De Beers looks to bring clarity to diamond market

James Wilson

De Beers is to break with decades of secrecy over the state of the diamond trade as it prepares to divulge details of sales for the first time.

The miner and diamond trader hopes that publishing revenues from regular sales events, known as sights, will help to underpin a recovery in the diamond market, which has suffered from a slowdown in demand, build-up of stock and falling prices.

Last year “felt as though the fates conspired against us”, said Philippe Mellier, chief executive.

De Beers’ customers take part in 10 annual sights, during which they are invited to view and purchase boxes of rough diamonds over several days at prices set by the miner. This year’s first sight took place last week in Botswana.

Longstanding opacity about the company’s revenues from sights had left a vacuum in which rumours of sales volumes proliferated. From this week, the group, which is still the largest diamond miner by revenues, will dispel these rumours by revealing its sight-by-sight sales figures.

The change in policy by De Beers, which has lost its virtual supply monopoly but remains a dominant industry force, is being welcomed by customers and company analysts as a move that will bolster confidence in the industry and improve transparency.

Jackie Morsel, vice-president at Dali Diamond, a De Beers’ sightholder, said: “Since it will increase transparency, it is indeed a positive change.

The additional information will also help investors to glean more about Anglo American, its parent. De Beers’ sales and profits have been increasingly important to Anglo during the past two years as the price of other commodities, from platinum to iron ore and coal, have plummeted. Shares in the UK-listed mining group lost three-quarters of their value last year.

Announcing the policy, Mr Mellier told investors: “We will communicate after each sight the sales of each sight, so that you don’t rely on rumours and you will understand exactly where we are.” – Philippe Mellier, De Beers chief executive

Des Kilalea, analyst at RBC Capital Markets, said: “Publishing the dollar sales figure from the sights will help dispel some of the conflicting numbers which tend to come out and help understanding of De Beers and Anglo.” Some commentary on price trends “would be a welcome addition”, he added.

Information about the first sight of the calendar year will be particularly important since it follows a key Christmas sales period in the US, during which De Beers stepped up its seasonal marketing to stimulate demand.

Strong demand for rough diamonds from De Beers’ customers would suggest sales for polished diamonds were healthy and that retailers and traders needed to restock.

Mr Mellier said this month that polished diamond prices had begun “to stabilise and even increase in certain areas”.

Ed Sterck, an analyst with BMO Capital Markets in London, said: “De Beers probably wants to show its buyers that things are not easy for them either, and that they do not have scope to drop prices as some in the trade have called for.

At the moment, all we get is the rumour mill about how sights have gone. It seems De Beers wants to reduce the amount of speculation and foster more trust with sightholders in what appears from the outside to be a relatively opaque system.

Source Financial Times