De Beers May Sight Estimated at $470M

De Beers LogoGaborone: The De Beers May sight closed with an estimated value of $470 million as the mining company reduced its rough diamond prices by an average of 3 percent. Sightholders noted that prices for many boxes fell by even more as the quality of the assortments declined in many categories.

Sightholders said that rough prices are close to the bottom but that manufacturers are still struggling to achieve sustainable profit margins. “I think De Beers is trying, but their prices have still have not reached the value of the goods when they are turned into polished diamonds,” a sightholder said.

He added that he would consider the market healthy again once sightholders are able to sell De Beers boxes for cash at a 3 percent premium on the secondary market. This would reflect the actual total cost to sightholders of buying a De Beers box. Currently, De Beers boxes were trading on the secondary market at premiums below 3 percent and with credit terms that averaged 90 days.

Sightholders noted that the May sight was expected to be relatively small due to the seasonal nature of rough diamond demand. They added that the amount of goods deferred or refused at the sight was much lower than previous sights this year, although no estimates were provided.

David Johnson, head of midstream communications for De Beers, said that in-plan applications for goods at the sight had been modest and were met by De Beers as were requests for a small amount of ex-plan goods.

Johnson and some sight participants observed that diamond market sentiment improved slightly in May. “The mood at the sight was helped by the recent period of relative stability in polished diamond prices, the sale of some polished inventory through the diamond pipeline and fairly low stocks of rough in cutting centers,” he said.

Johnson suggested that there was now less of an imbalance between the rough and polished markets than was the case in preceding months.

“De Beers is cautiously optimistic for the near-term,” he added. “Things appear to be moving in the right direction but there is still a bit of a ways to go.”