De Beers CEO says firm will be better outside Anglo

Al Cook, CEO, De Beers

DE Beers was already planning to become independent of Anglo American prior to the parent firm’s restructuring announcement, said News24.

Citing De Beers CEO Al Cook, the publication said De Beers’ Origins strategy, aimed at breathing fresh impetus into the organisation, had “a spin out in mind”.

Cook added that De Beers would be “a better company” outside of Anglo American. The group had mostly been independent until 2012 when the Oppenheimer family sold its 40% stake in DB Investments to Anglo American for about $5.1bn.

Said Cook: “It’s no accident that as these announcements are made, we’ve come forward with the strategy we now show.

“For 124 out of 136 years that De Beers has existed, it hasn’t been part of Anglo American. And I think there’s a sense of confidence [in the journey ahead] because of that.

“A change like this always raises more questions than answers in the early stage, but I think there is a sense actually that De Beers was a great company prior to 2012 …and will be a great company beyond Anglo American.”

“I believe that a De Beers independent of Anglo American is better than a De Beers within Anglo American.”

Cook said he did not expect the sale of De Beers by Anglo, which owns 85% of the diamond miner and marketer, for the next 12 to 18 months – a tacit acknowledgement of the complexity of the transaction.

According to Anglo CEO Duncan Wanblad, Anglo intended to complete its restructuring, which also includes the unbundling of its shares in Anglo American Platinum and sell its metallurgical coal assets in Australia, within 18 to 24 months.

Analysts told Miningmx De Beers would be difficult for Anglo to exit, especially given the poor state of the diamond market currently.

“We believe there is a good chance that De Beers is still in Anglo American come 2026,” said Ben Davis, an analyst for investment bank Liberum.

Given continued inventories in the midstream, the cutters and polishers, it won’t be until 2025 at the earliest that diamond prices improve meaningfully, said Marina Calero, an analyst for Canadian investment bank, RBC Capital Markets.

De Beers is a complex business to unravel. Structurally it is complicated, given its joint ventures with Botswana principally, as well as Namibia.

“Plus it’s a hybrid mining/luxury company; it’s just too unique a business for a sale to be easy,” said Paul Zimnisky, a diamond analyst. Billionaire tycoon Johann Rupert, the former CEO of Richemont, reportedly has no interest.

“That said, I think the best suitor would be someone that has deep pockets and can invest a sufficient amount in the business for the long term and someone like an LVMH [the French luxury group] could qualify in this way,” said Zimnisky. “But I wouldn’t hold my breath.”

“A sale of De Beers to a sovereign fund at a price above $4bn would be a positive as well,” said Christopher LaFemina and Albert Realini, analysts at New York bank Jefferies, in a recent report. Its sum-of-the-parts valuation is $3.4bn for De Beers.