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De Beers says diamond demand hit record high but warns of possible Snap Lake closure

by Greg Klein | March 20, 2015

Last year’s global diamond jewelry demand reached an all-time high of $81 billion, according to De Beers data released March 20. Sales overtook 2013 numbers in each of the world’s top five diamond markets, which account for 75% of global demand. Although the pace of growth slowed in China, India and Japan, American consumers helped push spending to record levels.

Overall, demand rose 3% globally. The U.S., the world’s fastest-growing market, climbed 7% to $37 billion. Even with China’s slower rate of increase, the Asian giant’s demand rose 6%. India, Japan and the Gulf states each saw increases of about 2%.

De Beers says diamond demand hit record high but warns of possible Snap Lake closure

Snap Lake, De Beers’ first mine outside Africa,
could close without an amended water licence.

“Retailers are also positive about the prospects for 2015,” said De Beers Group chief executive Philippe Mellier. Looking farther ahead, he added, “As the number of middle class households in the major consumer markets is set to grow by hundreds of millions in the years ahead, the medium to long-term prospects for the diamond industry are also exceptionally strong if the right investments continue to be made across the value chain.”

With mines in Canada, South Africa, Botswana and Namibia, De Beers is the world’s largest diamond producer by value. The company, held 15% by the government of Botswana and 85% by Anglo American, has made diamonds the second-most profitable commodity for Anglo. De Beers controls about 35% of rough diamond sales globally, part of a vertically integrated operation spanning the industry from exploration to retail.

In Canada, De Beers runs the Northwest Territories’ Snap Lake mine and Ontario’s Victor Mine, and also holds a 51% stake in the NWT’s Gahcho Kué, a joint venture with Mountain Province Diamonds TSX:MPV. Considered the world’s largest diamond development project, Gahcho Kué has production scheduled for 2016.

But De Beers has warned that Snap Lake could face a shutdown. On March 11 the mine’s COO Glen Koropchuk told a Mackenzie Valley Land and Water Board panel that the mine “cannot continue to operate” without an amended water licence.

Canada’s only fully underground diamond mine, Snap Lake has experienced a greater inflow of groundwater high in “naturally occurring total dissolved solids,” some of which is currently being stored underground. Saying the situation isn’t sustainable, the company wants permission to release greater quantities of water from the mine. Otherwise the seven-year-old operation could cease, throwing nearly 800 people out of work, Koropchuk indicated.

The mine produced 1.2 million carats last year. Analyst Paul Zimnisky has estimated an equal level of production this year at an average price of $105 per carat.

A De Beers spokesperson didn’t respond to inquiries from ResourceClips.com.

Read more about diamond supply and demand.

Read about diamond mining in Canada.

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