Botswana in talks to increase stake in De Beers

Botswana President, Masisi Mokgweetsi

BOTSWANA is in talks to increase its shareholding in De Beers, said Bloomberg News citing the comments of the country’s president Mokgweetsi Masisi.

“We are going to increase the shares that we have in De Beers,” Mokgweetsi Masisi told a political rally in Palapye, about 300 kilometers north of the capital Gaborone.

The government would also play a central role in selecting a new investor to replace Anglo at De Beers, according to Bloomberg’s article. It would require an investor prepared for the cyclical nature of the diamond business.

Mokgweetsi’s comments come a month after Anglo American CEO Duncan Wanblad unveiled a radical restructuring of the group that included the sale of the group’s 85% stake in De Beers.

Analysts, however say such a sale would be tricky to pull off. The diamond market is depressed so Anglo may struggle to extract value from the sale. Last year, the business made just $72m, though traditionally its profits have ranged between $500m and $1.5bn as the diamond industry swings from boom to bust.

Diamond mining is also highly specialised with a small range of potential buyers. But a third difficulty selling De Beers is in the diamond group itself as the company is a time-forged marriage between industrial specialisation and branding expertise that a single buyer might not want in its entirety.

“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 Paul Zimnisky, an independent diamond analyst. “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.

“We believe there is a good chance that De Beers is still in Anglo American come 2026,” Ben Davis, an analyst for investment bank Liberum was quoted in Miningmx last week as saying.

Al Cook, CEO of De Beers told News24 that De Beers was already preparing a possible spinout from Anglo as part of its Origins strategy aimed at breathing fresh life into the business. “It’s no accident that as these announcements are made, we’ve come forward with the strategy we now show,” he told the publication.

“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,” he said.

“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.”