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RPT-From carats to peanuts: how a pandemic upended the global diamond industry

Wed, 12th Aug 2020 14:25

(Repeats story with no changes to text)
* Global diamond supply chains convulsed by pandemic
* Diamond polishers in India switch to farming
* Miners seek new supply deals to boost margins
* Mines from Canada to Lesotho still shuttered

By Helen Reid, Tanisha Heiberg and Rajendra Jadhav
JOHANNESBURG/MUMBAI, Aug 12 - As the coronavirus pandemic
upended the global diamond industry, shuttering mines from
Lesotho to Canada and disrupting supply chains, Rajen Patel
swapped diamond polishing for peanut farming.
Patel, who worked for a decade in India's Surat where about
80% of the world's diamonds are polished, joined the exodus of
gem workers leaving the city as cases of the virus shot up.
After taking up farming in his home village, he has no plans to
return in the coming months.
"I won't earn as much I was earning in Surat, but I won't
starve and there is no fear of getting infected with
coronavirus," he said.
Demand for diamonds has plummeted during the pandemic,
freezing sales and squeezing prices. With temporary mine
closures at risk of becoming permanent, diamond miners are
seeking ways to extract more value from their stones.
The lone bright spot has been steady demand for large,
high-quality diamonds from affluent investors, according to
financiers and sales data.
"There are a lot more enquiries from people seeking to buy
these luxury stones as a hedge," said Chris Del Gatto, CEO of
the DelGatto Diamond Finance Fund, the largest non-bank lender
to the diamond, jewellery and watch industries.
Prices for high quality one-carat diamonds are rising
steadily and are currently around 12% higher than at the start
of the year, in contrast to still-depressed prices for
lower-quality stones of the same size, data from trading
platform RapNet shows.
For an interactive graphic, click: https://tmsnrt.rs/2Pqtl74


"If you are in that top end, the demand is still there
because the people who go for these type of goods feel the
pressure of the market downturn less," said Gus Simbanegavi, CEO
of Bluerock Diamonds.
But only a few miners are lucky enough to have deposits of
large, high-quality diamonds, leaving some producers at risk.
GRIM YEAR
COVID-19 has forced miners to cancel or delay sales, with
major diamond shows scrapped due to health and travel
restrictions. The few sales that have taken place showed rough
diamond prices down between 15% and 27%.
"What has happened in the second quarter, I have never seen
in my life," De Beers Chief Executive Bruce Cleaver told
Reuters. "There was no really properly functioning rough
market."
Indian imports of rough diamonds plunged from $1.5 billion
in February to just $1 million in April, data from the Gem &
Jewellery Export Promotion Council shows.
For an interactive graphic click here: https://tmsnrt.rs/2XxZuhs



Antwerp, another diamond hub, saw rough imports drop 20%
year-on-year in the first half, according to data from Antwerp
World Diamond Centre. The city's exports of polished diamonds
fell 46%. https://tmsnrt.rs/2DEez9P

REAL OPPORTUNITY
In a bid to survive, some miners are trying to change the
traditional pricing game by securing a cut of onward polished
diamond sales, and miners may eventually have direct tie-ups
with luxury jewellery brands, RCC Diamond Consultants managing
director Richard Chetwode predicts.
Australia's Lucapa Diamond Co inked a deal with an
unnamed "high-end diamantaire" to sell some of its high-value
diamonds from the Mothae mine in Lesotho for $505 per carat plus
a 50% share of the margin on the future polished diamond sale.
Lucara Diamond Corp,, which mines in Botswana,
struck a deal in July with Antwerp manufacturer HB Group under
which the miner's diamonds larger than 10.8 carats are sold for
a portion of the estimated polished price.
"There is real opportunity within the diamond business as a
whole to modernise the sales system," said Lucara CEO Eira
Thomas. Lucara has also set up an online diamond sales platform.
In the meantime, miners are hoping production cuts will help
prices recover. With Rio Tinto's massive Argyle diamond mine in
Australia among those coming offstream soon, global diamond
production will likely be reined in until 2025, independent
analyst Paul Zimnisky forecasts.
For an interactive graphic, click here: https://tmsnrt.rs/3icmNFm




Several diamond mines shuttered due to the pandemic have
also yet to reopen, including Stornoway Diamonds' Renard mine in
Canada, Petra Diamonds' Williamson mine in Tanzania, and
Firestone Diamonds' Liqhobong mine in Lesotho, which the company
said would likely stay closed until April to preserve cash.

Meanwhile, Africa-focused Petra Diamonds is in
restructuring talks with creditors, while in Canada's Northwest
Territories, Rio Tinto's Diavik mine partner has sought creditor
protection, saying it cannot afford the miner's cash calls.
Even De Beers is feeling the pain, saying job cuts are
likely, as it remains unclear whether supply will shrink enough
to meet plunging demand in the global diamond jewellery market,
which Bain estimated was worth $80 billion in 2019.
Industry hopes that the pandemic would boost sales of
engagement rings as people reassessed life priorities and more
made plans to get married have not borne out.
In retailer Tiffany & Co's February-April quarter,
engagement jewellery was the worst-performing category, with
sales almost halving.
Overall, fine jewellery sales are expected to drop 19% this
year, compared to a 3% rise last year, according to Euromonitor.




(Additional reporting by Zandi Shabalala in London; Jeff Lewis
in Toronto, Silvia Aloisi in Milan, Melissa Fares in New York,
Polina Devitt in Moscow, Sophie Yu in Beijing; Editing by Amran
Abocar and Kirsten Donovan)

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