DE Beers sold more diamonds at discount in the third quarter as it sought to further reduce a stockpile estimated to have topped $2bn this year.
Commenting in a third quarter production update, Anglo American said rough diamond sales from two sights totalled 5.7 million carats. This reflected “continued stock rebalancing initiatives with specific assortments being sold at lower margins”, Anglo said. Revenue of $700m was generated on a consolidated basis.
In comparison, a single sight of some 2.1 million carats in the third quarter last year generated $213m in sales, Anglo said.
The reduction in the stockpile comes as Anglo presses on with the sale of De Beers in which the UK miner has a controlling 85% stake. Reducing the stockpile helps simplify the sale of De Beers which Anglo values at $5bn versus sell-side consensus of $2.5bn.
The sale of De Beers is also complicated given the involvement of southern African governments which partner it. Botswana, a 15% shareholder in De Beers, which has the right to match offers, earlier expressed an interest in buying control. Angola also submitted an offer for De Beers, according to a report this month.
The backdrop to the sale is the depressed diamond market. De Beers reported a 3% decline in its average selling price to $155 per carat for the third quarter which compares to a 14% decline in the rough diamond price index.
Industry sentiment was “undermined” by US tariffs on diamond imports from India, the world’s largest cutting centre for natural diamonds, said Anglo. The US subsequently exempted natural diamonds from tariffs for countries with trade agreements which includes the European Union. The industry “awaits the outcome of potential agreements with other countries”, said Anglo.
Meanwhile, consumer demand for natural diamond jewellery remained stable in the US which is the world’s largest consumer of diamond jewellery. On a global basis, the diamond market was stable, Anglo said.
Commenting on the sale of De Beers, Anglo American CEO Duncan Wanblad said his company was “making good progress”. A structured sale process “is currently under way”, he added.
Diamond production increased 38% to 7.7 million carats in the quarter, an improvement driven by Jwaneng in Botswana ahead of an plant maintenance this quarter.
Anglo’s sale of De Beers is part of a broader strategy to focus on copper and iron ore. In September Anglo sold its remaining stake in Valterra Platinum, earning $2.5bn.
The group is also about to restart an auction for its metallurgical coal assets in Australia “in the coming months”. This was after Peabody Energy, the US group, bailed on its proposed $3.8bn purchase of the mines following a fire at Moranbah North, one of the mines for sale.
Anglo said today it had been given approval from the regulator in Queensland for the “first stage re-entry” to Moranbah North “marking a significant milestone in the recovery journey”. Arbitration to seek damages for “wrongful termination” regarding the scrapped Peabody sale were underway.
On a year-to-date basis, Anglo’s copper production fell 9% to 526,000 tons. Output stood at 183,500 tons in the third quarter compared to 181,000 tons at the same time last year. However it maintained copper guidance and lifted iron ore production guidance following a strong showing from Minas Rio, its operation in Brazil.
