In the recently published, The Future of the Natural Diamond (ND) Industry- by BCG in collaboration with De Beers Group the report said, on the Primary Production front, in a long-term rough diamond production declining.
New Greenfield sites are unlikely to contribute any significant upside to the current ten-year supply forecast. Mine exploration budgets are heavily suppressed and have fallen to 20% of 2007 levels: approximately $200 million in 2023 versus approximately $1 billion in 2007.
In addition, lengthy mine-development timelines will prevent significant volume increases over the next ten years, even if diamond values increase. For example, the Luele mine was discovered in 2013 but production did not start until 2023.
Despite this long-term outlook for Greenfield sites, supply elasticity from existing mines based on prevailing diamond demand is possible. Cyclical supply from mines higher up the diamond cost curve is more sensitive to fluctuations in demand.
Periods of depressed demand often result in supply pauses (sometimes permanently) from such mines. Conversely, positive demand conditions increase the financial viability, resulting in (re)opening or life-extension projects.
For this reason, the currently depressed demand environment has put downward pressure on supply. More mines are suspending production or shut down earlier than expected (for example, De Beers’s Snap Lake mine paused production in 2015 and began active closure in 202213).
A continued negative price outlook could drive additional declines in supply as more projects face delays or are discontinued due to low financial viability. Conversely, a potential sustained positive price outlook could promote some cyclical supply with higher operational capability to be maintained. This could potentially result in an overall flatter supply forecast.
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