Jewelers know how difficult it has become to sell diamonds in a market split between mined and laboratory grown gems, but that’s a modest challenge compared with selling the world’s premier diamond business, De Beers.
Widely regarded as one of the great names in luxury goods, an 85% stake in De Beers is in the process of being spun out as a separate business or sold outright by the London-based mining company, Anglo American.
An assortment of rough diamonds offered by De Beers in London. (Photo by Patrick Landmann/Getty … [+]
A deal involving De Beers moved closer this week when Anglo American finalised the sale of its steel-making coal business as part of a company wide makeover and takeover defence.
Diamonds, nickel and platinum assets are next cabs off the Anglo American rank with De Beers the crown jewel in a clean-out which will create a new-look business focused on copper, iron ore and fertilizer.
The two-stage success in selling the company’s Australian coal assets will raise $4.9 billion for Anglo American which is surgically dismembering itself rather than accept a merger proposal from the world’s biggest mining company, BHP.
A low-key Australian real estate and mining billionaire, Sam Chong, had first bite of the Anglo American coal assets, paying $1.1 billion for a 33.3% interest in the Jellinbah mine in which he already holds a one-third stake,
Peabody Buys More Coal
U.S.-based Peabody Energy wrapped up the coal exit on Monday, agreeing to pay $3.8 billion the remainder of the Australia portfolio.
Earlier today the process of quitting platinum moved forward with the offer to sell a 6% stake in Anglo American Platinum through a bookbuild process as a precursor to a total sell-down.
But it’s the planned sale of its controlling interest in De Beers which will be the most closely watched transaction because of the glamor and dark history of the diamond business which is clashing head-on with a collapse in prices.
Chief Executive of Anglo American, Duncan Wanblad. (Photo by Rodger Bosch/AFP via Getty Images)
Anglo American chief executive Duncan Wanblad said when announcing the Peabody coal transaction that the nickel business had attracted strong interest and good progress was being made in working with stakeholders effected by the exit from De Beers.
He said De Beers had “unmatched industry and brand position” but didn’t touch on the question of price, either for the business or for diamonds in general.
That job was left to McKinsey & Company which through good timing or good luck released its latest analysis of the diamond industry the day after Wanblad was celebrating the Peabody coal deal.
Diamonds At An Inflection Point
“The diamond industry is at an inflection point,” McKinsey said.
“After surging during the (Covid) pandemic, diamond prices have reversed to multiyear lows.”
Weighing on the market for De Beers specialty of mined diamonds is competition from low-priced laboratory grown gems, and growing customer acceptance of lab-grown stones.
Damage from the lab-grown sector is highlighted in the McKinsey report by a graph of Diamond Price Index over the last four years which shows a rise of approximately 37% from a base line of 100 in January 2020 to 137 two years later and then down to an index reading of approximately 77 in August this year.
It’s that four-year roller coaster ride for diamond prices, and the challenge of lab-grown gems which will be the focus for a potential De Beers buyer.
The price Anglo American might attract for its 85% stake in the 136-year-old De Beers business will attract the close attention of the jewelry industry.
But just as closely watched will be the identity of the successful buyer because while the business is expected to attract the interest of big mining companies De Beers is such a household name that it could appeal to owners of other luxury brands.
