by Greg Klein | November 26, 2015
Saying rough prices must fall by 30% to 50%, a leading industry commentator has called on De Beers head Philippe Mellier to resign. “The rough diamond distribution system is collapsing as De Beers and other mining companies attempt to force unsustainable artificially high rough diamond prices on the diamond trade,” Martin Rapaport said in a November 24 statement.
“Rough prices are higher than polished prices, which have come down to realistic levels due to the downturn in the global economy. The mining company’s refusal to lower rough prices is destroying the diamond trade, creating severe financial losses, illiquidity, supply shortages and the loss of tens of thousands of jobs…. Without a viable, profitable and sustainable diamond trade distributing their diamonds, De Beers diamond mines are worthless.”
Rapaport is chairperson of the Rapaport Group, described as “an international network of companies providing added value services.” The press release appeared on his news website, along with an article called Rough Bubble Bust.
Rapaport called on those working in the industry to contact Anglo American chief executive Mark Cutifani. “De Beers CEO Philippe Mellier’s brand of trade exploitation and cannibalization is no longer tolerable,” Rapaport charged. “It is time for Mellier to go.” Anglo owns 85% of De Beers, with the government of Botswana holding the rest.
A November 26 Rapaport News article predicted De Beers’ revenue will fall about 44% in 2015.
In a report released earlier this month, diamond analyst Paul Zimnisky said De Beers reduced its 2015 production plan by 12% with cutbacks in Botswana and South Africa. Although the company dropped rough prices around 10% at an August sight, prices remained unchanged at an October sale.
“Some buyers responded by rejecting up to half of their parcels offered, an indication that additional price cuts are probably still necessary in the current environment for some mid-stream clients to remain economically viable,” he stated. “Anecdotes suggest that in some cases it is still cheaper to buy polished on the open market than it is to buy rough directly and cut into polished.”
In a recent interview with Mining Weekly Online, Zimnisky said Canadian diamond mines are less likely to be affected by the downturn.