De Beers executives remained cautiously optimistic about the remainder of the year after allocating a July cycle (formerly called sight) of $520 million that produced no refusals or complaints about prices, which have held steady for most of the year.
The total of the July 25-29 cycle was about 8% less than June and the smallest all year, which was not surprising after lackluster demand at JCK Las Vegas and the June Hong Kong Gem and Jewellery Show. Reports from the cycle said that De Beers did not lower prices despite high inventories and declining premiums on rough parcels sold in secondary markets.
De Beers’ new CEO Bruce Cleaver said that the company would continue to take a cautious role through the remainder of the year. He also vowed to ramp up programs “designed to stimulate demand for diamonds and continue operations that enhance branding and product integrity.”
Cleaver came down firmly on the side of expanding diamond marketing programs to include millennials, saying: “Taking continued demand for granted would be a mistake. And assuming the factors that influenced demand yesterday will be the same as those that influence demand tomorrow is folly. We must embrace changing consumer trends and see them as an opportunity to grow.”
De Beers reported a first half profit of $585 million on sales of $3.3 billion. This strong performance that was extremely welcome for its corporate parent, Anglo American Corp., which had been in financial difficulty after the commodities price crashes of last year. By volume, the total was just over 17 million carats, a 29% increase over last year – a period when diamond manufacturers were hard-squeezed by rising inventories, shrinking credit and declining polished prices.
Alrosa, the Russian-based diamond producer, announced its sales increased 19% to $1.2 billion during the first half of the year. By volume, sales were up 7% to 9.6 million carats. Revenue rose much higher than volume because the company offered a larger percentage of gem quality rough and trimmed offerings of industrial goods.
While the credit situation remains difficult, De Beers executives noted that inventories levels have stabilized and don’t see them as problematic.
In India, however, the credit crunch continues to take its toll with several large firms declaring bankruptcy and one major sightholder on the banks’ watch list.
COLORED STONES
Gemfields, the London based colored stone mining company, plans to nearly triple its ruby production at the Montepuez Mine in Mozambique. The company secured a $65 million finance package to expand production facilities at the mine, which will bring production to 20 million carats yearly, up from the current 8 million.
Some of the proceeds from the loan package will go toward expanding production at the Kagem emerald mine to 40 million carats, up from a current 30 million carats.
GOLD PRICE
The currency volatility following Britain’s brexit vote helped push the gold price to its highest level in two years, topping $1350 oz. The World Gold Council noted that this represents a 29% increase over the metal’s January 1 level. The Council predicts that gold will top $1400 oz. by the year’s end.
Russell Shor is senior industry analysis at GIA in Carlsbad.
De Beers executives remained cautiously optimistic about the remainder of the year after allocating a July cycle (formerly called sight) of $520 million that produced no refusals or complaints about prices, which have held steady for most of the year.
The total of the July 25-29 cycle was about 8% less than June and the smallest all year, which was not surprising after lackluster demand at JCK Las Vegas and the June Hong Kong Gem and Jewellery Show. Reports from the cycle said that De Beers did not lower prices despite high inventories and declining premiums on rough parcels sold in secondary markets.
De Beers’ new CEO Bruce Cleaver said that the company would continue to take a cautious role through the remainder of the year. He also vowed to ramp up programs “designed to stimulate demand for diamonds and continue operations that enhance branding and product integrity.”
Cleaver came down firmly on the side of expanding diamond marketing programs to include millennials, saying: “Taking continued demand for granted would be a mistake. And assuming the factors that influenced demand yesterday will be the same as those that influence demand tomorrow is folly. We must embrace changing consumer trends and see them as an opportunity to grow.”
De Beers reported a first half profit of $585 million on sales of $3.3 billion. This strong performance that was extremely welcome for its corporate parent, Anglo American Corp., which had been in financial difficulty after the commodities price crashes of last year. By volume, the total was just over 17 million carats, a 29% increase over last year – a period when diamond manufacturers were hard-squeezed by rising inventories, shrinking credit and declining polished prices.
Alrosa, the Russian-based diamond producer, announced its sales increased 19% to $1.2 billion during the first half of the year. By volume, sales were up 7% to 9.6 million carats. Revenue rose much higher than volume because the company offered a larger percentage of gem quality rough and trimmed offerings of industrial goods.
While the credit situation remains difficult, De Beers executives noted that inventories levels have stabilized and don’t see them as problematic.
In India, however, the credit crunch continues to take its toll with several large firms declaring bankruptcy and one major sightholder on the banks’ watch list.
COLORED STONES
Gemfields, the London based colored stone mining company, plans to nearly triple its ruby production at the Montepuez Mine in Mozambique. The company secured a $65 million finance package to expand production facilities at the mine, which will bring production to 20 million carats yearly, up from the current 8 million.
Some of the proceeds from the loan package will go toward expanding production at the Kagem emerald mine to 40 million carats, up from a current 30 million carats.
GOLD PRICE
The currency volatility following Britain’s brexit vote helped push the gold price to its highest level in two years, topping $1350 oz. The World Gold Council noted that this represents a 29% increase over the metal’s January 1 level. The Council predicts that gold will top $1400 oz. by the year’s end.
Russell Shor is senior industry analysis at GIA in Carlsbad.
