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De Beers blocked from buying mines
David McKay
Posted: Thu, 31 May 2007
[miningmx.com] -- IT remains to be seen what Anglo American does with its 45% stake in private diamond company, De Beers. One view is that Cynthia Carroll, Anglo CEO, may decide to kick the diamond business into touch, to employ the American parlance.
As the diamond industry’s long-standing custodian, De Beers tends to provoke feelings of resentment within the sector. You can now add to this the wrath of anti-competition regulators.
Asked recently if De Beers would be able to bid for producing mines – which it may do in an effort to lift its production – chief financial officer, Stuart Brown, gave a curt negative.
The reason is that the world’s competition authorities would deem such an acquisition as anti-trust given the estimated 45% control De Beers has over diamond production.
That’s why the company has had to relinquish a $700m marketing agreement with Alrosa
from 2009 down to around $275m by 2011. It’s also why De Beers throws so much money into exploration; in fact about $100m will be dedicated to exploration in 2007, Brown said.
Instead, De Beers has had to fall back on its own (considerable) resources: “We’ve got four new mines coming into production over the next few years which will produce $700m worth of diamonds,” said Brown. “This is more than the
Russian production we’re now losing,” he said.
So where is De Beers looking for its new generation of diamonds?
Not Canada despite opening its Snap Lake prospect there. “Because we couldn’t put our money elsewhere, we put it in Canada,” said Brown.
“But now we’re reducing that budget in favour of the Congo and Angola.” De Beers is also exploring India for diamonds although gaining access to “the right ground” is described by Brown as “a challenge”.
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