Engineering and Mining Journal - Whether the market is copper, gold, nickel, iron ore, lead/zinc, PGM, diamonds or other commodities, E&MJ takes the lead in projecting trends, following development and reporting on the most efficient operating pr
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DIAMOND MINING SEPTEMBER 2017 • E&MJ; 59 www.e-mj.com in 2009, when production plummeted to 120.2 million ct. Since then, weak consumer demand has effectively put a cap on what produc- ers are prepared to place on the market. From time to time, as Figure 2 illustrates, demand has squeezed the market some- what, to the extent that higher average per-carat prices have given producers an economic boost, although the marked in- crease in output from 127.4 million ct in 2015 to 134.1 million ct in 2016 merely managed to weaken average prices from $108.96/ct to $92.49/ct as consumers in China and India in particular were wary of parting with their cash. Bear in mind that these average per-carat prices relate to rough (uncut) stones, with a huge differential between the amount paid for large, high-quali- ty gems and run-of-the-mill industrial diamonds. This is clearly illustrated by considering that the average price re- ceived by producers in the DRC last year was $10.63/ct, while their counterparts in Lesotho averaged $1,065.88/ct. KPCS data show that the DRC produced 23.2 million ct of predomi- nantly industrial-quality diamonds. Lesotho's 342,000 ct may have been a small fraction of that, but the country's mines have developed a reputation for unearthing some truly spec- tacular gemstones. In addition, producers still have the capacity to manage their diamond sales to a much greater extent than for most other mined commodities. With the traditional method of sales based around the concept of prepared packages of rough stones be- ing offered at "sights," from the producer's perspective the skill comes in understanding what the market wants in relation to consumer demand. Offloading surplus stock will inevitably re- sult in prices falling, yet for most producers there is a limit on how much inventory they can afford to carry. By way of illustration, Bain & Co. in the 2016 edition of its Global Diamond Industry report for the Antwerp World Diamond Center, noted that "Major rough-diamond producers in 2015 re- acted to the challenging circumstances of their customers by re- ducing output, increasing their own inventory levels and provid- ing more flexible purchasing terms while cutting rough-diamond prices. As a result, rough-diamond sales fell 24% in 2015." Published in the second half of the year, the report contin- ued "the industry rebounded in 2016. Restocking by midstream players, following their inventory sell-off in late 2015, produced growth of around 20% in rough-diamond sales during the first half of 2016. However," it warned, "strong rough-diamond sales Figure 2—Average per-carat prices for world rough diamond production, 2004-2016 (US$/ct). (Source: KPCS statistics) Gahcho Kué, where the De Beers-Mountain Province Diamonds joint venture began mining mid-last year, is expected to produce some 54 million ct over an initial 13-year life.