Industry Overview

There is a positive long-term outlook for the diamond market due to inherent production constraints which suggest that supply will struggle to keep pace with demand

Diamond Market Overview

  • 134 million carats were produced in 2016, with a total value of US$12.4 billion
  • Global diamond production peaked in 2005 at 177 million carats. Many commentators believe that production will not reach this level again and that the world has therefore already seen ‘peak diamonds’
  • New production coming on stream is unlikely to cover the declining profile of many of the world’s existing diamond mines (which are either due to reach the end of their lives or cannot maintain previous high levels of output) and discovery of new mines is limited
  • The success rate in diamond exploration is estimated as less than 1% and there have been no major new finds since the early 1990s
  • Global consumer market for diamond jewellery increased 0.3% in USD to US$80 billion in 2016
  • Demand growth is being driven by continued growth in the major US market and rising wealth in emerging markets, growing middle classes and
  • There are six major diamond trading hubs (the middle market): Antwerp, New York, Tel Aviv, Dubai, Hong Kong and Mumbai

Global diamond supply

  • Global rough diamond supply increased 5% in 2016 with increases from the Democratic Republic of Congo and Canada, offset by a significant decline from Zimbabwe
  • The world’s largest diamond mines are maturing and past their peak production levels
  • Potentially the world has already seen peak diamond production of circa 177 Mcts in 2005
  • The success rate in diamond exploration is estimated as less than 1% and there have been no major new finds for over 20 years
  • A number of mines came on stream in late 2016 – namely Gahcho Kue and Renard in Canada and Liqhobong in Lesotho, however these are not ‘new’ projects (Gahcho Kue was first discovered in 1997, Renard in 2001 and Liqhobong in the 1950’s)
  • Supply forecast to increase to ca. 143 Mcts by 2019 before declining to ca. 101 Mcts by 2030 (source: Canaccord Genuity)

World Diamond Mines

A key characteristic of diamond deposits is their scarcity, in contrast to many other commodities, and there are just 30 significant diamond mines in production today. Only seven mines in the world are considered to be Tier 1 deposits (+US$20 million Reserves).

To date, the most important discoveries (other than Argyle in Australia) have clustered into three regions of the world: southern Africa, Siberia, and western Canada.

Click on graphic to increase size.

Key demand drivers

  • Continued growth in the major US market where there is a very strong diamond buying culture
  • Bridal jewellery continues to be the foundation for the US market, but recent consumer research has identified self-purchase by women as an important growing demand category, as well as products aimed at millennials
  • Continued urbanisation, growing middle classes and rising wealth in emerging markets, particularly China and India
  • Diamonds are a ‘late cycle’ commodity, benefiting from the later stages of a country’s economic development
  • Brides in developing countries such as China and India increasingly desire diamonds in their bridal jewellery, as well as traditional gold
  • Rise in generic diamond marketing to consumers funded by the Diamond Producers Association, focused initially on the US, India and China
  • Mass luxury (i.e. affordable jewellery items priced from US$200 to US$2,000+) expected to drive the market
  • Trend to use diamonds across a wide range of luxury goods, from watches and accessories to

World polished diamonds consumption in 2016

  • The global diamond jewellery market (by value) grew 0.3% at a constant FX to circa US$80 billion;
  • The major US market recorded the strongest growth rate of 4% and increased its market share to 47%
  • The Chinese market (including Hong Kong and Macau) in local currency grew 1% to 16% of the global polished diamond demand share by market
  • The Indian market in local currency fell by 9%, impacted by an uncertain economic climate and the demonetisation process in late 2016
  • The diamond market in all regions remains underpinned by the engagement and bridal markets
  • The De Beers Diamond Insight Report 2017 noted “a relatively benign macro-economic environment should support global demand for diamonds in 2017. Geopolitical and policy uncertainties drive potential downside scenarios for the industry in the short to medium term.

Petra’s market position

  • Global production by volume: 134.1 Mcts
  • Global production by value: US$12.4 bn
  • De Beers, ALROSA and Rio Tinto (“the Majors”) remain the dominant players in the diamond market, accounting for circa 61% by volume in 2016.
  • Beneath the Majors there are only four sizeable quoted diamond producers, being:
    Petra, Dominion Diamond, Lucara Diamond, and Gem Diamonds.
  • Based on FY 2017 production of 4.0 Mcts and sales of US$477.0 million, Petra accounted for 3% of world supply by volume and 4% by value.
  • Petra’s world-class resource of 305.0 Mcts ranks fourth by size after De Beers and ALROSA. This factor, combined with the significant size of Petra’s orebodies, suggests relatively long lives for the Company’s mining operations (in particular, Cullinan and Williamson have the potential to be in production for over 50 years to come)