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Photo courtesy of Anglo American.

DE BEERS REPORTS WORST YEAR IN MORE THAN A DECADE, BUT VIEWS 2021 IN A DECIDEDLY MORE POSITIVE LIGHT

 

With the COVID pandemic causing havoc in the international markets, De Beers has reported its worst year of rough diamond sales in more than decade. 

According to the company, sales in 2020 totaled $2.72 billion, down from about $4.04 billion in 2019, which itself was considered to be a particularly bad year, during which diamond sales slumped by about $1.4 billion. Indeed, the coronavirus crisis trumped the great financial recession of 2009 when the mining company sold goods worth sold $3.84 billion.

Much of the slump came during the first half of the year, when rough diamond sales fell to $962 million, down from $2.3 billion during the same period in 2019. More than half of that amount was recorded during the first of what was supposed to be 10 sales cycles during the year, when sales worth $551 million were reported. It took place during before the imposition of worldwide lockdowns. The second sales cycle smaller, and the third sales cycle was canceled completely.

With sales worth $1.82 billion, the second half of 2020 was noticeably stronger, as the markets adjusted to the pandemic’s new normal.

2020 ENDING ON GENERALLY POSITIVE NOTE

All things considered, the year appeared to end on a more positive note, with De Beers’ provisional sales total for the 10th and final cycle of the year equaling $440 million. This represents an increase of 3.3 percent over the same cycle in 2019, which was before the onset of the COVID pandemic.

The highest sales cycle of the second half was the ninth, which took place in November. It was worth $462 million, and was said to be the result by de-stocking by manufacturers and indications that demand for jewelry would increase during the Diwali and Christmas seasons.

In a statement released together with the 10th sales cycle results, De Beers’ CEO was optimistic, but still cautious. “While the diamond industry ends the year on a positive note, we must recognize the risks that the ongoing COVID-19 pandemic presents to sector recovery both for the rest of this year and as we head into 2021,” said Bruce Cleaver in a statement accompanying the sales data.

Speaking to the Financial Times, Antwerp-based diamond analyst Anish Agarwal said that low inventories and lively demand should push sales upward into the new year, but it was still early to make predictions regarding how long the trend with last.

Bags of diamonds

According to De Beers, sales of rough diamonds during 2020 totaled $2.72 billion, down from about $4.04 billion in 2019. (Photo courtesy of De Beers)

 

 “We expect this to continue until the second quarter of 2021,” he said. “At that point the supply chain will be restocked and economies will have opened up a bit. Only then we’ll have a clearer idea of where the market’s going to go longer term.”

De Beers’ sorting facility in the Botswana capital of Gaborone.  (Photo courtesy of DTC Botswana)

OLD DE BEERS-BOTSWANA AGREEMENT EXTENDED ONE YEAR

In the meantime, De Beers has reported that has agreed to extend a 10-year sales agreement with Botswana by an additional year. This, it said, was because of logistical challenges posed as a result of the coronavirus pandemic, which slowed down the negotiations process. Simply stated, more time is needed to get the job done.

The current rough diamond sales agreement, according to which the jointly-owned Debswana sells all its output to De Beers, was signed in 2011. The deal, which also had led De Beer to relocate its diamond selling and sorting staff from London to the Botswana capital of Gaborone, was due to expire at the end of 2020.

Both sides have a vested interest in concluding a new agreement.  With De Beers accounting for two-thirds of the country’s foreign exchange and one fifth of its GDP, the government of Botswana wants to guarantee continuing inflow of revenues into its treasury. For De Beers, Botswana is the source of 70 percent of its diamonds.

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