De Beers sold $300m in rough diamonds last week following 10% price cut

DEMAND for rough or uncut diamonds among manufacturers – polishers and cutters – is reviving, partly owing to price cuts announced by De Beers and Russia’s Alrosa last week, said Bloomberg News.

The two miners had declined to cut prices through the Covid-19 pandemic to date, but they had seen enough recovery in sentiment to slash prices 10% – a development that triggered buying totalling $500m in uncut gems, said Bloomberg News citing unnamed sources.

“The worst I think is past us and there are reasons to be encouraged,” Stephen Lussier, head of consumer and brands at De Beers, told the newswire. “There is some real consumer data which underlines the midstream’s belief that business is coming back for them. The industry is in a healthier place than it has been for some time,” he said.

“The pipeline has been starved, and people were worried that they would not be able to get their hands on rough, missing out on sales when polished demand comes through,” said Anish Aggarwal, a partner at specialist advisory firm Gemdax.

Of $500m in last week’s sales, about $300m will go to De Beers, said the newswire. This compares revenue of $56m in the second quarter which is when Covid-19 travel restrictions hit diamond tenders hardest. Anglo American owns 85% of De Beers. Earnings before interest, tax, depreciation and amortisation (EBITDA) from its diamond division totalled only $2m in the first six months of the 2020 financial year.

According to Morgan Stanley analysts, Alain Gabriel, Brian Morgan, Dan Shaw and Sandeep Peety, however, De Beers would register EBITDA for the second half of the year of $112m.

The second half performance, partly prompted by the approaching year-end season which is traditionally a period of heightened sales for De Beers, would also reverse a $500m cash outflow from the first half.

A recovery in De Beers was crucial to Anglo American achieving a forecast $1.3bn year-on-year improvement in Anglo American’s EBITDA in its 2021 financial year, the bank said.