Despite slight decrease in Debswana’s total production in 2019, owing to trimmed output in Orapa, Botswana’s flagship mining company continued to rubberstamp its position in global rough diamond production.
The over 50 years old mining giant accounted for more than 75% of De Beers’ global diamond production for the year 2019. A year that was characterized by some of the worst global market challenges since 2008/9 global financial crises. This information is contained in Anglo American PLC’s 2019 full year financial report released this week; Anglo is De Beers Group parent company. According to figures highlighted in the report, De Beers’s production closed the year at just over 30.7 million carats, a significant decline from the 35.2 million carats achieved in 2018.
Much of De Beers total production decline during the year was attributable to 59% decrease of production at South Africa’s Venetia Mine, which is currently on transition from open pit to underground mining. Of the 30.8 million carat output, Debswana brought to the table over 23.25 million carats. Though this is a slight decline from the 24.13 million carats achieved in 2018, significant yearend decline in South Africa and other De Beers operations in Namibia and Canada translated into Botswana’s production accounting for over 75.4% of the De Beers Group total global output for the year.
This mirrored a significant increase in Botswana’s percentage contribution into De Beers global basket when compared to 68.36% in 2018 where Debswana brought in over 24 million carats of the 35.2 million carats Group total output. However output at Debswana itself declined by 4% to 23.3 million carats from 24.1 million carats in 2018. This slight decrease in Debswana production is attributable to 12% decline at Orapa which came as a result of delay in infrastructure project and expected lower grades.
Orapa which produces some of the world’s best industrial diamonds slowed down to 10.8 million carats compared to 12.2 million carats achieved in 2018. The decline at Orapa regime which comprises of the Orapa, Letlhakane & Damtshaa Mines, was however partly offset by 5% increase at Jwaneng Mine, the world‘s richest by value. The “Prince of Mines” as popularly known in the corridors of the lucrative diamond mining business roared to a staggering 12.5 million carats beating the previous year end of 11.9 million carats.
Other De Beers Mines
In the overall, De Beers rough diamond production decreased by 13% primarily driven by the reduction in South Africa. While trading conditions have improved somewhat since the third quarter of the year, production was lower in response to softer rough diamond demand conditions compared with 2018. Production decreased by 59% to 1.9 million carats from 4.7 million carats as the mining sequence at the Venetia open pit had a higher waste to ore ratio as it moves into its final years, prior to the transition to underground.
Production at Voorspoed ceased following the operation being placed onto care and maintenance in the final quarter of 2018. In Canada, production decreased by 13% to 3.9 million carats against 4.5 million carats as Victor reached the end of its life during the second quarter of 2019, resulting in a 55% decrease in output to 0.4 million carats against 0.9 million carats achieved in 2018. Gahcho Kué output remained flat at 3.5 million carats against the same in the prior year, with a planned grade reduction offset by strong plant performance.
Next door in Namibia where De Beers runs similar shareholding operation like Botswana arrangement, production decreased by 15% to 1.7 million carats from 2.0 million carats in 2018. Output from the marine operation under DebMarine outfit declined by 10% owing to routine planned maintenance for the Mafuta vessel.
NamDeb’s inland operations production decreased by 29% to 0.4 million carats from 0.6 million carats registered in 2018. This was predominately as a result of placing Elizabeth Bay onto care and maintenance in December 2018. In September 2019, the sale of Elizabeth Bay was announced.
De Beers total revenue decreased by 24% to $4.6 billion from $6.1 billion in 2018. This was attributable to rough diamond sales falling by 26% to $4.0 billion from 2018’s sales figure of $5.4 billion. Significantly this was due to 8% decrease in consolidated rough diamond sales volumes to 29.2 million carats from 31.7 million carats and a 20% reduction in average realised price to $137 per carat from $171 per carat in 2018.
Anglo reports that the reduction in realised price was driven by a 6% decline in the average rough price index and from a lower value mix of diamonds sold, in response to the weaker demand for higher value diamonds. In response to the challenging midstream trading environment, De Beers offered increased supply flexibility to sightholders and sold a lower value and volume of rough diamonds to the midstream, while increasing marketing expenditure to $178 million from $166 million in 2018, to further drive consumer demand for diamond jewellery.
Underlying Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) decreased by 55% to $558 million from $1,245 million owing to lower sales volumes, a lower value sales mix which curtailed mining margins, and the lower rough price index which reduced margins in the trading business. However Anglo says profitability in the mining business was supported by improved efficiencies and cost savings.
“Although there was a 13% decline in production in response to weaker demand, with the business being impacted by mining cost inflation in southern Africa, unit cost increases were limited to 5%.” Of the $558 million EBITDA, Botswana alone brought in $385 million with rough diamonds from Debswana having sold at $139 per carat on average. De Beers Group owns 50% of Debswana, and Diamond Trading Company Botswana (DTCB).
De Beers Group’s other worldwide interest spans into the lucrative midstream and downstream space with business such as Foevermark, the Group’s jewellery retail outfit, ElementSix, the industrial technology and manufacturing company, as well as LightBox the newly established synthetic diamonds brand operating from the United States. Botswana Government owns 15% of De Beers Group, the remaining 85% is owned by Anglo American PLC.
Source: Weekend Post