Diamond sales drop for first time in 2016
Brian Benza | Wednesday May 25, 2016 18:00
“As normal seasonal trends return to the market, we are encouraged by the continued stability of demand for rough diamonds shown in the fourth sales cycle of 2016,” said Philippe Mellier, chief executive officer of De Beers.
The relatively small drop in May follows consecutive increases in the four sales from December to April, after a slump in the second half of 2015 to an estimated low of $178 million in November.
On a year on year basis, the May sale is up 24 percent from an estimated $506 million recorded a year ago.
Apart from the Gaborone sight, the figure also includes auction sales and supply to beneficiation and government partners.
De Beers holds 10 sights a year to handpicked buyers who come to Gaborone from major cutting centres such as Tel Aviv, Mumbai, Antwerp to negotiate their parcels.
Although the decline in fourth sight sale snapped a four-month rising streak, diamond sales this year are still significantly higher than in 2015, a development that would be a boost for Botswana.
Through royalties, dividends and taxes, government gets about 82 thebe from every P1 worth of diamonds that Debswana sells to De Beers. Debswana, which mined 20.4 million carats last year, sells all but Okavango Diamond Company’s (ODC) 15 percent share of its production to De Beers, which in turn sells the diamonds through 10 sales a year to handpicked buyers called sightholders.
Rough diamond sales hit rock bottom in 2015 due to an ‘indigestion’ in the diamond pipeline as cutters and polishers, who suffered from low polished prices, pooled rough diamonds.
As a result, Botswana, which gets 40 percent of its revenues from diamonds and 20 percent of GDP, slashed down its 2015 growth to a negative, -0.3 while the budget swung into a deficit. Mineral revenues are expected to be down seven percent this year due to commodity prices downturn.
Debswana dug up 5.33 million carats of diamonds in the first three months of the year, a five percent reduction from the 5.63 million carats produced in the same period last year. According to shareholder, Anglo American the marginal decline in output at Debswana was a result of the strategy to align production to trading conditions.
In 2016, the company, which produces about 70 percent of parent company De Beers’ production, plans to keep production at a flat 20 million carats this year, as it remains cautiously optimistic of the market despite early signs of an improved market sentiment in 2016.