Sunday, May 19, 2024

Anglo American Reportedly Exploring Sale of De Beers Amid BHP’s Interest in Anglo

London—Anglo American is reportedly in discussions with potential buyers for its subsidiary, De Beers Group, according to sources cited by The Wall Street Journal on Thursday.


The report suggests that Anglo has engaged in talks with entities including “luxury houses” and “Gulf sovereign-wealth funds” in recent weeks. However, it’s emphasized that these discussions are in preliminary stages, and there have been no deliberations on valuations.


Responding to inquiries regarding the Journal’s report, a spokesperson for De Beers directed queries to Anglo American, stating, “For De Beers, our focus remains on executing our strategy in the best interest of all stakeholders.”

Anglo declined to comment directly, but earlier this year, the mining conglomerate marked down the value of De Beers by $1.6 billion, attributing it to “macroeconomic sentiment impacting our view on near-term consumer demand for luxury goods,” particularly in the United States and China, where post-COVID demand recovery has been sluggish.

During its February earnings call, Anglo underscored that all its assets are subject to strategic review.

The news of Anglo American considering a sale of De Beers comes in the wake of reports, initially disclosed by Bloomberg on Wednesday, indicating BHP Group Inc.’s unsolicited bid for Anglo.

The proposed offer, acknowledged separately by Anglo and BHP in official statements, valued Anglo at £25.08 per share, totaling £31.1 billion ($38.9 billion). It proposed spinning off Anglo’s platinum business and Kumba Iron Ore operations in South Africa while retaining its copper mines in Peru and Chile and iron ore operation in Brazil.

Copper, which constitutes 30 percent of Anglo’s total production, is currently in high demand, commanding elevated prices due to its indispensable role in “green” energy solutions such as wind turbines, solar panels, electric, and hydrogen fuel cell vehicles.

BHP is the world’s largest diversified miner, and they have explicitly expressed interest in metals essential for the renewable energy revolution,” remarked diamond industry analyst Paul Zimnisky in an interview with National Jeweler on Thursday.

On Friday, Anglo announced its rejection of BHP’s proposal, asserting it “significantly undervalues” the company and its future potential.

Anglo Chairman Stuart Chambers characterized the offer as “opportunistic” and featuring a “highly unattractive” structure, emphasizing Anglo’s capability to generate substantial value from its portfolio of high-quality assets aligned with energy transition and other major demand trends.

“With copper constituting 30 percent of Anglo American’s total production and with promising growth prospects in copper and other structurally attractive products, the board believes that Anglo American’s shareholders stand to gain substantial value appreciation as these trends materialize fully,” stated Chambers.

Regarding De Beers, Zimnisky highlighted the complex nature of diamonds as both a mined commodity and a luxury product, currently facing challenges such as competition from lab-grown diamonds.

“It’s a nuanced situation, requiring a buyer willing to tackle the associated challenges,” he remarked.

“Selling De Beers now would potentially undervalue it, and it needs an owner with a long-term vision willing to invest in marketing efforts to sustain diamonds’ relevance in the future. De Beers requires careful handling; it cannot be viewed solely as a short-term value proposition.”


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