Information on the target
The target is a leading player in the diamond mining industry, operating on a consolidated accounting basis. Its production figures are reported on a 100% basis, with the exception of the Gahcho Kué joint venture in Canada, which is accounted for on an attributable 51% basis. In the latest reporting period, the company achieved total sales volumes of 33.7 million carats, a slight decrease from 35.1 million carats in the previous year. This figure includes both pre-commercial production sales from Gahcho Kué and the 50% proportionate share of sales from its joint venture partners.
The pricing strategy for the mining business units is based on the 100% selling value after aggregating goods. The realized price reflects the impact of non-equity product sales, making it not directly comparable to unit costs, which pertain solely to equity production. The company reported rough diamond sales of $5.4 billion, marking a 4% increase from the previous year, driven by improved consumer demand for diamond jewelry.
Industry overview in the target’s specific country
The diamond industry in the target's country has shown resilience despite global economic fluctuations. Preliminary data for 2018 indicates a rebound in consumer demand for diamond jewelry, particularly in the United States and China. The first half of the year saw solid growth, but the latter half faced challenges due to increased political uncertainty and stock market volatility, which dampened demand. In India, the depreciation of the rupee further impacted local demand in US dollar terms, highlighting the interconnectedness of global markets.
The midstream sector began the year positively, buoyed by healthy demand for polished diamonds. However, as the year progressed, the low-priced product segment encountered significant pressure due to weak demand and surplus availability. This was exacerbated by the rapid depreciation of the rupee and a tightening of bank financing, leading to a surplus of low-priced polished diamonds by year-end.
Operationally, the mining sector experienced a 6% increase in rough diamond production, totaling 35.3 million carats. This growth was primarily driven by increased output in Botswana and Namibia, while production in South Africa faced challenges due to operational suspensions and lower ore grades. The overall production figures reflect the industry's ability to adapt to changing market conditions while striving to maintain profitability.
Looking ahead, the outlook for the diamond industry remains cautiously optimistic, with production expected to range between 31-33 million carats in 2019. Howev…