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Testing Diamond Resilience - May 2024 News



De Beers Consolidated Mines was founded in 1888. Anglo American mining and De Beers were intricately related companies until Henry Oppenheimer lost interest in diamonds and sold all his shares to Anglo American. Anglo American, currently, ranks as the seventh largest mining company in the world and De Beers accounts for approximately 7.6 billion dollars of Anglos’ 46-billion-dollar market cap. 

De Beers is an essential player in the diamond and jewellery world, but it is a bit player in the much larger world of mining conglomerates. Anglo American is disappointed with the resent performance of De Beers and has downgraded its value citing “macroeconomic sentiment impacting … near-term consumer demand for luxury goods.”  

In mid-April BHP Billiton, the largest mining company in the world, worth about 144 billion dollars, also the company that sold the Ekati mine because they didn’t want to be involved with diamonds, offered to buy Anglo American, lock, stock, and barrel. BHPs’ interest in acquiring Anglo American has nothing to do with their diamond assets and everything to do with their iron ore, copper, coking coal, potash, and nickel holdings.

BHP does not want to re-enter the diamond business. This could be the reason that Anglo is considering selling De Beers as a separate, stand-alone deal. 

If BHP does acquire all of Anglo Americans’ assets, then De Beers would be an unwanted part of the purchase and could be flipped out as part of an over-all restructuring. In a statement BHP said if the sale is completed, “Anglo American’s other high-quality operations, including its diamond business, would be subject to a strategic review post-completion.”

It is not unusual for large corporations to off-load assets that don’t fit into their corporate profile. Anglo is coming off of a very tough two-year period, with its’ valuation falling and profits declining 94 percent in 2023. 

The sale of Anglo American and its subsidiary De Beers is a very real possibility. So far there is no deal, as the first bid by BHP was turned down. However, negotiations continue.

Jamie Maddock, energy analyst at Quilter Cheviot, said, “The fact that [Anglo’s] shares are trading just above what BHP is offering suggests one of two things—either BHP is going to up its offer or sweeten the deal in some way, or a second offer comes forward from another diversified miner, like Glencore.”  Either way, De Beers and the whole diamond pipeline are, currently, facing difficult economic headwinds, and a sale of De Beers could test the industries resilience. 

….and that ends the May edition of the Regal Imports News

Mel Moss