Tuesday, October 3, 2023

De Beers Chief calls for calm

The Chief Executive Officer of De Beers group, Phillipe Mellier, has said there is no reason for Batswana to be anxious about the recently announced deal that will see Anglo American buy the Oppenheimer family stake in De Beers.

The Oppenheimers currently have a controlling stake in De Beers, which in turn has 50 percent of Debswana.

Debswana, half owned by the Government of Botswana, runs all the major diamond mines in Botswana.
Since the announcement of the deal, there has been speculation on the true reasons behind the exit of the Oppenheimer family from De Beers, a company that has been under their control for over 120 years.

The Oppenheimer family has been intertwined to Botswana’s diamond industry right from the beginning.
Given the family’s rich knowledge of the world diamond industry, there have been fears that they were leaving possibly because they were privy to confidential information that the industry had a bleak future, which would be a disaster for Botswana ÔÇô a country that does not only rely on diamonds, but which has also up to now failed to diversify her economy.

Given that diamonds are Botswana’s economic mainstay, the Oppenheimer exit has sent jitters down the spines of many Batswana.

If the deal goes through, Anglo would pay $5.1 billion to buy out the Oppenheimer family. Under the arrangement, the Botswana Government, which has a 15 percent stake in De Beers, has the option to increase its holding to 25 percent.

In an interview, Mellier said the good thing about the deal is that Anglo American is not a shareholder coming from nowhere. Rather, the multi-resource mining conglomerate has been involved with De Beers for the last 80 years.

Anglo is among the three blue chip mining companies in the world, occupying a most envied space among the top 100 companies listed on the London Stock Exchange.

“Anglo American is a shareholder we know very well. They have always been on the De Beers Board. We also know how much they value diamonds as a commodity,” Mellier.

In fact, the history of De Beers and Anglo are so closely linked that up until a decade ago the two had always been led by a single CEO for a continuous period of close to 80 years.

Mellier said over and above the fact that they have been involved in De Beers, Anglo American has also made it clear that they will not be changing management at De Beers.

The company has made it clear that De Beers will continue to be run independently, with a separate board and a visibly clear brand detached from Anglo American’s.

“We think this is a well thought out decision. Whatever they are doing they are doing it for De Beers. Not only are they buying shares they also are buying the management. And the Government of Botswana can still increase their shareholding from 15 percent to 25 percent,” said Mellier.

Speaking about the relocation of DTC from London to Gaborone, a move that is expected by 2013, Mellier said the relocation is a big corporate coup for Botswana as it will further entrench and consolidate the country as a world leader in the global diamond industry. He said the fact that De Beers will become much more visible in Botswana as a result of the relocation will bring with it many spinoffs to the economy of Botswana, including retail, banking, security, aviation, housing, schools and many other sectors.

On the fears that the world could be heading back into a recession similar to that of 2008 which forced Debswana to close down its mines, Mellier said this time around there is no risk of closing down the mines.

He said the company will scale back its operations owing to subdued demand in the world diamond rough. He emphatically ruled out ant closures.

“We will produce less, but we will not close.”

He said the scaling down of the operations will in the medium to long terms serve Debswana well as there will be an opportunity to repair plants at both the Jwaneng and Orapa mines.
The scaling down of operations will also allow the company to improve its efficiencies by allowing more time for waste stripping.

“In Orapa, the slowdown will mean that one plant is closed down for repairs. In Jwaneng we are behind in the treatment of waste versus ore. The slowdown provides an opportunity to catch up,” he said.

He said, currently, efforts are underway to make Debswana responsive to the ever shifting economic scales.

But has Debswana become any more efficient than it was years ago when shareholders replaced the then Managing Director?

“It’s never good enough, but a lot of progress has been made as demonstrated by reduced wastages,” said Mellier.

On the projections of the world diamond markets in the short to medium terms, the De Beers Chief said there are crises in Europe which inevitably are affecting the pipeline.

He, however, is of the view that despite the crisis, retail demand remains very strong. Only the rough side of the market has been hit, he said, adding that inevitably this has affected restocking.
He said the industry also draws some solace from the resurgent China, Japan and India.

“As a result of the banking crisis in Europe, the rough sales are struggling. The pipeline is financed by banks and most of these banks are in Europe and it is a fact that they have been impacted by restricted access to dollars. That has created some uncertainty in the pipeline.”
He, however, said this is expected to be a short term development which will correct itself in the New Year.

“We should not be concerned for 2012. If we compare what is happening now with events of 2008, there should be no reason for fear,” said Mellier.


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