The rapidly-spreading coronavirus pandemic has quashed diamond miners’ dawning hopes of a recovery in a sector severely hit by weak prices and demand since late 2018.
The market began suffering from the effects of the covid-19 spread in early March and measures to contain it has already pushed De Beers, the world’s largest producer by value, to cancel its April sales event.
Russia’s Alrosa, the world’s No.1 producer of rough diamonds by carats, said earlier this month that it was studying options for online trade as global travel restrictions make traditional physical inspection of gemstones almost impossible.
Mines in South Africa, Canada and Lesotho have been put on care and maintenance for at least a few weeks to stop the spread of the virus.
Smaller producers, however, have
been forced to make more extreme decisions, suspending guidance for the year
and halting operations. Mines in South Africa, Canada and Lesotho have been put
on care and maintenance for at least a few weeks to stop the spread of the
virus.
According to VTB Capital’s estimates,
increasing
mining disruptions put at risk 2.5% of rough diamonds supply expected for the
year.
Canada’s Lucara Diamond (TSX:LUC) said on Wednesday it continued to operate, but noted the extent of how covid-19 might change the business landscape was impossible to judge.
The Vancouver-based company also
suspended production and sales outlook for the year. It had guided recoveries
of between 370,000 to 420,000 carats for 2020. Sales had been estimated at
between 350,000 to 390,000 carats, generating $180 to $210 million in
revenue.
“The global diamond industry is
experiencing the widespread impacts of COVID-19 throughout the value chain,
manifested as fewer sales, weaker pricing and production curtailments at
several mines,” chief executive, Eira Thomas, said in the statement.
“Though the Karowe diamond mine continues to operate according to plan, and the first quarter 2020 sale achieved results within expectations, the full impact of COVID-19 on our business remains uncertain,” Thomas said.
Production cuts are not enough to help the market swing to undersupply.
Petra Diamonds (LON:PDL) also had to halt its production outlook for fiscal 2020 after closing its mines in South Africa for a mandatory 21-day lockdown aimed at tackling the worsening coronavirus pandemic.
Ruby and emerald miner Gemfields (LON: GEM), which returned to the London Stock Exchange in February, has suspended “all but critical operations” at its Kagem mine in Zambia and cancelled an upcoming auction.
Rough diamond supply disruptions
are mounting and might be amplified by precious metals and gems repository
Gokhran expected acquisition of between $0.5 and $1 billion Alrosa’s rough
diamonds this year, says Dmitry Glushakov, VTB Capital’s head of metals &
mining research.
The cuts, however, are not enough
to help the market swing to undersupply, according to Liberum analyst Ben
Davis. He says announced output cuts would reduce supply by around 12% and
that, even if prices go up as a result, small miners remain in dire
straits.