Thursday, May 23, 2024

Anglo American plans asset unload, De Beers chief sees new possibilities

Anglo American, listed on the Botswana Stock Exchange, has announced intentions to divest several assets as part of a turnaround strategy, following the rejection of a $43 billion takeover offer from BHP. The plan includes spinning off its platinum-metals subsidiary Anglo American Platinum, divesting or demerging its diamond unit De Beers, selling its steelmaking coal assets, and considering options for its nickel operation.

De Beers, majority owned by Anglo American with an 85 percent controlling stake and 15 percent by the Botswana government, had one of its toughest year in 2023, with Anglo American putting a $1.6 billion write-down of the book value of De Beers.

A write-down in book value of a company refers to the reduction of the recorded value of an asset or group of assets on the company’s balance sheet. This reduction typically occurs when the company believes that the asset’s current market value has decreased significantly or that its future earning potential has diminished.

De Beers’ total revenue decreased to $4.3 billion from 2022’s $6.6 billion after rough diamond sales almost halved to $3.6 billion compared to the $6 billion in 2022.

Total rough diamond sales volumes fell by 19 percent to 24.7 million carats from 2022’s 30.4 million carats. Even worsening the situation, the average realised price decreased by 25 percent to $147 per carat, down from 2022’s $197 per carat.

In response to the latest development, De Beers Chief Executive Al Cook noted the potential for new opportunities under new ownership. He emphasized that while change is on the horizon, certain aspects will remain unchanged. De Beers is committed to delivering value to all stakeholders, including partners in Botswana, South Africa, Namibia, Canada, Angola, and beyond. Cook expressed anticipation for finalizing a transformative agreement with the Government of Botswana, a key stakeholder with a 15 percent ownership interest in De Beers.

Looking ahead, Cook announced plans to unveil a new strategy for De Beers later in the month. Despite industry challenges, diamonds continue to hold immense global appeal, presenting an opportunity to introduce their timeless allure to a new generation of consumers. With the ongoing recovery in rough diamond demand and a positive sector outlook, Cook expressed confidence in De Beers’ future trajectory.

Reflecting on De Beers’ enduring legacy, Cook affirmed the company’s leadership in the diamond industry, citing unparalleled expertise, assets across 20+ countries, a unique sales model, and an iconic brand synonymous with diamonds.

Recently Botswana’s president Mokgweetsi Masisi publicly stated that the country will protect and retain its stake in the diamond miner. While president Masisi acknowledged that he is yet to be briefed on the proposed takeover of Anglo by BHP, the president in an interview with CNBC Africa said he will protect Botswana’s interest in De Beers.

“The value of De Beers is fundamentally created by Botswana. Without Botswana, De Beers doesn’t exist,” Masisi said. “That can never be missed by anybody.”

Botswana contributes over 70 percent of De Beers’ rough diamonds, and is the world’s largest producer of diamonds by value. Since the discovery of diamonds in Botswana in the early 1970s, the country’s economy has been dependent on diamond trade, accounting for nearly 90 percent of exports and over 30 percent in foreign exchange revenue.

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