Southern African diamond miners deliver polished performances in second quarter
De Beers’s production of rough diamonds increased by 134.3% to 8.2 million carats in the second quarter of 2021 compared with a contraction 7.7% seen in the previous quarter.
In a recent report, PSG Namibia research analyst, Shelly Louw, said the massive rise in production mainly reflects base effects and planned higher production to meet robust consumer demand.
Looking at De Beers’ output per country, production in Namibia decreased by 6% to 0.3 million carats, largely due to the planned maintenance of the Mafuta vessel, which was completed in the quarter, and another vessel remaining demobilised.
South Africa’s production increased by 130% to 1.3 million carats on the back of higher grade ore being treated from the final cut of the Venetia open pit, as well as base effects related to the pandemic.
“The open pit section of the Venetia mine (South Africa’s largest diamond mine, situated in the Limpopo province) is expected to reach the end of its lifespan this year and to completely transition to underground mining by next year, extending the mine’s life to 2046,” Louw said.
Meanwhile, Botswana’s production increased by 216.7% to 5.7 million carats, mainly thanks to base effects caused by the Covid 19 lockdown which halted mining activities during the second quarter of 2020.
Further afield, diamond production in Angola also increased by 24.1% during the first five months of 2021 compared with the same period last year, reaching 3.4 million carats, according to the latest figures from the Angolan Ministry of Finance (De Beers does not operate in Angola).
Turning to rough diamond sales, Louw noted that demand for diamond jewellery has proven to be robust thus far in 2021 mainly thanks to buoyant consumer sentiment in the key markets of the US and China.
Louw said dwindling inventories within the global diamond supply chain have resulted in demand outstripping supply, resulting in De Beers raising prices at its January, February, and June sales auctions.
Rough diamond sales measured $510 million in De Beers’ sixth sight of 2021 compared with $116 million in the sixth sight of 2020. The year to date performance shows even more promise, as sales in 2021 are higher by 183.1% compared with 2020 figures and 15.2% higher compared with 2019 figures.
De Beers has narrowed its production guidance to 32 million to 33 million carats compared with its previous guidance of 32 million 34 million carats, subject to trading conditions and the extent of any further Covid 19 related disruptions.
Looking ahead, Louw noted that some of the major diamond retailers are expecting to see clear signs of consumers spending some of their cash reserves on luxury goods by the northern hemisphere’s autumn this year.
“This bodes well for certain Southern African countries that are heavily dependent on diamond exports to generate foreign earnings and government revenues. Specifically, higher diamond earnings in 2021 will help to improve Namibia’s and Botswana’s fiscal positions following the sharp widening of their government budget deficits last year,” she added.