No Risk, No Reward - February 2025 News
Diamonds make up 80% of Botswana’s exports, and account for one third of their total budget. Botswana’s economy shrank in 2024, but economic growth is expected in 2025. Both the shortfall and projected recovery are the result of the poor performance of diamonds in 2024 and the anticipated recovery in 2025.
Botswana is the world’s largest producer of natural diamonds. Their government owns 15% of De Beers. The mining conglomerate Anglo American owns 85%.
De Beers is currently sitting on a stockpile of approximately two billion dollars in rough diamonds. They accumulated this excess rough by continuing to mine into a slow market. Anglo American is consolidating their mineral holdings and wish to sell De Beers. Last February, Anglo wrote down the value of De Beers by 1.6 billion dollars. Its current worth is listed at 7.6 billion dollars. Anglo wants to sell De Beers, but no one is stepping up to the plate. So, they are going to write down the value of De Beers for a second time.
The price to purchase De Beers is getting cheaper and cheaper, soon it might even start to look like a bargain. Botswana’s mines minister thinks that it may be the right time to increase their share in the legendary diamond miner.
Botswana is the most likely candidate to take over a majority share of De Beers, because they have the most to lose if the company gets into the wrong hands. The government of Botswana is already a shareholder in a downstream cutting venture. It owns a 24% share in the Belgian cutting firm, the HB Group. The problem with their deal with HB is that HB does not have the polished diamond marketing savvy that De beers has accumulated over the past one hundred years. Botswana needs De Beers selling experience to market the full range of their diamond production.
If an appropriate price can be achieved, it would seem logical that the Government of Botswana would take over De Beers. Purchasing De Beers would be a calculated risk for Botswana, however, without a prosperous diamond business, Botswana will not be able to sustain their economic strength.
A mine to consumer origin and beneficiation story may just be the thing needed to stimulate overall diamond demand. Anglo wants to divest De Beers as quickly as possible and get on with the mining of less complex minerals like copper and potash. The combination of a motivated seller with a buyer with a direct financial interest is compelling. If Botswana can manage the risk, then it just might be the right time to buy in.
Mel Moss
