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De Beers Focuses on Marketing as Anglo American Plans Exit

Natural Diamonds Highlighted, Botswana Seeks Larger Stake

by Adenike Adeodun

De Beers, known for its iconic “A Diamond is Forever” campaign, is shifting back to its marketing roots. This change comes as parent company Anglo American prepares to divest its stake in De Beers. The new ‘Origins’ strategy emphasizes natural diamonds, aiming to differentiate the diamond sector from other minerals.

Announced on May 31, the ‘Origins’ strategy aligns with De Beers’ historic focus on marketing. “Marketing moves the needle,” said diamond analyst Paul Zimnisky. “You can create demand if the products are marketed properly.”

Anglo American’s decision to divest from De Beers follows a failed acquisition bid by BHP. This move is expected to give both companies more strategic flexibility. The Botswana government, which holds a 15% stake, has also shown interest in increasing its share. High capital needs and declining diamond supply present further challenges.

De Beers plans to suspend its Element Six lab-grown diamonds subsidiary. Instead, the company will focus on synthetic diamond technology for industrial use. “The outlook for natural diamonds is compelling,” said CEO Al Cook. He emphasized the need to reinvigorate category marketing to grow demand.

Production has declined, with De Beers reporting an 8% drop to 31.9 million carats in 2023. This year, the first quarter’s output was down 23% from the previous year. Sales have also slowed, with Cycle 4 rough diamond sales down 20% from last year.

The diamond industry faces lower demand, especially in the U.S. and China. Amid this, De Beers cut the price of 0.75-carat stones by 4% to 6% this year. Production costs and supply constraints add to the company’s challenges.

BMO Capital Markets analyst Raj Ray highlighted the potential impact of losing Anglo-American’s backing. “Not having a parent company like Anglo could have serious implications for diamond supply,” he said. De Beers has invested $1 billion in Botswana’s Jwaneng mine and $2.3 billion to move South Africa’s Venetia mine underground.

Once De Beers leaves Anglo American, it faces being purchased or going solo. “Anglo wanted to become more of a pure play copper producer,” said Zimnisky. Selling De Beers is complicated due to its Debswana joint venture. An IPO seems unlikely due to limited interest in the diamond sector from an equity perspective.

Ray sees De Beers maintaining its 30% share of the global diamond market. “They’ll continue to be the pre-eminent producer,” he said. “Anyone who buys De Beers will continue to fund its projects.”

Despite challenges, De Beers’ marketing strategy and investments in production suggest it will remain a key player. The company’s ability to adapt and innovate will be crucial in navigating the future of the diamond industry.

De Beers’ return to its marketing roots marks a significant shift as it prepares for a future without Anglo American. By focusing on natural diamonds and reinvigorating its brand, De Beers aims to maintain its market leadership. The company’s strategic changes and investments will play a critical role in its continued success.

Source: Mining.com

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