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Profit Margins Improve at $425M De Beers Sale
Dec 18, 2019 9:15 AM
By Joshua Freedman
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RAPAPORT... De Beers’ rough sales totaled $425 million in December,
the highest since April, as lower price levels and better profit margins
spurred an upturn in demand from sightholders.
Buyers are returning to the market after six months of
sluggish activity, market sources said. While sales were 22% lower than a year
ago, they improved compared with November’s total of $400 million, De Beers
reported Wednesday.
“Following continued polished-diamond price stability in
the lead-up to the final sales cycle of the year, we saw further signs of
steady demand for rough diamonds during sight 10,” said De Beers CEO Bruce
Cleaver.
De Beers maintained its prices at last week’s sight in
Botswana after reducing them by around 5% in November. The lower cost of rough
has made manufacturing more profitable and increased the premiums dealers can
get when they resell the miner’s goods on the secondary market, a broker noted.
“The prices are now more convenient, and while it’s still
difficult to make a decent profit, sightholders can either sell the rough at
cost or a 1% premium, and manufacturers can make a few percent,” the broker
explained on condition of anonymity. Sightholders are more positive about the
market than they were, and are now looking for rough since inventory levels
have decreased, the broker continued.
The rough market has struggled this year amid an
oversupply of goods in the midstream, with De Beers’ sales falling 25% to $4.04
billion for the full year, according to Rapaport calculations based on the
miner’s reports. The company introduced extra concessions for much of the
second half, allowing sightholders to reject more goods than usual, but
withdrew that flexibility for the December sight as sentiment had improved,
rough-market sources told Rapaport News.
The company’s average selling price fell around 20% for
the first nine sights, reflecting a 5% drop in its rough-price index and a
shift to lower-value goods, Mark Cutifani, CEO of parent company Anglo
American, said last week.
Image: De Beers’ Orapa mine in Botswana. (Ben Perry/Armoury Films/De Beers)
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Tags:
Anglo American, Bruce Cleaver, De Beers, Joshua Freedman, Manufacturing, Mark Cutifani, profit margins, Rapaport News, Sightholders, Sights
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