Diamond Market Overview

• 107.1 million carats were produced in 2020, with a total value of US$9.2 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
• Global consumer market for diamond jewellery was flat to slightly lower in 2020, at US$80 billion
• Demand growth is being driven by continued strong underlying fundamentals in the major US market and growth in middle classes in China and India
• 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 decreased 22% in 2021. Material reductions in the volume of rough diamond supply came in Russia, Botswana, Australia, Canada, the Democratic Republic of Congo and Namibia, due to a combination of production being slowed or temporarily shut down due to COVID-19, pending exhaustion of resources, mine closures, operations transitioning from open pit to underground and falling alluvial output. Increased volume of output was recorded in South Africa and Zimbabwe.
• During November 2020, Rio Tinto ceased mining at Argyle in Australia after 37 years of operations, with closure and rehabilitation to take five years. Argyle produced 11 Mcts in 2020 against 13 Mcts in 2019.
• 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)
• For CY 2021, various sources project rough supply to increase as mines come back into production, though the increase will be ameliorated by the closure of Argyle which still accounted for 11 Mcts of global output in 2020. Bain & Co’s “Optimistic” scenario projects that mines which continue to operate will reach pre-pandemic production levels by 2021-2022 and that global inventories will gradually sell out in a year.
• Longer term, there are forecast to be few material additions to production over the next decade, with rough diamond supply forecast to remain “almost flat” at 2021-type levels over the next 10 years, according to Bain & Co, with few projects coming on line.

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.

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 Natural Diamond Council, 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 2020

• Global demand for diamond jewellery in 2020 declined by an estimated 14% to US$68bn as a sharp drop in the first half was followed by moderating year-on-year declines in the second half of the year.
• The major US market, which accounts for ca.51% of demand fell by 7% to US$35bn.
• Mainland China consumer demand in both local currency and US$ fell by 26% as Chinese acquisitions abroad declined sharply due to international travel bans, while domestic demand declined by only half of this rate.
• The Indian market fell 28%; the Gulf market fell 19% and the Japanese market fell 17% in US$ terms.

Petra’s market position

• Global production in 2020 by volume: 107.1 Mcts
• Global production in 2020 by value: US$9.2 bn
• De Beers, ALROSA and Rio Tinto (“the Majors”) remain the dominant players in the diamond market, accounting for circa 65% by volume in 2020.
• Beneath the Majors there are only four sizeable quoted diamond producers, being:
  Petra, Arctic Canadian Diamond Company, Lucara Diamond, and Gem Diamonds.
• Based on FY 2021 production of 3.2 Mcts and sales of US$402.3 million, Petra accounted for 3% of world supply by volume and 4% by value.
• Petra’s world-class resource of ca. 230 Mcts ranks third 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).