Duncan Wanblad, the CEO of Anglo American which holds 85% equity in De Beers, said assessment of the situation was continuing to guide any further production decisions.
“As previously announced, we reduced rough diamond production from De Beers in response to market conditions,” the CEO said in a third-quarter update released recently.
“The diamond market remains challenging as the midstream continues to hold higher than normal levels of inventory and the expectation remains for a protracted recovery. “As a result and together with our partners, we will continue to assess the options to reduce production going forward.”
From an initial target of as much as 32 million carats at the beginning of the year, De Beers revised its maximum output this year to 29 million carats, then in July lowered this to 26 million carats. Debswana produces about two-thirds of De Beers’ annual output.
The diamond retail market has been experiencing subdued demand since the second half of last year, causing the mid-stream, which consists of cutting and polishing firms, to build up high inventories. These high inventories have in turn required producers such as De Beers and Debswana to cut production.
Whilst Debswana was forced to cut jobs in 2009 after a demand crunch caused by the global financial crisis, the company has tightened its structures since then, whilst also producing to demand and avoiding costly stockpiling. The tailings plants at Jwaneng and Letlhakane have introduced unparalleled operational flexibility for Debswana, allowing it to curtail production without mass job cuts.
Industry analysts have, however, said further cutbacks in Debswana’s production could lead to excess spare capacity at the mines, pressurising the mine’s pledge to not lay off workers.
In addition, cutbacks in Debswana’s production will pressure third and fourth-quarter activity in the country, pushing the economy closer to negative growth for the year or a technical recession.
According to Anglo’s figures, production at Debswana in the year to the third quarter, fell by 26% compared to the same period last year, in line with the requirement to restrain demand.
The strongest drop was at Jwaneng Mine, where output dropped by 43% over the period, whilst Orapa fell by six percent.
“Production guidance for 2024 is unchanged at 23 – 26 million carats; however, as the midstream continues to hold higher than normal levels of inventory and the expectation for a recovery remains protracted, De Beers is actively assessing options with our partners to reduce production going forward,” the Anglo update said.
Besides the supply-side interventions, De Beers has ramped up its traceability and marketing activities in key markets such as the United States, India and China to perk up demand, particularly over the festive period.
