ANGLO American CEO Duncan Wanblad said on Thursday Botswana’s government would be brought into negotiations with one or two short-listed bidders for De Beers as the miner sought to conclude the sale if its 85%-owned diamond business.
“This isn’t going to be the classical first round, second round sale process that you would ordinarily receive for businesses of this type,” said Wanblad at the FT Mining Summit.
“What we are planning to do is now move into the second round with one or two of the potential selected buyers that came through the first round with us and work with the Government of Botswana in finalising an agreement that works not only for the potential buyers, but also for Botswana,” Wanblad said.
“So that’s the process that we’re in now and I’m hoping that will take place over the next six months.” Wanblad did not rule out the option of spinning out De Beers, as previously outlined, should negotiations fail.
Botswana owns 15% of De Beers through Debswana, a joint venture with Anglo American. While the country has rights as a minority shareholder, Anglo is making its active participation central to its negotiations, especially as Botswana’s president Duma Boko has been sharply critical of Anglo.
Amid a protracted slump in the diamond market, which led to De Beers posting a $189m loss for the six months ended June, Boko said his administration would be more successful running the diamond miner than Anglo.
Then in September, Boko said he wanted to conclude a deal for control of De Beers this year. Wanblad said he was “very respectful” of Botwana’s ambitions.
“We’re also very cognisant and very thoughtful about the role that De Beers plays in the diamond markets and specifically for Botswana as well as other producer countries. So dialogue is constructive with the Government of Botswana and we will continue to progress that to a successful conclusion in the next few months.”
De Beers is valued by Anglo at about $5bn and while bids may not match that level, the transaction could still “surprise”, said UBS in a recent note.
“Even though market conditions are challenging with rough diamond prices depressed and De Beers cash flow negative, we still see potential for the sale of De Beers to positively surprise ($3-$4bn including deferred/contingent consideration),” the bank said. This compares to a sell-side consensus value of $2.5bn for De Beers.
The sale has been further complicated by a rival claims from Angola, according to reports. Operating through state-owned diamond company Endiama, Angola submitted a bid for a minority stake in De Beers. It proposed establishing a pan-African consortium of diamond-producing nations to jointly operate De Beers.
De Beers recently restarted exploration in Angola after the country’s president João Lourenço relaxed state ownership rules. Angola also removed Russia’s Alrosa from its mining operations selling the Russian firm’s stake to Omani investors.
Wanblad said his company was “not obligated” to take any buyer for De Beers, but added the interest from a number of sub-Saharan countries underpinned the value of De Beers. “I think it’s really positive news that the government of Angola has expressed an interest in taking some ownership in the business,” said Wanblad.
“We’re taking all of this into the mix and working through what the best thing for the business is and what the best thing for Anglo and its shareholders are,” he said, adding that “the best thing for the Government of Botswana” was part of his thinking.
