Botswana in talks to raise stake in De Beers

Botswana has affirmed speculations circulating in the market regarding its intent to bolster its ownership in De Beers, amid Anglo American’s (LON: AAL) plans to divest or offload the diamond producer.

President Mokgweetsi Masisi declared during a political gathering north of Gaborone, the capital, on Monday, as reported by Bloomberg, “We are set to increase our stake in De Beers.”

Masisi emphasized that the government will take a pivotal role in identifying a new investor to succeed Anglo at De Beers, prioritizing an investor cognizant of the cyclic dynamics inherent in the diamond industry.

Presently, Botswana holds a 15% interest in De Beers, the world’s foremost diamond miner by value, with the country contributing 70% of the company’s yearly supply of rough diamonds.

Anglo American announced its intention last month to divest its 85% interest in De Beers to ward off an unsolicited takeover bid from BHP (ASX: BHP). Anglo had acquired the diamond giant in 2011, purchasing the Oppenheimer family’s 40% stake for $5.1 billion.

De Beers stands as a linchpin of Botswana’s economy. Earlier this year, the company pledged $1 billion to prolong the operational lifespan of its flagship Jwaneng mine by transitioning to underground operations. This initiative has been under consideration since 2010 to extend the productive tenure of Jwaneng, the world’s richest mine in terms of diamond value.

Debswana, jointly owned by the government and De Beers, constitutes a fifth of the nation’s GDP and contributes nearly half of the carats produced annually by De Beers.

In anticipation of the separation from Anglo, De Beers, renowned for its slogan “Diamonds are Forever,” is discontinuing the sale of synthetic stones. This entails the cessation of a six-year venture to market lab-grown diamond jewelry under its brand, Lightbox, established in 2018.

Although the miner won’t immediately halt the sale of Lightbox stones, it will subject the unit to evaluation upon depletion of current inventory, expected to take about a year.

De Beers aims to achieve annual core profits of $1.5 billion by 2028. Last year, the company earned a modest $72 million, though historically, its profits have fluctuated between $500 million and $1.5 billion amid the diamond industry’s oscillations.

The diamond giant appears poised to navigate autonomously, as it did for 124 of its 136 years in existence. Anglo American acquired a majority stake in De Beers just 13 years ago, with the government of Botswana retaining the remaining shares.

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