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Report: De Beers may reduce buyers to improve margins in 'new diamond world'

Anglo American PLC's diamond unit, De Beers SA, is considering slashing its roster of handpicked buyers and changing diamond allocations amid customers' struggle to generate profits, Bloomberg News reported Jan. 17, citing people familiar with the matter.

A glut in rough and polished diamond supplies eroded margins at middlemen, while banks also restricted funding for the sector.

By decreasing its number of customers, De Beers could help boost the clients it retains, according to the newswire.

De Beers requires buyers to accept the usually discounted gem price and quantities they are offered through 10 sales cycles each year. However, the company was forced to provide some flexibility in 2019 amid an industry crisis.

The report said one key issue is the company's system of allocating more diamonds to buyers, also called sightholders, that have previously purchased large amounts. Designed to reward the strongest buyers, the policy may also have resulted in irrational buying. The company may change the allocation criteria to be more subjective, the report said.

Customers have reportedly been told that an update on possible changes may come during the company's first sale of the year and annual cocktail party in Botswana next week.

No final decisions have been made, and details are likely to go public later this year, the sources said. The report noted that De Beers' current six-year contract with buyers expires by 2020-end.

A De Beers spokesperson declined to comment on specifics when Bloomberg News asked about the possible changes. "We will be communicating directly with customers in the coming months about the new contract, which will focus on [maximizing] the opportunities in the new diamond world," Bloomberg quoted the company as saying.

In December 2019, De Beers reported provisional sales of US$425 million in its 10th and final cycle of the year, dropping from US$540 million year over year.