Anglo to wait a year for De Beers credit

[] – IT would take more than a year for Anglo American to receive credit for its operational improvements, including the contribution made by its 85% investment in De Beers, said the UK-listed firm’s CEO, Mark Cutifani.

Asked at a De Beers investor day if Anglo would consider re-listing De Beers as a means of having it recognised better by the investment market, Cutifani said: “I think it’s too early to say that it is or it isn’t doing value”.

“I certainly believe that if we continue to perform more here, and we continue to perform across the portfolio, we’ll get more and more credit. I don’t think people will be able to give us full credit after 12 months of hitting all of our targets,” he said.

Cutifani said he wanted to have the group’s business units achieve a 15% return on capital employed (RoCE) or face the prospect of restructuring. Prior to his appointment, Anglo achieved RoCE of about 9%. De Beers had “done exceptionally well in getting towards its 15% target”, said Cutifani.

According to Kieran Daly, an analyst for Macquarie Research, De Beers now accounts for 41% of the UK-listed firm’s 2014 earnings, and 25% of its valuation. It reported a 13% return on RoCE on a trailing 12-month basis at the interim stage.

Some analysts have asked whether it is time to relist De Beers. “How do they get visibility?’ Jeremy Wrathall, head of global natural resources at Investec told Bloomberg News on November 4. “They should re-list it. It’s the premier diamond producer in the world,’ he said.

Analysts also asked whether De Beers would be forced into more concessions in order to renew marketing agreements with the governments of Botswana and Namibia. De Beers is currently hoping to renew a sales agreement through Namdeb, its joint venture with the Namibian government.

Philippe Mellier, CEO of De Beers, said there was a trend for sales partners in Botswana and Namibia to demand more concessions, but he added that they “cherished” the joint ventures with De Beers.

“We see a trend coming from the government to try to improve always, but I think it’s a very well-understood business between the Government of Botswana, the Government of Namibia and De Beers that we are partners.

“And we are clearly the very best partner to extract every value possible from every carat we mine from Namibia and South Africa or Botswana,” said Mellier.

He did not think the shift of the nine sight meetings a year from London to Gaborone in Botswana was a concession enabling De Beers to tie Botswana to a new sales agreement. “The move from London to Botswana is pretty welcome because 17% of our diamonds are coming from Botswana,” said Mellier.

“To be closer to production is maybe a good idea, instead of sending them all to London and after that sending them back there. So I think it was something which had to happen but it was independent from the sales agreement,” he said.

The Namibian government said recently it was uncertain when it would be able to renew a sales agreement through Namdeb.

“We are still negotiating; we hope an agreement would be reached but we don’t know when,’ Mines Ministry Commissioner for Diamond Affairs Kennedy Hamutenya told Bloomberg News.

Namibia and De Beers are working out a sales accord to replace a 2007 agreement that allowed Anglo to sell the stones through Diamond Trading Company, the trading arm of De Beers, until the end of 2013.