Edging Towards a De Beers Sale
April 30, 25
FOR SALE: One iconic diamond miner, a bargain at only $4.1bn (current book price).
That's a fraction of the value when De Beers last changed hands (approx. $13bn in 2012).
It's now been on the market for almost a year now, but there was little in the way of positive interest, at least publicly, until this week.
Botswana's vice president Ndaba Gaolathe was reported yesterday as saying a number of serious players were interested - and indicating that his own government could increase its current stake from 15 per cent to as much as 50 per cent.
The background to this week's development is that Anglo American, the company that owns 85 per cent of De Beers, fought off a takeover bid from Australian rival BHP last year.
It decided to ditch the diamond division, together with other loss-making or less profitable assets, and focus primarily on copper.
It's since agreed sales of its steelmaking coal and nickel mines, and is progressing with talks to demerge its platinum assets later this year, but De Beers has, so far, proved harder to shift.
The company that shaped the global diamond industry is no longer the sure-fire prospect it once was, and no longer has the monopoly that once allowed it to advertise diamonds without having to use its name.
It's now 13 years since Anglo bought a 40 per cent stake in De Beers from the Oppenheimer family for $5.2bn, a move that gave it overall control and effectively valued the entire company at $13bn - more than three times its current price tag.
But things have not been going so well of late. In the last six months (Q4 2024 and Q1 2025) De Beers sold just over $1bn of rough diamonds.
To put that into perspective, back in the first half of 2012, at around the time of the Anglo buyout, it sold $3.3bn And that was on the back of a "slowdown" in demand (it was a 14 per cent decrease on the previous year).
As things have gone bad to worse, Anglo has been forced to write down the value of De Beers, by $1.6bn in February 2024, then by another $2.9bn in February 2025, to its current $4.1bn value.
De Beers made a $25m loss last year as rough prices collapsed and is stockpiling an estimated $2bn - almost half its current value - in unsold inventory.
But in spite of all that, De Beers remains an attractive proposition for Botswana, which relies on diamonds for 70 per cent of its export revenue.
In February the country's mines minister Bogolo Kenewendo, speaking after a long-delayed signing of agreement on rough sales and mining licenses, said it was "absolutely" the right time to discuss the government increasing its stake.
A Bloomberg News report yesterday (29 April) quoted vice president Ndaba Gaolathe as saying the Botswana government could increase its stake in De Beers to 50 per cent (under the new deal it could, by 2035, receive an increased 50 per cent share of the diamonds produce by the Debswana joint venture).
He also said partnering with his government was a serious commitment. "Whoever wants to take over the Anglo shares, it's not just the takeover of shares," he said.
"It's actually the consummation of a relationship with the government of Botswana. And I want to impress upon you, we take relationships very seriously."
Botswana recognizes that diamonds are a finite resource, indeed the De Beers deal includes a substantial fund to help diversify its economy.
But it's betting on the (relatively) long-term value of its diamond industry, compared to the (relatively) short-term challenges, such as lab-grown competition and weak Chinese demand.
And Debswana, the joint venture with De Beers, is investing $1bn in Jwaneng, the world's highest-value diamond mines, extending its life to around 2052.
Anglo CEO Duncan Wanblad has made it clear that any sale or spin-off of De Beers should be agreed by the end of this year.
Let's see what happens under Botswana's new president - markedly different in approach from his predecessor - and let's see what the next eight months bring.
Have a fabulous weekend.