[LONDON] De Beers – the world’s largest diamond miner by volume – is likely to be listed or sold in the near future, with the implications expected to be felt across the global diamond market.
It was reported last week in the Wall Street Journal that British multinational mining company Anglo American was considering selling De Beers, of which it owns an 85 per cent stake. The Botswana government owns the remaining 15 per cent.
This came amid an effort by Anglo’s arch-rival BHP’s US$39 billion takeover bid of Anglo, which was rejected last week. There is talk in the market that BHP could make a higher offer for the London-listed company soon.
What seems fairly certain, however, is that De Beers’ future is a highly uncertain one. Last week, CNA reported that the company will shut its Singapore office as it relocates its auction business headquarters to Botswana.
“A sale of Anglo American would open the door for unprecedented change within the international diamond industry,” said Martin Rapaport, a gem dealer from New York. “We expect De Beers to be sold off, creating an unprecedented opportunity to restructure the diamond trade.”
Anglo’s chairman Stuart Chambers was quoted as saying that BHP’s initial offer has undervalued his company.
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BHP is keen to buy Anglo because the latter owns large copper mines and reserves in South America. Anglo also has iron ore and metallurgical coal resources that dovetail with BHP’s mines.
Copper accounts for 30 per cent of Anglo’s assets, the company said recently. The metal has become fashionable in recent years as it is a major component in electric vehicles that is used in batteries and wiring. Some industry experts have gone so far as to say there will be a global shortage of copper in the coming years.
The Oppenheimer family, the richest in South Africa, sold their 40 per cent stake in De Beers to Anglo in 2012 for US$5.1 billion. That stake raised Anglo’s holding to 85 per cent, which it has maintained until today.
According to latest available data, De Beers controls about a third of global diamond sales in value and a quarter in volume.
The company’s diamond trading unit is by far is the biggest promoter of natural mined diamonds. It allocates gems to select dealers at sights in Botswana that are held ten times each year.
The global diamond market has suffered of late because of a surge in production of high-grade “lab-grown synthetic gems, which to the naked eye are almost as good as the real thing.
With so much supply out there, prices of these lab-grown diamonds have plunged and are undercutting natural gems. As a result, both the prices and sales volumes of De Beers and other major diamond miners have fallen in tandem.
Complicating matters is the fact that Russia’s Alrosa, the owner of several large mines in Russia and Siberia, is still banned from selling its rough and polished diamonds to the West due to sanctions.
No matter what happens in the coming months, De Beers is under pressure to demonstrate that it can continue to perform. In the first quarter of this year, De Beers’ sales were down by 14.3 per cent on the same period in 2023.
If Anglo does end up spinning off De Beers, it could still retain control of the company in conjunction with Botswana.
Anglo could then have an initial public offering of 49 per cent of the shares and raise at least US$3.5 billion from external shareholders.
Alternatively, it could offer De Beers to luxury goods companies such as LVMH, Hermes or Richemont, or even to large mining companies such as Swiss commodity trading and mining company Glencore. Whether any of them are daring enough to take the risk and make the acquisition is another matter altogether.
