Investor Alert: De Beers Forecasts Diamond Price Jump By 2020
Diamond extraordinaire De Beers cautioned on Tuesday that global production of the gemstone will decline from 2020, suggesting prices for diamonds could increase exponentially.
"Unless major new discoveries are made in the coming years, supply can be expected to decline gradually from 2020," De Beers said.
According to the inaugural “Diamond Insight Report,” published by the De Beers Group of Companies, a reduction in supply from existing sources will likely not be matched by new production. Diamond supply is expected to flatten out in the second half of the decade before declining in 2020 and onwards.
Diamond mines in Botswana, South Africa and Namibia are becoming exhausted, forcing mining companies to dig deeper, making operations less profitable.
The three principal input costs – labor, electricity and diesel – have all seen increases well above local inflation levels in the primary diamond producing countries over the last decade, and the trend is set to continue.
De Beers is now turning its sights on Angola, the Democratic Republic of Congo, Zimbabwe, the Siberian Arctic and Canada.
Global demand for diamonds
The report also highlighted the demand for diamonds, which is expected to continue to grow, driven by the U.S. and from growth of the middle classes in developing markets such as China and India.
"Even under scenarios of volatile or weaker global economic growth, demand for diamonds is expected to show positive real growth in the next decade," De Beers said.
Global demand for diamond jewelry reached a record high of $79 billion in 2013.
"China and India, the engine for growth, these two big markets clearly could be as big as the US in the next maybe 15 years," De Beers's CEO, Philippe Mellier said. In addition, he expects the Chinese market to grow at more than 10% per year for "many more years".
While a supply shortage and price hike may not necessarily be good for consumers, it’s not such a bad thing for De Beers. The company accounts for roughly 33 percent of global rough diamond sales.
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.