New chapter for De Beers as Anglo American dims its shine

Diamond polishing: Beneficiation has the potential to create much-needed jobs. Pic: De Beers

Diamond polishing: Beneficiation has the potential to create much-needed jobs. Pic: De Beers

Published May 17, 2024


By Nicola Mawson

No longer a shining star for Anglo American, De Beers’ future seems uncertain after Anglo recently said it is looking into various options to spin off the business to set it up for success and unlock full value under its Origins Strategy, which mainly hinges on giving back to the communities in areas where it operates.

Anglo believes that spinning out De Beers, which holds 30% of the diamond market, will provide both companies with “a new level of strategic flexibility to maximise value for both company’s shareholders”.

However, the precise form this will take has yet to be announced.

Izak van Niekerk, portfolio manager at Mergence Investment Managers, yesterday said it was too early to say if Anglo was selling or unbundling De Beers, or a combination of the two.

“It largely depends on if there is a buyer out there with a good enough price to satisfy Anglo’s view of its value. Otherwise, they will unbundle to shareholders, who can then make their own decision on value,” he said

“The only thing we know for sure is that they committed to separating it from Anglo American.”

Umthombo Wealth equity fund manager and analyst, Matthew Zunckel, said management may look to list De Beers separately, with the government of Botswana forming part of the shareholder base.

Anglo American holds 85% of De Beers, while the government of Botswana – where its biggest mines are located – owns the remainder.

Anglo American also recently said it had made “significant progress towards finalising the sales agreement with the government of the Republic of Botswana”.

De Beers was de-listed in 2011, when Anglo bought the Oppenheimer family's 40% stake for $5.1 billion (R40bn at the time).

Zunckel said that overall, Anglo American shareholders should benefit from a “cleaning up“ of the portfolio with a clearer focus on copper and iron ore.

“The market will likely ascribe a higher rating to Anglo American once the portfolio restructure is complete.”

However, Anchor Capital’s mining analyst Seleho Tsatsi said it was not yet clear what the divestment or de-merger of De Beers meant for Anglo American shareholders, because Anglo has not given a final decision on how it will separate the business.

The diamond miner’s Origins Strategy details 12 “ambitious” goals that it seeks to achieve by 2030, which include supporting entrepreneurs, especially women; increasing the diversity of creative talent in the diamond jewellery sector; becoming carbon neutral; supporting the UN’s Sustainable Development Goals; and, providing the origin and impact of every diamond it sells.

Zunckel said that unlike commodities such as copper, the fundamentals of the diamond industry were not obvious from a demand perspective in the long term.

“De Beers has failed to live up to expectations and is detracting from overall group returns,” Zunckel said

Tsatsi concurred that De Beers had become an increasingly small part of Anglo's profit base.

He said there were structural issues in the diamonds industry, as lab-grown diamonds were having an impact on mined ones, while the sector was also in a down-market.

“That's reflected in De Beers' recent results. De Beers made an operating loss last year, its worst profit number and only operating loss in the last 10-15 years,” he said.