JOHANNESBURG (miningweekly.com) – Retreating diamond demand led to a slump in gem production from 31.3-million carats in 2011 to 27.9-million carats for the year ended December 31, 2012, the De Beers Group reported on Friday.

The diamond major said this was in line with its strategy of producing to demand, with operations continuing to focus on maintenance and waste stripping backlogs.

The company’s flagship Debswana operation produced 20.2-million carats – 2.7-million carats lower than in 2011, mainly as a result of a Jwaneng mine slope failure.

In Canada, production remained relatively steady at 1.6-million carats, but was still down from the 1.7-million carats produced the year before.

De Beers recovered 4.4-million carats in South Africa – one-million carats fewer than the previous year – partly owing to having sold the Finsch mine to Petra Diamonds.

However, output at De Beers’ Namibia-based subsidiary Namdeb Holdings increased to 1.7-million carats, up from 1.3-million carats in 2011.

Meanwhile, total sales fell by 16% to $6.1-billion, compared with $7.3-million the year before, with rough diamond sales having dropped 15% to $5.5-billion, compared with $6.5-billion the previous year.

PROJECTS

In Botswana, construction of the infrastructure at the Jwaneng mine Cut-8 project was completed during the year and would provide access to some 95-million carats of mainly high-quality diamonds, as well as extend the life of the world’s richest diamond mine to at least 2028.

In addition, as part of the ten-year Debswana sales agreement between De Beers and the government of the Republic of Botswana, De Beers would complete the migration of its London-based sales activities to Gaborone by the end of 2013.

“Thereafter, the sale of De Beers’ worldwide production to international and Botswana-based sightholders will be carried out in Gaborone,” the company said.

Meanwhile, in Canada, the environmental-impact review documentation for the Gahcho Kué project, in which De Beers held a 51% interest, had been submitted for review, with a decision expected in 2013.

EXPLORATION

The company spent $59-million on exploration work programmes in Angola, Botswana, Canada, India and South Africa in 2012 – $7-million more than the $46-million spent in 2011.

In addition, De Beers signed an option and subscription agreement with Peregrine Diamonds in September in respect of early-stage work on the Chidliak diamond project on Baffin Island, in Canada, which enabled the company to start mineral exploration and development work to assess the project’s techno-economic viability.

Results would determine whether or not De Beers exercised its option to earn-in, ultimately becoming the majority owner in a new joint venture with Peregrine.

OUTLOOK

De Beers expected moderate growth in diamond jewellery demand in 2013, supported chiefly by positive market trends emerging from China and India.

“Some upside is possible in the US, while trading conditions in other developed markets are likely to be challenging. The rough diamond manufacturing sector closed 2012 with high levels of inventory, particularly in the higher-end categories of diamonds, and faces continued pressure in terms of midstream liquidity,” De Beers said.

In the medium to long term, industry fundamentals were expected to strengthen as diamond production plateaus and demand continued to increase.