Iconic 138-year-old company in South Africa shuts down largest operation
Iconic diamond group De Beers will halt production at its Venetia mine in South Africa for 2 years, amid major challenges for the diamond industry.
The Venetia mine is the group’s largest diamond mining operation, which launched in 1992. It has been the largest diamond producer in the country since 1995, producing about 40% of all diamonds.
De Beers was founded in 1888 in Kimberley, Northern Cape, by the controversial British businessman Cecil Rhodes.
Rhodes merged his mining assets with competing operations to consolidate control over the diamond industry.
De Beers is owned by Anglo American, which holds an 85% stake, and the Government of the Republic of Botswana, which owns the remaining 15%.
The diamond industry is facing major headwinds, including weak consumer demand and the rise of lab-grown diamonds, which avoid the environmental issues associated with mining and are sourced from conflict-free areas.
The group is thus undergoing a massive streamlining of its business by setting a number of planned portfolio and organisational changes to ensure an efficient cost base.
It said this will ensure the group has an efficient cost base that strengthens near-term resilience while enhancing future competitiveness.
Since 2024, the group has eliminated $100 million in annual overhead costs through streamlining activities.
The group has also sold or closed a number of non-core assets and undertaken significant capital and cost reconfigurations to support asset expansion projects.
As part of its recent efforts to improve resilience, the group now intends to pause production at the Venetia mine in Limpopo for 2 years to reduce costs.
This will also allow De Beers to rephase capital expenditure on its underground project at the mine.
“This will involve critical infrastructure investment to enhance the capacity and efficiency of the mine, with the intention to support future production growth as business and industry conditions improve.”
The mine was an open-pit mine for 30 years. However, after exhausting the open-pit operations, De Beers announced a new 1,000-metre underground expansion to extract the remaining ore.
De Beers is now engaging with stakeholders in accordance with the legal requirements. The group said it will support affected employees and invest in its Social and Labour Plan commitments.
Not just South Africa
The move at Venetia comes after the decision to pause the Tuzo Phase 3 expansion project at the Gahcho Kué mine in Canada.
Moreover, the group added that it will reconfigure its global operating model to prioritise resources on the core operational businesses and reduce its central corporate cost base.
“We recognise the protracted challenging conditions as the diamond industry evolves,” said Al Cook, CEO of De Beers Group.
“We are encouraged by signs of consumer demand growth in the US and beyond, particularly in higher-quality diamonds.”
Cook said that the global rough diamond supply is declining, bringing more support to the market, noting that the changes in the business are focused on improving efficiency.
The group noted that the increasing rarity of diamonds and the emerging signs of improvement in consumer demand are expected to support longer-term value creation.
Nevertheless, rough diamond trading conditions are expected to remain challenging in the near term due to cyclical and industry-specific factors.
Headline Image Source: Reuters
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