De Beers zero inventory strategy!
Despite
headwinds,
100% Sales
equal to production!
Update 1: Anglo American
published its preliminary financial results for 2018. Out of that, De Beers key
highlights are 1: Marketing increased at US$166 million to the highest spends
in a decade. 2: Tracr, the industry's first end-to-end blockchain-backed
asset-tracking platform. 3: Gemfair formalising the artisanal, small-scale
mining sector, delivering improved conditions and value for those
participating.
4:
Lightbox jewelry providing consumers with lower-priced, fashion jewellery using
lab-grown diamonds. 5:
Upstream
development of Venetia underground mine and DeBeers purchase of Peregrine
diamonds. 6: Exploration increased spends in Canada to support future production
potential.
De
Beers says a
strong performance in 2018, despite headwinds, “We demonstrated a robust
financial and operational performance in 2018, with revenue up four per cent to
US$6.1 billion, though earnings were down 13 per cent at US$1.25 billion,
driven by expenditure on activities to support future success.
We
made good progress on projects to expand our production capacity, including
continued work on transforming our Venetia Mine in South Africa into an
underground operation. However, there were a number of headwinds that impacted
consumer confidence, including the US-China trade dispute and weakening of the
rupee against the US dollar.
De
Beers prepared on a consolidated accounting basis, except for production, which
is stated on a 100% basis except for the Gahcho Kué joint venture in Canada,
which is on an attributable 51% basis. Consolidated sales volumes exclude
pre-commercial production sales volumes from Gahcho Kué.
Total
sales volumes (100%), which are comparable to production, were 33.7 million
carats (2017: 35.1 million carats). Total sales volumes (100%) include
pre-commercial production sales volumes from Gahcho Kué and De Beers Group’s JV
partners’ 50% proportionate share of sales to entities outside De Beers Group
from Diamond Trading Company Botswana and Namibia Diamond Trading Company.
Pricing
for the mining business units is based on 100% selling value post-aggregation
of goods. The De Beers realised price includes the price impact of the sale of
non-equity product and, as a result, is not directly comparable to De Beers
unit costs, which relate to equity production only.
Unit
cost is based on consolidated production and operating costs, excluding
depreciation and operating special items, divided by carats recovered. That includes
rough diamond sales of $5.4 billion (2017: $5.2 billion). In 2018, includes the
acquisition of Peregrine Diamonds Limited for a consideration of $87 million.
In 2017, includes pre-commercial production capitalised operating cash inflows
from Gahcho Kué.
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