Diamond sales drop at Anglo American's De Beers

Anglo American said on Tuesday that the value of rough diamond sales at De Beers fell in the eighth cycle of the year.

Sales declined to $475m from $503m in the seventh cycle, but were up from the $376m achieved in the eighth cycle of last year.

De Beers chief executive officer Bruce Cleaver said: "While the rupee-dollar exchange rate has impacted demand for lower value categories, we continue to see steady overall demand for De Beers Group rough diamonds, reflecting ongoing consumer demand for diamond jewellery in the US."

RBC Capital Markets said that although down on the last sale, this is in line with seasonal trends and importantly avoided the dip from last year.

"Year-to-date diamond sales are at $4.4bn versus $4.39bn at this point in 2017 which is a fairly resilient performance considering the pressures mentioned in the release around the impact from a weaker Indian rupee on the value chain, a theme we have touched on in the past," said analyst Tyler Broda.

"There is likely an element that De Beers pushed through some of the deferrals from last sale though which has smoot‎hed the results. Nonetheless this recent sight shows the diamond market is holding in through some of the recent macro volatility. With production in the diamond space likely to fall in aggregate over the next couple of years, we continue to see the potential for a slight increase in diamond prices over the coming year."

Broda said that while Anglo ‎has outperformed the FTSE 350 mining index by 17% year-to-date, RBC continues to see modest upside in the shares and prefers the diversified commodity exposure even with any headwinds from upcoming South African elections that may arise.

"Anglo American remains the only diversified company in our coverage that is investing above the 3.5% EV/expansion capex Miningball ratio necessary to sustain market position through a cycle."