By Hilary Mare
DE Beers Marine, a 50 percent-owned Namdeb subsidiary recorded an 11 percent year-on-year decrease in production to 1.6-million carats, the group’s 2016 financial report reveals.
This the group says is owing to lower output by Debmarine Namibia as a result of the Mafuta vessel undergoing extended planned in-port maintenance, as well as lower grades at Namdeb’s land operations.
“Nonetheless, Debmarine Namibia’s new sampling vessel, the SS Nujoma, was completed three months ahead of schedule and within budget and sea trials started in November 2016. The vessel is expected to become operational during 2017,” the group highlighted.
Holistically however, higher revenues contributed to a 42 percent improvement year-on-year in diamond miner De Beers’ underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) to US$1.4-billion in 2016.
A 30 percent increase in revenue to US$6.1-billion was driven by stronger rough diamond demand, which led to reduced inventory levels, thereby reflecting improved trading conditions, compared with conditions experienced in the second half of 2015.
Rough diamond sales increased by 37 percent year-on-year to US$5.6-billion as a result of a 50 percent increase in consolidated sales volumes to 30-million carats from 19.9-million carats in 2015.
This was partly offset by a 10 percent decrease in the average realised rough diamond price to US$187/ct from US$207/ct in 2015, which reflected in the 13 percent lower average rough price index, which was, however, offset to “some extent” by an improved sales mix.
De Beers last week said its results for the 2016 financial year also benefited from cost-saving programmes, portfolio changes and the impact of favourable exchange rates. Unit costs decreased by 19 percent year-on-year from US$83/ct to US$67/ct.
De Beers last week stated that macroeconomic conditions underpinning consumer demand for diamonds remained “broadly stable” in aggregate, with the US expected to continue to be the main driver of global growth in 2017.
The company commented that the extent of global growth would, however, be dependent on a number of macroeconomic factors, including the new administration in the US, the strength of the US dollar impacting on consumer demand, economic performance in China, the effects of India’s demonetisation and sentiment following the main US and Chinese New Year retail season.
“With midstream stocks having returned to more typical levels in 2016, rough diamond demand is expected to normalise in 2017, reflecting underlying consumer and retail demand,” De Beers added.
Rough diamond production decreased by 5 percent to 27.3-million carats from 28.7-million carats in 2015, which De Beers said reflected the decision it had taken in 2015 to reduce production in response to prevailing trading conditions.
De Beers further commented that, owing to continuing depressed markets in key industrial sectors, its industrial diamonds business, Element Six, had experienced a “challenging year”. The company said the reduction in contribution arising from lower sales had been largely offset through the initiation of a comprehensive cost-reduction programme.
Global diamond miner, De Beers has agreed to a new deal with the Namibian government to restructure their 50- 50 shareholding in Namdeb to enable Namibia to raise its shareholding in both land and marine diamonds. Under the restructured deal, the Government has raised its stake in marine diamonds miner, De Beers Marine to 50 percent from 15 percent.
The revised deal means that Namdeb and De Beers Marine now fall under a holding company, Namdeb Holding (Pty), a 50-50 shareholding with a corresponding 50-50 dividend policy between Namibia and De Beers. Namdeb Holding (Pty) now holds all exploration and operating licences for both land and sea diamond deposits. Diamond cutting and sorting company, Namibia Diamond Trading Company (NDTC) will continue to operate under the same 50-50 percent shareholding. Negotiations for the restructured shareholding in the diamond miner started in 2006.
Confidente. Lifting the Lid. Copyright © 2015