JOHANNESBURG (miningweekly.com) –  Anglo American subsidiary De Beers sold 34.4-million carats of diamonds in 2014, with the company reporting earnings before interest and taxes (Ebit) of $1.4-billion, a 36% increase from the $1-billion Ebit in 2013.

The higher sales volumes were attributed to solid demand across key markets, particularly the US, which resulted in strong revenue growth, while operating costs benefited from favourable exchange rate movements, which offset underlying inflationary pressures.

De Beers' total sales revenue rose 11% to $7.1-billion, with rough diamond sales up 12% to $6.5-billion.

Average realised diamond prices were in line with 2013 at $198/ct, driven by a 5% higher average rough price index in 2014, offset by a marginally lower product mix. 

In a video interview published on its website, De Beers CEO Philipe Mellier noted that the company was “very pleased with [the] results in all compartments of the business”.

“For this type of performance, we needed a [strong] market and the market was pretty good in 2014. It started very well at the end of 2013 and carried on in 2014,” he noted.

Consumer demand for diamond jewellery showed positive growth in local currency terms in all the main markets in 2014. The economic recovery gained momentum in the US, the largest consumer diamond market, which resulted in healthy diamond jewellery sales growth throughout the year.

Further, growth in diamond jewellery demand in China continued, albeit at more modest levels, reflecting slowing economic growth. Macroeconomic conditions in India started improving in the final quarter of 2014, following the election of a new government earlier in the year, which boosted consumer confidence, lifting hopes that growth would return.

“[These markets] were really pulling the rest of the world. The second part of the year was a bit weaker [owing to a lack of liquidity in the diamond pipeline] and the selling season around Christmas was slightly lower than we expected,” he added.

Polished prices ended the year broadly in line with where they started in 2014, with the increase in the first half of the year being offset by a reduction in the second half.

Rough diamond prices increased over the course of 2014, albeit with some softness experienced towards the end of 2014 and early in 2015. 

“We see some green shoots coming here and there and we strongly believe that [the second quarter of this year] will see a rebound in the market,” Mellier added.

In July, De Beers announced details of a new approach to its rough diamond sightholder sales contracts. The new contract period, which would start in March and run for three years – with an option for De Beers to extend – required its rough diamond customers to comply with more rigorous financial and governance criteria to be eligible for supply. 

OPERATIONS
The company noted that its Debswana operations, in Botswana, benefited from greater efficiency at its processing plants following operational improvement initiatives, producing 24.2-million carats –12.9-million carats from Orapa and 11.3-million carats from Jwaneng.

The performance was enhanced by recovery from the carry-over effects through 2012 and 2013 of the Jwaneng slope failure clean-up, as well as the Orapa No 1 plant maintenance stoppage that occurred in 2013.

Further, De Beers noted that its Jwaneng Cut-8 waste mining was progressing well, with just over 50% of the 500-million tonnes of waste stripping required to expose the ore, now complete.

Cut-8 would become the main source of ore for Jwaneng in 2018 and would extend the life of one of the world's richest diamond mines to at least 2033, providing access to an estimated 91-million tonnes of ore, containing almost 110-million carats.

In Namibia, the company’s Namdeb and Debmarine mines delivered marginally higher production at 1.9-million carats, driven by strong operational improvement by the MV Mafuta vessel.

Namdeb production was broadly in line with the previous year, despite a 19-day strike in the third quarter.

Meanwhile, Namdeb Holdings received a 15-year licence extension for both land and sea operations to 2035.

De Beers’ South African operations recorded a 2% decrease in output to 4.6-million carats, mainly owing to lower grades being mined at Kimberley. 

In Canada, production was slightly lower at 1.8-million carats, owing to the impact of flooding, forest fire smoke protocols, and the review and implementation of revised ground support standards at the Snap Lake operation.

De Beers’ synthetic diamonds segment Element Six (E6) enjoyed a year of solid growth, with a strong performance in the synthetic industrial diamond product groups, both for abrasives and advanced technology applications.

This growth was offset partially by weakness in tungsten carbide sales in the first six months. To continue improving customer service and operating efficiencies, E6 announced in April that De Beers would close its plant in Robertsfors, Sweden, to focus on its primary plants in Shannon, Ireland, and Springs, South Africa.

GOING FORWARD
Diamond production for 2015 was forecast to be in the range of 32-million to 34-million carats, subject to market demand.

Mellier added that simultaneous investments in three of its mines showed that the company was investing in its future and that it was “important for sustainable production for many years to come”.