Diamond Glut Prompts De Beers to Slash Production

RAPAPORT...De Beers has lowered its production forecast for this year,noting that weakness in the diamond trade negatively affected itsperformance in the second quarter.Sales volume slumped 10% to 9 million carats in the threemonths ending June 30 due to an oversupply of goods, Anglo American, De Beers'parent company, reported Thursday. In light of that, it now expects to recover about31 million carats for 2019, compared to its previous plan of 31 million to 33million carats. "Demand for rough diamonds remains subdued as a result ofchallenges in the midstream with higher polished inventories, and caution dueto macroeconomic uncertainty, including the US-China trade tensions," thecompany explained. De Beers' sales value dropped 16% to $1.39 billion from thethree sales cycles the company held during the quarter, according to Rapaportcalculations. The company's rough-price index - reflecting like-for-likeprices - fell 4% year on year in the first half, and slipped 3% compared withthe second half of 2018. Weak demand prompted the miner to reduce prices oflower-value stones at the June sight.The average selling price for the first half also slid 7% to$151 per carat, reflecting the lower like-for-like prices and a shift in thesales mix. Mining output fell 14% to 7.7 million carats in the secondquarter "as we continue to produce to market demand," and because of lower volumesat the Venetia mine, Anglo American added. The company's only deposit in SouthAfrica is currently shifting from open-pit to underground operations, leadingto a 38% drop in production at the site to 571,000 carats. The other De Beers minein the country, Voorspoed, has now closed. Output in Botswana fell 9% to 5.7 million carats, reflectinga planned shutdown at the Orapa mining unit. Lower grades at Gahcho Ku?(C)in Canada contributed to a 9% decline in production in that country, for atotal of 1.1 million carats.Image: A Canadian rough diamond in the palm of a hand at De Beers' GlobalSightholder Sales in Botswana. (Ben Perry/Armoury Films/De Beers)