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Anglo American has warned that its De Beers diamond division will cut production further as the luxury market braces itself for a protracted depression amid a downturn in high-end spending by Chinese consumers.
The pullback in output would add to already implemented plans to curtail production by 10 per cent at the world’s largest diamond mining company by value, which resulted in second-quarter output falling 15 per cent year on year to 6.4mn carats, according to an update on Thursday.
A sale or listing of De Beers is one of four key parts of Anglo’s sweeping break-up plan to fend off a £39bn takeover approach from industry peer BHP earlier this year, but the depth of the diamond market slump is raising a potential problem for executing that aim by the end of 2025.
“Trading conditions became more challenging in the second quarter as Chinese consumer demand remained subdued,” said Anglo’s chief executive Duncan Wanblad.
High inventories for diamond traders and manufacturers and expectations that any recovery will be “protracted” meant the company was “therefore actively assessing options with our partners to further reduce production to manage our working capital and preserve cash”, he added.
The prospect of deeper production cuts for diamonds came as the company laid bare the effects of other setbacks — which had been anticipated by analysts — in its second-quarter production update.
Full-year guidance for metallurgical coal was downgraded from 15mn to 17mn tonnes to 14mn to 15.5mn tonnes after a fire broke out at Grosvenor, one of its Australian mines, putting it out of action for months.
Costs for the coal business are also expected to be significantly higher this year, at a range of $130 to $140 per tonne, up from $115 per tonne.
Anglo is prioritising the sale of its metallurgical coal division due to strong buyer interest, with the divestitures of De Beers, its platinum unit and nickel to follow.
It also said an impairment on its Woodsmith fertiliser mine in North Yorkshire, UK, on which spending will be drastically cut back as part of the turnaround plan, is expected in its half-year results next week.
Shares in Anglo gained 2 per cent in early trading in London on Thursday as production for most commodities beat consensus analyst forecasts.
Anglo achieved record second-quarter iron ore production in Brazil, and is on track to meet guidance for its copper unit.
Wanblad reiterated his commitment to completing the majority of the rationalisation of the company to just copper, iron ore and fertiliser within 18 months.
“We are working at pace to execute on the asset divestments, including steelmaking coal,” he said. “Work is progressing with the aim of substantively completing this transformation by the end of 2025.”
