A recent analysis by trend analytics firm Tenoris, featuring insights from diamond industry analyst Edahn Golan, delves into the hottest topic in the industry in recent weeks – the sale of De Beers by mining giant Anglo American.
Potential Buyers
Qatari and Gulf Investors: There is speculation about interest from Qatari and other Gulf investors. De Beers has previously sought Gulf financing during the 2008-2009 economic crisis and when the Oppenheimers sold their stake. Large investment funds might also be interested, but they would likely need a strategic partner to manage the company.
Government of Botswana: Botswana, which already owns a 15% stake in De Beers, is another potential buyer. The government has a strong desire to take greater control of the diamond industry but would also need a strategic partner.
Indian Sightholders: A consortium of Indian diamond traders is also a possibility. They have the financial capability and ambition to add value to diamonds through manufacturing. The Indian diamond industry has a history of collaboration, as seen with Diamonds India Ltd. However, they would need to become more vertically integrated to manage De Beers effectively.
Challenges to the Sale
De Beers is a symbol of the diamond industry with extensive operations from mining to retail. Despite its strengths, it faces challenges due to declining consumer demand, especially in China, and competition from lab-grown diamonds (LGDs). Any buyer must also secure the consent of the Botswana government.
Possible Scenarios
IPO: An initial public offering (IPO) could potentially yield a high valuation but is expensive and complicated. Anglo American would remain a stakeholder, which may not align with its goal to sell.
Indian Consortium: Indian buyers have the expertise and financial resources but lack mining experience. Their reluctance to invest in consumer marketing and potential opposition from Botswana could be obstacles.
Qatar/Gulf Fund: Gulf investors have the capital and interest. They might gain Botswana’s support by promising local beneficiation through increased manufacturing and infrastructure investment. However, they lack mining experience and may seek quick returns.
Government of Botswana: Botswana aims to expand control over its natural resources and promote local beneficiation. However, full investment in a finite resource might be shortsighted, and governments typically do not excel as business operators.
Conclusion
A successful sale of De Beers will require a long-term vision, the right partnerships, and the ability to deliver industry value. Each potential buyer has pros and cons, but securing Botswana’s consent is essential for any deal to proceed.
Read the full analysis here.
