Wednesday, January 27, 2021

De Beers shareholders give thumps-up to rights issue

Shareholders of the debt ridden diamond giant, De Beers, voted on a scheme aimed at rights issue to raise US $ 1 billion with the view of cushioning the company from the impact of the global economic crisis.

In a statement issued Thursday, De Beers said the three shareholders being Anglo American Corporation Plc, Oppenheimer family and government of Botswana have “agreed to subscribe for additional equity capital of US$1 billion in proportion to their existing equity holdings in the company.

“This latest decision will result in a reduction in overall debt and strengthen the company’s balance sheet,” the company said.
Under the arrangement, the Botswana government will fork-out P 1.5 billion into De BeersÔÇöthe world’s largest diamond producer— which went private in May 2001.

Late last year three shareholders of De Beers agreed “in principle” to proportionally raise up to US $ 1 billion in a bid to rescue it from US $ 1.5 billion that falls due in March this year. 

“The (diamond) industry is our industry. It will impact on other things, including confidence in the future of the diamond industry,” Minerals and Energy Minister, Ponatshego Kedikilwe, said last December during a press briefing┬á as he justified why government had to participate in the right issue open until March.

“We take this matter very seriously and we have to ensure that the company stays afloat,” he added.

However, he indicated that the Botswana government’s finances were also affected by the global economic downturn ÔÇö that has impacted on the delivery of some of National Development Plan 10 projects.

Government revenue streams were impacted by the administrations free spirited spending mood and global economic crisis that hit hard on the diamond industry, which is the backbone of the economy.

DiamondsÔÇöincluding downstream activities– contributes as much as 40 percent of the GDP and supports over 50 percent of government spending.

De Beers’ total net debt stands at US 4.06 billion and of this bank borrowing is at US $ 3.22 billion. Another US $ 734 million are shareholders loans. In February this year De Beers asked its shareholders to pump in US $ 500 million in the form of loans.

“By reducing De Beers’ level of external debt and improving its capital structure, this investment would better enable the company to take advantage of new opportunities and demonstrate shareholders’ confidence in De Beers’ continued market leadership as recession gives way to recovery,” De Beers has said.

However, De Beers implemented a raft of cost cutting measures from the close of 2008 until April this year when it scaled-down production in all of its mines in Africa and closing those in Canada.

Botswana holds 15 percent in De Beers, while the Oppenheimer family has 40 percent and the remaining 45 percent belonging to Anglo American. In Debswana, Botswana government and De Beers stand at 50/50 percent stake.

De Beers, which has operations in Botswana, Canada, Namibia and South Africa, is the world’s largest producer of rough diamond, accounting for 42 percent of the global produce.


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