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De Beers suffered heavy losses in the first half of the year due to Covid-19, and cautioned that substantial challenges would remain for the diamond market.

The diamond miner fell into the red for the six months ending June 30, with an underlying loss of $214 million compared to a profit of $187 million a year earlier. Earnings before interest, tax, depreciation and amortization (EBITDA) came to just $2 million, versus $518 million in the first half of 2019.

“Significant challenges for rough-diamond demand look set to continue in the short term with the ongoing restrictions to travel in southern Africa, as well as the risk of further Covid-19 cases in the Indian cutting centers,” the company explained in an interim report that parent Anglo American published on Thursday.

De Beers hosts 10 sights a year at its sales headquarters in Gaborone, Botswana. However, the travel restrictions forced it to cancel its third sight, which began in late March, and allow sight holders to defer their full allocations at subsequent events. The company’s rough sales fell 56% year on year to $1 billion for the period, and most of that revenue came from the first two sights of the year, before the pandemic. The average price declined 21% to $119 per carat, while the company’s average rough price index fell 8%.

Total revenue dropped 54% to $1.22 billion, including sales from De Beers’ rough unit, its industrial and synthetic diamond business Element Six, and other divisions such as grading and research.

De Beers said it was accelerating its business transformation as a result of the slowdown, including a review of its mining operations and its rough sales platforms. The company sells about 90% of its rough through long-term contracts to sight holders, and the rest via its auction platform. A reappraisal of the contracts was under way before the coronavirus crisis, with De Beers planning a more customized supply model by dividing clients into three categories: manufacturers, dealers and retailers.

CEO Bruce Cleaver was due to address employees on Thursday about the plans, according to a report on Miningmx. The company maintained its full-year outlook of recovering 25 million to 27 million carats in 2020. Production fell 27% to 11.3 million carats in the first half.

The company’s jewelry brands also saw steep declines as a majority of its De Beers Jewellers stores and its retail partners that carry Forevermark were closed for large parts of the reporting period. While most have reopened, there is still a risk of further shutdowns, De Beers noted.

“The current market outlook is highly uncertain owing to the possibility of a second wave of Covid-19 infections [and] the ability of fiscal and monetary measures to continue to support employment and businesses in consumer countries, as well as the shape and strength of the global macroeconomic recovery,” the company said.

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