De Beers Sale Nears Completion Amid Challenging Market Conditions

Anglo American is in the final stages of selling De Beers, with a conclusion anticipated in the second half of this year, according to CEO Duncan Wanblad. The divestment process, described as complex and challenging, is ongoing with multiple parties still under consideration, and Anglo American is pursuing a private sale rather than a public listing.

Sale Process and Bidder Status

Speaking during the release of Anglo American's first-half financial results, Wanblad stated that the team has been working diligently in a 'terribly complex environment' to sell De Beers. He emphasized that the company is now in the 'final phases of our process,' which he acknowledged as the most challenging due to the need to align numerous parties toward signing final agreements. Wanblad refuted reports of a front-runner, confirming that Anglo American is 'not exclusive' with any single consortium and that more than one bidder remains in consideration. Bloomberg had previously reported that Anglo American was in advanced talks to sell its majority stake to a consortium led by former De Beers CEO Gareth Penny for approximately $1 billion.

Private Sale Preferred Over IPO

Wanblad confirmed that the company is pursuing a private sale for De Beers, explaining that the current market conditions do not support a public listing or IPO. 'We don’t think that the market has capacity for a listing of De Beers at this particular point in time,' he said, adding that this decision was supported by 'real traction' in the divestment process with strategic partners. The company expects the statutory approvals process, involving authorities in the United States, China, and Europe, to take about a year once the sale is finalized.

Financial Performance and Market Challenges

De Beers reported challenging trading conditions for rough diamonds in the first half of the year, with revenue falling 19 percent to $1.6 billion from $2.0 billion in the same period last year. The consolidated average realized price dropped 32 percent to $105 per carat, attributed to a higher proportion of lower-value goods and a decline in the average rough diamond price index. The company recorded an underlying EBITDA loss of $113 million, an improvement from a $189 million loss in the prior year, aided by cost-cutting measures. Despite these challenges, first-half production increased by 46 percent to 14.9 million carats, boosted by the Orapa mine returning to full capacity and a planned ore release at the Gahcho Kué mine. However, production is expected to decrease in the second half due to scheduled maintenance at the Orapa and Jwaneng mines. Production guidance for the full year remains unchanged at 21–26 million carats.

Cost-Cutting Measures and Strategic Adjustments

In response to ongoing market weakness, De Beers has implemented significant cost-cutting measures. These include pausing production at its Venetia mine in South Africa for approximately two years and rephasing capital expenditure on its underground project. Additionally, the company is simplifying its corporate structure and reducing its central cost base to improve efficiency and preserve value. These actions are aimed at strengthening the business as the diamond industry adapts to evolving market dynamics, including the impact of synthetic lab-grown diamonds on lower-quality and smaller stones, while demand for larger, higher-quality natural diamonds remains resilient. Encouraging consumer demand signals have been noted in the United States, with stable sales globally, though demand in mainland China continues to decline.

Anglo American's CFO John Amaral highlighted the proactive measures being taken to preserve De Beers' value, emphasizing cash preservation, cost reduction, and value protection while positioning the business for a successful divestment.