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Botswana Seeks Bigger Bite of the Diamond Apple

Diamond Giant's Future in Flux as Anglo American Considers Restructuring

by Victor Adetimilehin

The ownership of De Beers, the world’s leading diamond company, hangs in the balance. Botswana, a major player in the diamond trade, is looking to increase its stake in the company as its parent company, Anglo American, ponders a spin-off or outright sale.

Botswana’s Diamond Ambitions

Botswana President Mokgweetsi Masisi has signaled the country’s interest in acquiring a larger share of De Beers. Currently, Botswana holds a 15% stake and supplies a significant chunk, roughly 70%, of the company’s rough diamonds each year.

“The government could raise its shareholding in De Beers if it’s attractive to us,” President Masisi told JCK News. This statement implies that Botswana is open to negotiations but will prioritize favorable terms.

Anglo American, facing a potential takeover from BHP Group, a larger mining competitor, is undertaking a strategic review of its business. One option being explored is divesting the diamond sector, which includes De Beers. An initial public offering (IPO) for De Beers is also a possibility, according to Reuters.

The diamond industry, like many luxury goods sectors, has been squeezed by declining global demand. This has impacted De Beers, forcing the company to restrict diamond supplies and offer flexible arrangements to contracted customers. In February 2024, Anglo American even announced a substantial impairment charge on De Beers.

Seeking a Long-Term Partner

President Masisi emphasized Botswana’s desire for a long-term investor in De Beers. The ideal partner, according to Masisi, would be someone aligned with the government’s vision for the diamond industry’s future.

“One of the characteristics of a bad owner is someone who has short-term financial goals,” Masisi said. “This industry requires someone who is in it for the long haul, because it has its ups and downs.” This statement underscores Botswana’s preference for a stable and committed partner.

The potential sale or spin-off of De Beers by Anglo American has created uncertainty for the diamond giant. While Botswana is eager to increase its stake, other potential buyers or investors have yet to emerge.

The outcome of Anglo American’s strategic review will have significant implications for Botswana. The country relies heavily on diamond mining for revenue and employment. An increase in Botswana’s ownership of De Beers could provide the country with greater control over its diamond resources and potentially lead to higher profits. However, a sale to a new owner could jeopardize Botswana’s influence in the industry and its economic dependence on diamonds.

Looking Ahead: Negotiations and Industry Trends

The coming months will likely see negotiations between Anglo American, Botswana, and potentially other interested parties. The final decision on the ownership of De Beers will depend on various factors, including the terms offered by potential buyers and the overall outlook for the diamond industry.

The global diamond market is expected to rebound in the coming years, but the long-term sustainability of the industry hinges on innovation, ethical sourcing practices, and effectively marketing diamonds to younger generations.

Source: Mining.com

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