- Tsaone Segaetsho
Black Sheep De Beers will be sold next year amid sluggish diamond performance. De Beers has dragged down strong Anglo-American performance according to the latest released Q2 Production Report.
While announcing its intentions to sell De Beers in May amid perpetual sluggish demand for diamonds in the global market, Anglo American has made it clear that it will sell it when or while it still has value. Mining analysts observed that Anglo American in May deliberately wanted to sacrifice its legacy assets; De Beers and Amplants, in a way to fend off the persistent BHP hostile takeover.
On Thursday Anglo American CEO Duncan Wandbald reiterated the 107-year-old miner plans to sell its assets by 2025. Wanbald said in the Q2 Production Report that work is progressing with the aim of substantively completing transformation of disinvestments by the end of 2025. In May the Anglo’s boss said the miner will be “extremely highly valued” by the end of 2025, saying “to the extent that if anybody wants to buy us at that particular point in time, they are going to have to pay an enormous amount of money for it.”
Additionally, in the pipeline for being on the chopping board together with De Beers and Amplants are Anglo American coal unit in Australia and Brazil’s nickel mines. But as the latest Q2 Production Report stands; economic challenges, characterised by weakening demand and falling of diamond prices, selling De Beers remains a complicated pipeline dream.
In the latest production report, the assets that have been put up on sale next year, diamonds and platinum were the only down-trending production figures of the second quarter of 2024. The evergreen copper mining business, subsequently becoming an apple in Anglo American’s eye, production figures were 2% higher than the first half of 2023. This was however dragged down by diamonds and platinum; with production figures of 15 percent and 2 percent lower respectively. After shedding off most of its mining assets Anglo American will after 2025 only remain with copper, premium iron ore and crop fertiliser assets.
Anglo-American boss Wanbald was happy that they will sell a well-performing Steelmaking coal, unlike its sisters; diamonds and platinum. According to the latest production report, Steelmaking coal production increased by 26 percent. “We are working at pace to execute on the asset divestments, including Steelmaking Coal – with the intention of optimising value for our shareholders, while minimising frictional costs, mitigating execution risks, and enabling the delivery of significant sustainable cost savings.
Work is progressing with the aim of substantively completing this transformation by the end of 2025,” said Anglo American CEO Wanbald yesterday. But a worry will be, if De Beers diamond production figures remain gloomy, the anticipated sale of its assets from Anglo American will be sold for a song. According to Wanbald De Beers’ diamond production reflects the lower revised guidance announced in our first quarter production report.
The Anglo-American boss explained that trading conditions became more challenging in the second quarter as Chinese consumer demand remained subdued. “With higher than normal levels of inventory remaining in the midstream and an expectation for a protracted recovery, we are therefore actively assessing options with our partners to further reduce production to manage our working capital and preserve cash,” said Wanbald.
According to the Q2 Production Report, rough diamond production decreased by 15% to 6.4 million carats, primarily reflecting the lower production guidance announced in the first quarter production report in response to the higher than normal levels of inventory in the midstream, and the expectation for a protracted recovery in demand. This has seen in Botswana production decreasing by 19% to 4.7 million carats, driven by intentional lower production from short-term changes in plant feed mix at Jwaneng to process existing surface stockpiles. Meanwhile, production at Orapa was broadly flat. Analysts have said that another complication to selling De Beers, apart from poor performance, is its ties to the government of Botswana where it sources between 70 and 80 percent of its precious stones every year. The other downside would also be the rise of lab-grown diamonds which in some areas is reported to have been embraced by youth and innovative consumers.
