Windhoek-While Namdeb’s onshore diamond production continues to dwindle, the offshore operations are doing extremely well, with Debmarine Namibia’s newest vessel, the US$157-million SS Nujoma, which was inaugurated in June this year and is now fully operational, playing a major role in ensuring the profitability and sustainability of the company’s marine mining activities.
According to the chief executive officer of the De Beers Group, Bruce Cleaver, the SS Nujoma’s sampling tool is twice as efficient as its predecessors, making it a significant factor in marine diamond mining activities.
The group’s preliminary financial results indicate that at Namdeb Holdings production increased by 17 percent to 0.9 million carats, compared to 0.7 million carats during the same time last year.
This figure was mainly due to production recovering following Debmarine Namibia’s Mafuta vessel having been on extended planned in-port maintenance in the second quarter of 2016.
Speaking to New Era yesterday during a teleconference from London, Cleaver commented on the De Beers Group’s interim results for the six months ended June 30, 2017.
He noted that he was pleased with the half-year results but added that the group continues to streamline operations as it strives to become more efficient.
During the first half of 2017 the group’s global rough diamond production increased by 21 percent to 16.1 million carats, which is in line with the higher production forecast for 2017. The half-year diamond production for 2016 stood at 13.3 million carats and Cleaver expects between 31 million and 33 million carats for the full-year results, subject to trading conditions of course.
The half-year results indicate that the De Beers Group’s underlying earnings before interest, taxes, and amortization (EBITA), which is a financial indicator used widely as a measure of efficiency and profitability, increased by three percent to US$786 million, compared to US$766 during the first half of 2016. Cleaver stated that this figure is primarily attributable to savings resulting from the closure of Snap Lake in North America and a continued efficiency drive across the group.
Meanwhile, the group’s total revenue decreased by four percent to US$3.1 billion, compared to US$3.3 billion during the corresponding period in 2016. However, Cleaver said the marginal decrease in total revenue was expected and was driven by lower rough diamond revenue, given the benefit of strong midstream restocking during the first half of 2016.
“The average realised rough diamond price decreased by 12 percent to US$156/carat (H1 2016: US$177/carat), partially offset by a seven percent increase in consolidated sales volumes to 18.4 million carats (H1 2016: 17.2 million carats). This reflected stronger demand for lower-value goods in the first quarter of 2017 following a recovery from the initial impact of India’s demonetisation programme in late 2016. The lower-value mix was compensated in part by a higher average rough price index, which was four percent higher when compared with the first half of 2016,” read a statement from the De Beers Group.
Market analysis from the De Beers Group also show that preliminary consumer demand data for diamond jewellery for the start of 2017 showed continued growth in the US and slight improvements in China in local currency.
In India, retailer sentiment improved due to a return to more normal trading conditions following the government’s demonetisation programme while underlying US results reflected the broader changes in consumer behaviour affecting the overall US retail environment, with growth in the independent jewellers’ sector contrasting with some weakness from large chains.
“Sentiment in the midstream remains positive following a reasonable 2016 fourth quarter retail season, with evidence of Chinese retailers restocking and demonetisation in India having less impact than anticipated. This has supported good demand for De Beers’ rough diamonds. Spot polished prices remained broadly flat in the first half of 2017,” read the statement from De Beers.
During 2017, De Beers expects to invest a total of around US$140 million in marketing, which is approximately 20 percent more than in 2016. Marketing activities are to take place through a combination of proprietary and partnership activity across the US, China and India.