Finsch closure epitomises slump in natural diamonds
Diamonds are no longer forever amid the biggest crisis for the industry in 100 years. Competition from lab-grown diamonds and falling consumer demand from China and the US have resulted in mine closures and job losses in South Africa.
The sector now contributes just 0.14% of GDP from about 15% in its 1980s heyday. In that decade, it employed about 23,000 people, and in 2005 the figure stood at 22,033 — but by last year employment had plunged by about 50% to 11,277.
Recent mine closures include Ekapa in the Northern Cape, which was liquidated after five people were killed in a mudslide in February.
According to Minerals Council South Africa, the only major remaining mines are Venetia in Limpopo — where De Beers has suspended operations for two years — Cullinan in Gauteng and Baken in the Northern Cape. Other, smaller diamond operations are mainly alluvial.
The De Beers decision to freeze production at Venetia is part of a cost-cutting drive. Parent company Anglo American is in talks to sell De Beers, which has recorded write-downs in its carrying value due to the market downturn.
Petra Diamonds’ Finsch mine in the Northern Cape, which competes directly with synthetic diamonds, was placed under business rescue in May, while Petra sold Koffiefontein in the Free State to Dubai’s Stargems two years ago.
LSE-listed Petra owns 74% of Finsch. Joint business rescue practitioners (BRPs) Luke Saffy and Daniel van Jaarsveld “have not found a viable outcome to restart operations”. They said creditors have approved the plan to sell off the assets of Finsch “in order to recover the maximum amount of value possible”, according to the business rescue plan.
Finsch is particularly affected by the growing production of lab-made diamonds because these are displacing smaller natural gems — and more than 90% of its production is rough diamonds of two carats or less.
Management forecasts demonstrated that the company was consuming cash at an unsustainable rate.— Finsch BRPs
Saffy and Van Jaarsveld said efforts to stabilise Finsch’s finances, including restructuring and a reduction in corporate overheads, had not helped.
The mine’s revenue declined 44% year on year to R1.26bn for the 12 months to end-June 2025, while losses widened to R874m from R1.14bn, resulting in cumulative losses of R2bn over two years. The situation worsened in the first six months of 2026 as diamond prices fell 23% below budget, resulting in sales revenue being R604m lower than forecasts.
The BRPs said operating cash flow losses after capital expenditure were R70m a month. While mining performance and recovered grades were in line with expectations, this pointed to losses being driven by lower diamond prices and reduced sales volumes.
“Management forecasts demonstrated that the company was consuming cash at an unsustainable rate and would remain materially loss-making and cash-negative for the foreseeable future,” they said.
Kago Diamonds owns 14% of Finsch and an employee trust holds the remaining share.
The BRPs said the business plan did not foresee continued operations at the mine. “Instead, the plan provides for a structured, controlled recovery, preservation, marketing and disposal process whereby the remaining value of the company is realised and distributed to shareholders,” they said.