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De Beers Sheds P17 Billion

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  • But Botswana outshines other operations
  • Rough diamond sales fall by P15.5bn
  • Diamond process declines by 20 %

KEABETSWE NEWEL

For the 2019 full year, diamond mining conglomerate De Beers saw its total revenue decrease by 24 percent, wiping out a staggering P17 billion in revenue, compared to the 2018 reporting period.

According to a financial statement released by the company, revenue was $4.6 billion (around P51 billion) in 2019 after a 24 percent decline from the $6.1 billion (P68 billion) seen in 2018. In actual terms, the 2019 revenue was P17 billion lower that what was recorded in 2018.

At the same time, rough diamond sales fell by 26 percent to $4.0 billion (P44.3 billion) in 2019, from the $5.4 billion (P59.8 billion) recorded in the 2018 reporting period.

De Beers blames the performance decline to an 8 percent decrease in consolidated rough diamond sales volumes to 29.2 million carats in 2019 compared to the 31.7 million carats in 2018. Further, De Beers saw a 20 percent reduction in average realised price to $137/ct compared to $171/ct in 2018.

“The reduction in realised price was driven by a 6 percent decline in the average rough price index and from a lower value mix of diamonds sold in response to the weaker demand for higher value diamonds,” De Beers said.

In response to the challenging midstream trading environment, De Beers said it offered increased supply flexibility to sightholders and sold lower value and volume of rough diamonds to the midstream while increasing marketing expenditure to $178 million from $166 million to further drive consumer demand for diamond jewellery.

Underlying Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) decreased by 55 percent to $558 million (2018: $1,245 million) owing to lower sales volumes, a lower value sales mix which curtailed mining margins and the lower rough price index which reduced margins in the trading business, according to the company.

The company further said profitability in the mining business was supported by improved efficiencies and cost savings, adding further that although there was a 13 percent decline in production in response to weaker demand, with the business being impacted by mining cost inflation in southern Africa, unit cost increases were limited to 5 percent.

BOTSWANA LEADS IN DIAMOND PRODUCTION
Rough diamond production in 2019 decreased by 13 percent to 30.8 million carats. In 2018, rough diamond production was 35.3 million carats. De Beers said the reduction was primarily driven by a reduction in South Africa. “While trading conditions have improved somewhat since the third quarter of the year, production was lower in response to softer rough diamond demand conditions compared with 2018,” the statement said.

Botswana accounted for the bulk of the 30.8 million carat production. In Botswana, production was 4 percent lower at 23.3 million carats (2018: 24.1 million carats). Production at Jwaneng Mine increased by 5 percent to 12.5 million carats (2018: 11.9 million carats) as throughput rose to partly offset a 12 percent decrease at Orapa to 10.8 million carats (2018: 12.2 million carats), owing to a delay in an infrastructure project and expected lower grades.

In Namibia, production decreased by 15 percent to 1.7 million carats (2018: 2.0 million carats). Output from the marine operation declined by 10 percent owing to routine planned maintenance for the Mafuta vessel. Production at the land operations decreased by 29 percent to 0.4 million carats (2018: 0.6 million carats) as a result of placing Elizabeth Bay onto care and maintenance in December 2018. In September 2019, the sale of Elizabeth Bay was announced.

In South Africa, production decreased by 59 percent to 1.9 million carats (2018: 4.7 million carats) as the mining sequence at the Venetia open pit had a higher waste-to-ore ratio as it moves into its final years prior to the transition to underground, according to De Beers. Production at Voorspoed ceased following the operation being placed onto care and maintenance in the final quarter of 2018.

In Canada, production decreased by 13 percent to 3.9 million carats (2018: 4.5 million carats) as Victor reached the end of its life during the second quarter of 2019, resulting in a 55 percent decrease in output to 0.4 million carats (2018: 0.9 million carats). Gahcho Kué maintained output at 3.5 million carats (2018: 3.5 million carats), with a planned grade reduction offset by strong plant performance.

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