s difficult to keep on buying rough and manufacturing like normal.”

De Beers kept prices steady at last week’s July sight in Botswana, after lowering them in June, buyers said. Instead of offering further discounts, it permitted customers to delay purchases, over and above the standard allowance of one deferral of a box of goods per “band” (selection of goods) per half year. Relaxing the buying obligations should help ease the crisis affecting the market, which will dissipate when diamonds work their way through the pipeline, De Beers predicted.

“With ongoing macroeconomic uncertainty, retailers managing inventory levels, and polished-diamond inventories in the midstream continuing to be higher than normal, De Beers Group provided customers with additional flexibility to defer some of their rough-diamond allocations to later in the year,” De Beers CEO Bruce Cleaver said. “As a result, we saw a reduction in sales during the sixth cycle of 2019.”

Sales haven’t been this weak since December 2015, when proceeds totaled $248 million. According to Rapaport estimates, the November 2015 sale was even smaller, at approximately $180 million.

Sightholders and brokers showed little optimism that the situation would improve soon, as companies need to sell their excess goods to redress the imbalance of stocks.

“The current crisis in the midstream has moved upstream,” Dudu Harari of brokerage firm Bluedax wrote in a report on the sight. “This means producers can’t sell the quantities they are used to. If they want to increase their sales, there will need to be a big price correction downward to allow the market to reduce its stock of polished.”

De Beers’ rough-diamond revenues have declined 23% year on year in the first six sales cycles of 2019, according to Rapaport calculations. The next sight begins on August 19.

Image: A box of rough diamonds from a De Beers sight.

Source: Diamonds.net

De Beers Lets Clients Delay Rough Purchases

De Beers loosened its purchasing requirements for rough buyers at last week’s sight in an effort to ease the oversupply affecting the diamond market.

Sightholders have struggled to reduce their inventories due to an imbalance of stocks and weak polished demand. To tackle the problem, De Beers allowed its customers to defer purchases from the July sight to other sales later this year, a spokesperson confirmed Thursday.

De Beers’ long-term sales program compels customers to show certain levels of demand at sights, which take place 10 times a year in Botswana. They are free to push off buying one box per “band” (selection of goods) per half year, but only from one sight to the next. However, at last week’s sale, sightholders were able to make an extra deferral, and could also delay to later in the year, not just by one sight.

In addition, the company has brought forward sightholders’ annual opportunity to reschedule their purchases, known as “re-phasing.” This year, that will occur after the July sight, the sixth of the year, whereas it’s normally scheduled for the eighth sight.

De Beers’ revenue and profit fell in the first half, as a buildup of excess polished goods in the midstream and retail sectors hit rough demand, the company explained last week in its half-year earnings. A price reduction at the June sight helped sightholders deal with the weak profitability they are facing, De Beers chief financial officer Nimesh Patel told Rapaport News Thursday.

The miner also lowered its production forecast to 31 million carats for this year, compared with an earlier outlook of 31 million to 33 million carats, Patel noted. Output in 2018 was 35.3 million carats.

Holding back rough

The combination of lower production and prices, together with increased purchasing flexibility, should tackle the “short-term” crisis, Patel predicted. The company also experienced a “meaningful increase” in its own rough inventories during the first half because it held back rough, he said.

“We’ve clearly reacted in terms of price, so we’ve injected profitability back into goods,” the executive said. “Secondly, we’ve reacted in terms of production…. Alongside that, we’re working with our customers to offer them more flexibility in the way they purchase, so [we’ve introduced] re-sequencing of the timing of their purchases of goods through the course of the year, which is something that we’ve allowed [them] to do, and we’ve added to that additional referrals as well. All those things will see us through this difficult period.”

The problems come from within the diamond industry rather than from outside: Growth in global gross domestic product supports consumer demand for diamond jewelry in the long term, Patel said. The US retail market is increasing, while sales in China and India are also rising in local currencies, he observed.

However, weak fourth-quarter holiday sales in 2018 and shaky consumer demand in the first half has made it difficult for the industry to offload polished stocks to retailers, Patel said. Consumers’ shift away from lower-end shopping malls has forced some companies to close stores and liquidate their goods, he added. Furthermore, retailers’ increased reliance on consignment has raised inventory risks for the midstream, as failure to make a final sale often forces suppliers to resend jewelry items to a different client, or to dismantle and remanufacture the jewelry, he explained.

“That doesn’t help the midstream in terms of sell-through,” he noted.

Yet the near future is positive because the issues are “specific to the balance of stocks in the midstream and the downstream,” Patel argued. “It’s a function of that excess polished as it sits today…just working its way through the system. As that happens, we should see polished prices perform better [and] rough demand return.”

Source: Diamonds.net

De Beers Profit Falls Amid Market Slump

Rough diamond sorting Kimberley South Africa

De Beers’ profit dropped in the first half of the year as weak demand at the trade and consumer levels impacted diamond prices, the company said Thursday.

The rough market was subdued due to high inventories in both the midstream and the retail sector, as well as a slowdown in growth of consumer demand, the miner explained. The US-China tariff dispute, protests in Hong Kong and the strong US dollar hit retail performances outside the US, especially in China and the Gulf region. In the US, retailers’ store closures and reduction of stocks weighed on polished demand, creating a further negative effect for the rough business, De Beers added.

Earnings before interest, taxes, depreciation and amortization (EBITDA) slumped 27% to $518 million as a result of the impact on margins, the miner reported. Total underlying earnings fell 7% to $187 million. Revenue slid 17% to $2.65 billion, with rough-diamond sales decreasing 21% to $2.3 billion. Other revenues came from businesses such as Element Six, its industrial-diamond unit, and De Beers Jewellers, its high-end retail chain.

“The lower rough-diamond sales reflected higher-than-expected polished stocks at retailers and the midstream at the beginning of 2019, with overall midstream inventory levels continuing to be high throughout the first half,” De Beers noted.

De Beers’ rough-price index, measuring prices on a like-for-like basis, fell 4% for the period versus a year earlier. The average selling price declined 7% to $151 per carat, influenced by a change in the sales mix caused by the weaker conditions.

The company expects those challenges to continue in the short term, but also foresees an improvement as the industry reduces its inventory and consumer demand rises.

“Underlying GDP [gross domestic product] growth remains supportive of consumer-demand growth, and is expected to bring midstream and retailer stocks back to more normalized levels as we move into 2020, subject to an improving macroeconomic environment,” De Beers said.

Last week, De Beers reduced its production outlook following low demand, forecasting output of 31 million carats this year, whereas it had previously expected to recover 31 million to 33 million carats. Production fell 11% to 15.6 million carats during the first half, as the company chose not to increase mining levels at other deposits to compensate for a lull at the Venetia mine. Output at the site in South Africa has fallen amid its transition from open-pit to underground operations.

Source: diamonds.net

Brewing Diamond Industry Crisis Prompts De Beers to Cut Output

De Beers trimmed its production plans for this year as the world’s biggest diamond producer responds to a brewing industry crisis that’s hitting demand for its stones.

The Anglo American Plc unit will now mine about 31 million carats in 2019, at the bottom end of a previous forecast range. The company, once the monopoly supplier of diamonds, has a longstanding strategy to match supply with demand.

The diamond industry’s engine room, dominated by family-run businesses that cut, polish and trade the stones, is struggling to make money amid a flood of polished diamonds and stagnant consumer purchasing. That’s led to a slump in demand for the rough stones that De Beers mines from Botswana to Canada.

De Beers Diamond Sales Keep Dropping as Weak Patch Drags on

The weakness is showing up in the company’s sales, which are down about $500 million so far this year compared with 2018. The company has already gone unusually far in offering flexibility for its customers — allowing them to defer agreed purchases and lower the number of diamonds they plan to buy this year.

De Beers had already planned to produce a lot less diamonds than last year, when it dug up more than 35 million carats, the most since the global financial crisis. First-half output of the stones was 15.6 million carats, 11% lower than in 2018. The average selling price also fell 7%.

“Demand for rough diamonds remains subdued as a result of challenges in the midstream, with higher polished inventories, and caution due to macro-economic uncertainty, including the U.S.- China trade tensions,” Anglo said Thursday.

Macquarie Group Ltd. said before today’s announcement that it expects De Beers to post first-half profit of $567 million. While that’s down on last year, it’s performing far better than its smaller rivals, many of whom have seen their market values plummet to multi-year lows.

Source: bloomberg

De Beers Cuts Prices as Rough Sales Slide

De Beers’ rough-diamond sales slumped to a 20-month low of $390 million in June amid weak sentiment in the manufacturing sector. Sightholders noted the price cuts De Beers implemented on certain categories were not enough to stimulate demand.

“The reaction to the price adjustments was lukewarm,” observed one Antwerp-based manufacturer who attended last week’s sale in Gaborone. “It’s a case of too little, too late, as polished prices have declined and we’re not seeing the same movement in the rough market.”

De Beers reduced prices by an estimated 4% to 8% on low-quality and smaller stones, sight participants reported. Sightholders who spoke with Rapaport News expected the company would need to make further cuts later this year, but recognized it was unlikely to do so at the next sight.

“We don’t expect a correction in July because that will start a downward spiral,” said one India-based sightholder. “But people will refuse goods. The mood is not good, even after this month’s reduction, as manufacturers are under pressure.”

High inventory

De Beers CEO Bruce Cleaver noted that rough buyers were cautious in June due to higher-than-normal polished-diamond inventories in the midstream. The sight was the lowest on record by De Beers since October 2017, and sales were down 33% compared to last June.

Manufacturers have cut production by an estimated 20% to 30% this year to reduce those inflated inventory levels, sightholders estimated. They’ve also shifted their production to lower-value goods to keep workers busy at a minimal investment, one India-based sightholder added.

As a result, De Beers’ sales declined 18% to $2.38 billion in the first half of 2019, while Alrosa’s rough sales fell 35% to $1.46 billion in the first five months of the year, according to Rapaport calculations.

Midstream pressure

Meanwhile, Cleaver also noted the challenging environment in China was affecting sentiment in the diamond market, while the US retail environment remained solid. Polished trading at the Hong Kong Jewellery & Gem Fair, which ended Sunday, was quiet, dealers noted. Attendance was down amid the mass protests that have taken place in the city during June, but also because Chinese buyers are not looking to make large purchases.

“People are hesitant to buy in a downward-trending market because they don’t yet see a bottom,” explained one Hong Kong-based polished dealer. “The mood is not good.”

US orders are more consistent, observed a Mumbai-based sightholder. US retailers are not making major orders, but he expects that will start to happen in the next month or two. Diamond trading generally remains quiet in July, when most US wholesalers close for the summer vacation.

“We expect the market will stabilize in late July,” he said. “But the problem isn’t from the retail side. It’s the business-to-business (B2B) trading that is low and the manufacturing sector that is under pressure. People don’t want to do business in the rough market.”

Source: Diamonds.net

The diamond dream is over: Rosendorff jewellers goes into administration

More than 110,000 Western Australian couples have celebrated a special occasion featuring a piece of Rosendorff’s fine jewellery.

An announcement to the Australian Securities and Investments Commission (ASIC) said a meeting of creditors was set to get under way at 11am Thursday.

Richard Tucker of KordaMentha Restructuring, appointed receivers and managers of Rosendorff Diamond Jewellers, said the business was holding too much stock.

“We are running a short highly discounted sale through the store to materially reduce the current stock levels whilst a sale or recapitalisation of the business is pursued,” Mr Tucker said.

I have always loved the mystique of diamonds. I’m attracted to the joy and romance they bring to their beholders

Craig Rosendorff
“It is a tremendous opportunity to acquire a very special jewellery item at very competitive prices and may also help save an iconic Perth jeweller.”

He said a secured creditor would support the receivers to ensure current special orders, repairs and lay-bys were completed in time for the special occasions they might be destined for.

“From proposals, to weddings and anniversaries, we understand the importance and significance these items have on people’s special memories,” Mr Tucker said.

Daniel Hillston Woodhouse of FTI Consulting has been appointed as administrator.

Rosendorff is an iconic West Australian luxury business specialising in diamonds and bespoke jewellery design headed by Craig Rosendorff.

In 1975 Mr Rosendorff renamed and launched what became one of the longest-standing diamond companies in Australia.

His rags to riches story has been dubbed The Diamond Dream.

“I have always loved the mystique of diamonds,” he says on the company’s website.

“I’m attracted to the joy and romance they bring to their beholders, the heritage and their connection to families across generations.”

The large, glamorous showroom in the centre of Perth on Hay Street has been the setting of many magnificent parties and events showcasing the designs of the Rosendorff team.

Mr Tucker said gift cards and store credits would be honoured while trade continues.

Source: watoday.com.au

White knight rescues collapased Rosendorff Diamond Jewellers

The Rosendorff fine jewellery business will carry on but under new ownership following a deal struck by receivers appointed last month.

Insolvency firm KordaMentha confirmed today it had struck an agreement to sell the business set up by Craig Rosendorff in the 1980s to an unidentified WA buyer also involved in the jewellery trade.

The deal, expected to be finalised in two to three weeks, guarantees more than 20 jobs and covers the Rosendorff trading name, stock and intellectual property.

Receivers from KordaMentha were put into Rosendorff Diamond Jewellers at the end of April.

The business, which owes at least $4 million to creditors, has shrunk on falling sales in the past three years to just its flagship store in Hay Street Mall.

The deal covers the Rosendorff trading name, stock and intellectual property.

Today’s sale announcement coincided with news the receivers are stepping up a discount sale which has already brought in between $2 million and $3 million.

The West Australian revealed yesterday that administrators from FTI Consulting had identified “irregularities” in the company’s accounts while sheeting home blame for the collapse to the mining downturn.

They questioned a $1.8 million shortfall in stock and four transactions totalling $170,000 where jewellery “left the store without payment”.

FTI said “there were limited controls around the accounting and inventory functions, which have led to some anomalies in the financial accounts”.

However, it noted that such irregularities were not uncommon, and there is no suggestion of any wrongdoing by Mr Rosendorff.

The firm’s statutory report on Rosendorffs also noted that Mr Rosendorff, who has invested millions of dollars in the business over the past 30 years, had drawn increasing amounts out of the company as its financial situation deteriorated.

Between July 2017 and FTI’s appointment, those withdrawals totalled $1.8 million, including $582,000 in the past 10 months.

The administrators says Rosendorffs had been under financial pressure for two years, citing “cash leakage” and a steady decline in sales after 2011, triggered by the end of the mining boom.

Gordon Brothers is owed about $2.2 million, Rosendorffs’ staff $400,000 and trade creditors $270,000.

Source: perthnow.com.au

Debmarine Namibia invests in custom diamond vessel

The vessel, which has an expected total capital cost of US$468 million, will be the seventh in Debmarine’s fleet. It is expected to start production in 2022 with the capacity to add 500,000 carats of annual production, a 35% increase above current levels.

De Beers CEO Bruce Cleaver said some of the highest quality diamonds in the world were found at sea off the Namibian coast.

“With this investment we will be able to optimise new technology to find and recover diamonds more efficiently and meet growing consumer demand across the globe,” he said.

Anglo American CEO Mark Cutifani said the addition of the vessel would bring numerous benefits, including improving De Beers’ production profile by value and volume, greater efficient and productivity through the vessel’s deployed technologies, and sustained economic benefits for Namibia.

“This highly attractive investment offers a three-year payback, a more than 25% IRR and an EBITDA margin of more than 60% – typical of the high quality of our brownfield growth options,” Cutifani said.

“We will continue allocating appropriate levels of capital in a disciplined manner across Anglo American’s wider organic pipeline of near- and medium-term growth opportunities, including the world-class Quellaveco copper development in Peru, that we expect to contribute towards our 20-25% production growth by 2023.”

Debmarine last ordered a new vessel in November 2017. At the time it was projected to cost US$142 million and was expected to start operations in 2021.

Source: miningmagazine

Diamond Trading Goes Online as Lucara Takes on Industry Goliaths

The opaque diamond trade may be ripe for disruption.

Lucara Diamond, which recently found the second-largest diamond in history in Botswana, is taking on industry giants such as De Beers and Alrosa PJSC with an online platform to replace the current physical auctions.

The service allows Lucara to match buyers’ requirements, not only saving jewelers the trouble of traveling to Botswana but also ending the practice of buying stones by the bucket. They typically can only use some, and then have to sell the rest on the secondary market.

“For the first time ever, manufacturers buy only what they want, they don’t have to carry all this extra inventory,” Eira Thomas, Lucara’s chief executive officer, said in an interview in Stockholm. “The large integrated jewelry companies don’t want to be in the business of secondary trading. They’re just trying to source diamonds for their own products.”

In a series of trials, Vancouver, Canada-based Lucara claims that prices were 8 percent over Lucara’s traditional market price. It’s now trying to bring other independent producers on board, with the aim of moving at least a portion of the $18 billion annual diamond trade onto its site called Clara.

Whether Lucara will be able to attract major producers to use its system remains to be seen. De Beers, the world’s biggest diamond producer, is famous for its tight control over the diamond market and has relied on its own system of selling gems for decades.

“If we can get to $1.5 billion transacted through the platform, the cash flow we generate from Clara will be as important as the cash flow we generate from the mine,” Thomas said. “We’re taking baby steps right now, but each quarter we’ll report, we expect the volume to increase.”

Clara incorporates blockchain technology, which is seen as a promising avenue for an industry that has been plagued by ethical problems, including the trade in so-called “blood diamonds” used to finance armed conflicts. Lucara is far from the only miner who has seen the benefits of the digital ledger in guaranteeing the provenance of its product.

De Beers has launched Tracr, a platform aiming to increase the traceability of diamonds using blockchain. That pilot program was joined by Russia’s Alrosa, another giant in the business, in October last year.

Lucara’s Clara uses similar technology, but its main purpose is to match buyers and sellers. While it’s difficult to judge Clara in an early stage, Ola Sodermark, an equity analyst at Kepler Cheuvreux, sees potential in the initiative. The key is to get more producers to join the platform, he said.

“Lucara’s own volumes aren’t sufficient to make this fly,” he said. “The question is whether they’re too early with this technology, or if the market is ready for it.”

Lucara was founded by Thomas in 2007, together with Catherine McLeod Seltzer and current chairman Lukas H. Lundin, whose family oversees a commodities empire that includes stakes in oil, gold and solar power across the globe. The Lundin family holds an 18 percent stake in the company through the investment company Nemesia Sarl.

Source: bloomberg

Forevermark Appoints New CEO

De Beers jewelry subsidiary Forevermark has promoted chief operating officer Nancy Liu to CEO, as Stephen Lussier steps back.

She will take over the day-to-day running of the brand, allowing Lussier, who has been CEO since 2009, to increase his focus on shaping De Beers’ strategy at the consumer level, the company said last week. He will also continue in his position as Forevermark chairman, and will oversee its strategic role within the De Beers portfolio.

Liu joined Forevermark in 2008 as president of its Asia Pacific region. She was previously employed by L’Oréal, Louis Vuitton and the Boston Consulting Group.

“ Liu is an outstanding candidate to take over as CEO of Forevermark,” said Lussier. “As the brand sees rapid growth in Asia, Nancy’s exceptional expertise and knowledge of the region provides us with excellent continuity.”

De Beers appointed Liu to its executive committee in 2017.

Source: diamonds.net

De Beers Closes Diamond-Reselling Unit

De Beers is shutting its diamond-recycling division, as digital advancements in the sector have lessened the need for its services.

The International Institute of Diamond Valuation (IIDV) was set up in 2016 to repurchase and recycle diamond jewelry that consumers no longer wanted. De Beers began the operation after noting the difficulty consumers faced in trying to sell their jewelry at a fair price. The venture provided a means of emphasizing the enduring value of diamonds, De Beers said.

However, since IIDV launched, technology in the industry has improved, and online consumer-to-consumer selling platforms have become a more popular option, the company explained.

“Following a number of years gaining experience in the diamond-recycling sector, we have taken the decision to suspend the activities of the International Institute of Diamond Valuation,” David Johnson, De Beers’ senior manager for media and commercial communications, told Rapaport News Thursday.

While the project is no longer a viable option, it has provided De Beers with valuable insight into consumer behavior and the needs of its retail partners, Johnson explained.

“We know that consumer acceptance of the consumer-to-consumer market is growing and likely to be the future of this sector, and we will therefore continue to look for opportunities in this space,” he added.

Image: Diamond solitaire earrings. (De Beers)

Source: Diamonds.net