Supply and Demand
November 28, 24
Demand is down, supply is down. We all know consumers aren't buying natural diamonds like they used to. And global production is in decline. But what about the future?
Al Cook, De Beers Group CEO, addressed the challenges of finding new diamond reserves at the Facets 2024 conference in Antwerp earlier this week.
"Mother Nature hid her diamonds very carefully, and we have to use every element of technology we have to try to find out where new diamond deposits could be," he said.
It's a costly quest. De Beers alone has invested more than $1bn over the last two decades in search of elusive, untapped kimberlites.
But there has been just one commercial diamond discovery this century, and it wasn't by De Beers.
The Luele mine (formerly known as Luaxe), in Angola, is majority-owned by Sociedade Mineira de Catoca and is forecast to produce 6m carats annually.
De Beers has actually been scaling back its exploration activities, Cook told the conference.
"Even two years ago, we were in Canada, we were in Brazil, we were in other places around the world exploring for diamonds. We're cutting that down," he said.
The focus has shifted to Angola, a country that has yet to explore 60 per cent of its diamond-rich territories, and to Botswana, the world's leading producer of diamonds by value. And the biggest supply country for De Beers by far.
De Beers resumed explorations a couple of years in Angola, a country ravaged by 27 years of civil war, and still tainted by corruption, nepotism and internal conflict. Last month De Beers said it had identified eight new high-potential kimberlite sites in the country.
Meanwhile the geology of Botswana points to the possibility of more undiscovered diamond deposits, feasibly on the scale of Jwaneng or Orapa.
"My belief is the best place to explore for diamonds is near where you've discovered diamonds," said Cook.
"And, my goodness, there's no country on earth that has discovered more special resources of diamonds than Botswana."
There's a balance to be achieved, he said, "to ensure that we don't overproduce, we don't underproduce, but we produce towards prevailing demand".
That's why De Beers is currently reviewing the size of the fleet that operates off the shore of Namibia, where marine diamonds account for three quarters of all the country's rough production.
It's also why De Beers is looking at the most responsible way to develop the Venetia mine in South Africa, as it nears the completion of a $2.2bn switch to underground production.
Global diamond production peaked in 2008 and has been declining ever since.
De Beers' production guidance for this year has been lowered to between 23m and 26m carats, down by around a fifth. That compares with actual production of 31.9m carats in 2023. De Beers' Q3 production this year was 5.6m carats, a year-on-year drop of 25 per cent.
The balance between under and over-production is critical, and ultimately it's probably easier to persuade people to buy diamonds than it is to find new, needle-in-a-haystack deposits.
"I think what's really important is that we continue to create that demand and then mine towards that demand," said Cook. "So we really need to focus on the creation of demand."
Have a fabulous weekend.