De Beers CEO Cautiously Optimistic As Sales Tumble

De Beers’ rough diamond sales tumbled at the latest auction but the leading global producer remained optimistic as it managed to move stones at the most difficult period of the year. According to the company owned by Anglo American, sales were lower at its Global Sightholder Sales and Auction Sales for the sixth sales cycle of 2016.

Sight box PIC By De Beers

Sight box PIC By De Beers

The provisional figures showed it sold $520 million worth of stones during the sight as opposed to the actual $564 million it made at the Cycle 5 2016. The company with most of its meat in Botswana however praised the figures although it remains cautious of the market.

New chief executive officer of the group, Bruce Cleaver said the there is a reason to celebrate. “This is an encouraging sales performance for this point in the year, supported by positive sentiment from our customers,” said the man who took over from Philippe Mellier in July.

“We maintain a cautious outlook for the remainder of 2016.” The Cycle 6 2016 provisional sales value represents sales as at 1 August 2016. Sales value is quoted in terms of sales by De Beers Global Sightholder Sales and De Beers Auction Sales, and reported on a consolidated accounting basis. Auction Sales included in a given cycle are the sum of all sales between the end of the preceding cycle and the end of the noted cycle.

Anglo American, which is the parent company to De Beers said when releasing its first half results that the macro-economic conditions underpinning consumer demand for diamonds remain broadly stable in aggregate, but with persistent downside risks looking into H2 2016-including recent social and political instability.

The global diversified giants added that caution is also expected when buying in the midstream by polishers. However, rough diamond production decreased by 15% to 13.3 million carats (H1 2015: 15.6 million carats), reflecting the decision to reduce production in response to prevailing trading conditions in H2 2015.

Preliminary data indicate that during H1 2016, the US market showed positive growth overall, while the Chinese market was broadly stable. Japan demonstrated modest growth in local currency, whereas consumer demand in India was hampered by a month-long jewellers’ strike in March 2016 against new government regulations.

“In the Midstream, caution in rough diamond buying is expected to prevail, as the supplies bought by diamantaires in H1 2016 are gradually converted into polished,” said Anglo.

The company added that forecast diamond production (on a 100% basis) for 2016 remains unchanged and is expected to be in the range of 26-28 million carats, subject to trading conditions. “Consistent with this level of production, plans are in place to deliver approximately $200 million of cash savings in production costs, overheads, capital expenditure and disposal proceeds in 2016.”

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