De Beers Lowers 2020 Production Forecast

RAPAPORT... De Beers has reduced its production outlook for next year and beyond amid uncertainty about the health of the diamondmarket.The miner now expects to recover between 32 million and 34million carats in 2020, compared to its earlier outlook of 33 million to 35million carats, parent company Anglo American said Tuesday. Its output is forecastto rise to between 34 million and 36 million carats in 2021, versus a previousprojection of 35 million to 37 million carats."It's a slight trimming of production [and] a prudent approach tosupply outlook for next year, given the rebalancing the industry is goingthrough," David Johnson, head of strategic communicationsfor 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 manufacturingsector and sluggish consumer demand have forced De Beers to revise itsproduction plan twice in five months. In July, it trimmed its 2019 estimate toaround 31 million carats from its earlier prediction of 31 million to 33 millioncarats, citing weakness in the rough market. While 2020 production isanticipated to be higher, it will still lag behind the 35.3 million carats unearthedin 2018.De Beers' revenue has declined 26% for the year to dateamid "challenging diamond-market conditions," it noted in an investorpresentation on Tuesday. Anglo American also expects inventory for theentire group to grow by around $500 million in 2019, with De Beers accountingfor most of that increase. This follows the company's decision to offerunprecedented concessions to sightholders in the second half of the year toenable them to buy less rough and reduce their stockpiles.The excess inventory at diamond cutters has weighed onthe entire market this year, with Bain & Company predicting a slightimprovement in 2020. However, the management consultancy doesn't expect a realopportunity for rebalancing until 2021."Ongoing supply-demand inequality will prevent fullrecovery of the industry [in 2020], and may be exacerbated by a continuingdecrease in available financing for midstream players," Bain said Tuesday inits annual sector-wide report. "Few producers have announced sufficient miningplan cuts, so we do not foresee a major decline in supply."A shift at De Beers' Venetia deposit from open-pit tounderground mining has also impacted production, as output there hasfallen during the transition period. Production at the mine in South Africa wasanticipated to increase in 2021 as it focuses on a high-grade section, thecompany said a year ago. However, the final transition to undergroundoperations will result in a drop in company-wide production tobetween 33 million and 35 million carats in 2022.The miner's final sight of the year is currently taking place in Gaborone, Botswana.Image: De Beers' Jwaneng mine in Botswana. (Ben Perry/Armoury Films/De Beers)