Tuesday, June 11, 2024

Botswana Seeks to Increase Stake in De Beers Amid Anglo American’s Planned Divestment

Botswana has confirmed its intentions to increase its shareholding in De Beers, as parent company Anglo American (LON: AAL) prepares to spin off or sell the diamond producer.


“We are going to increase the shares that we have in De Beers,” President Mokgweetsi Masisi announced on Monday at a political rally north of Gaborone, according to Bloomberg.


Government’s Strategic Role

President Masisi emphasized that the government will play a central role in selecting a new investor to replace Anglo American. The focus will be on finding an investor who understands the cyclical nature of the diamond industry. Currently, Botswana holds a 15% stake in De Beers, the world’s largest diamond miner by value, and accounts for 70% of the company’s annual rough diamond supply.

Anglo American’s Divestment Plans

Last month, Anglo American revealed its plan to either sell or spin off its 85% stake in De Beers to fend off an unsolicited takeover bid from BHP (ASX: BHP). Anglo American acquired the diamond giant in 2011, purchasing the Oppenheimer family’s 40% stake for $5.1 billion.

Economic Impact and Investments

De Beers is crucial to Botswana’s economy. In January, the company committed to spending $1 billion to extend the life of its flagship Jwaneng mine by transitioning operations underground. Extending Jwaneng’s productive life has been planned since 2010, and the mine is the world’s richest in terms of diamond value. Debswana, a local company jointly owned by the government and De Beers, constitutes a fifth of Botswana’s GDP and nearly half of De Beers’ annual carat production.

Transition from Lab-Grown Diamonds

In preparation for the split from Anglo American, De Beers is ceasing production of lab-grown diamonds for jewelry. This decision ends a six-year experiment with its Lightbox brand, created in 2018. While De Beers will continue selling Lightbox stones until current inventory is depleted, the unit will be put under review within the year.

Future Outlook

De Beers aims for annual core profits of $1.5 billion by 2028. Last year, the company made $72 million, though historically its profits have ranged between $500 million and $1.5 billion due to the diamond industry’s volatility.

This strategic move indicates De Beers’ readiness to operate independently, as it did for most of its 136-year history. With Anglo American’s divestment, Botswana’s increased stake could play a pivotal role in the company’s future trajectory.

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