De Beers Plans 5% Annual Price Increase to Meet Anglo Returns Target
Anglo American’s revenue produced from diamonds comprised approximately 19 percent of their $33 billion total sales in 2013. Anglo owns 85 percent of De Beers, which means they have significant reason behind their new push for even greater returns. Anglo has set the goal for its unit returns on capital at 15 percent by 2016. This has led De Beers’ plans for an annual increase of five percent.
This five percent annual increase decided upon by De Beers represents an evenly graduated increase over the next three years. The company is banking on this graduated increase matching growing demand in the marketplace, creating an essentially seamless increase in prices. Some would even say it’s an increase that may potentially go unnoticed by customers over the long haul. With that, De Beers is not forecasting any additional increases for this current year beyond the five percent it’s already risen.
The U.S. economy’s recovery from the global financial crisis and China’s growing middle class have been attributed as the leading causes for the price more than doubling in the past five years. Rough diamond prices increased by approximately 10 percent this year. “We know the long-term trend, we know demand is going to be bigger than supply. One of the objectives is more stable prices and to drive volatility out. We have a plan to get there. My team is very focused. It’s our one objective, the objective,” says Chief Executive Officer Philippe Mellier.
It’s not just an increase in U.S. demand that will help De Beers drive its price increase. Having suffered a setback in sales in 2013 due to the fall of India’s rupee, De Beers does foresee a rejuvenated India providing a global demand increase of two percent, climbing to 10 percent.
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.